The Financial Diaries by Jonathan Morduch and Rachel Schneider

image1 (15)The Financial Diaries details a study conducted by a research team directed by Jonathan Morduch and Rachel Schneider that investigates how families receive and spend income within a single year. I picked this up per the suggestion of a colleague that it would be helpful background reading for a project I’m embarking upon soon and I’m so happy that I did.

This book dives into the fact that we typically think of and analyze income in a way that is not compatible with how most families interact with money on a regular basis. Their study uncovers many essential pieces of family spending that we are missing when we think about income in more traditional ways.

When we think about a family’s annual income, we are often missing the spikes and dips of income that occur for families with inconsistent, and even sometimes, consistent income. For example, receiving a large tax refund might make a family’s income spike in a predictable way that they count on, through putting off paying certain debts or making large purchases until they receive their refund check. Families with inconsistent income, such as those with work that is seasonally influenced or is related to regional events, often have to plan ahead and put large chunks of their money aside to cushion their income during months where their paycheck is lighter. There are many reasons why this is difficult for families to surmount and this book does an excellent job of portraying these spending realities.

My big takeaway from this book is that (somewhat obviously, but something I hadn’t been able to articulately describe before) a lot of families are “sometimes poor.” The idea here is that families who appear to have middle income and possess the assets to be “stable” when you look at their family’s annual income actually have moments of being sometimes poor, where their income is dramatically lower than it is at other times of the year. Families confront this by trying to prepare for these dips in income, but also devote a lot of their income spikes to paying for purchases that were necessary during income dips. For these families, it becomes almost impossible to save for the future when they’re constantly catching up.

This was a very nuanced, necessary reframing of spending and saving within American families. I highly recommend this book to anyone who wants a better understanding of income instability in America.

Publication Date: 4 April 2017 by Princeton University PressFormat: Hardcover.

Authors: Jonathan Morduch web & Rachel Schneider @twitter

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