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A surprising number of people see their pay swing widely every month

By Jim Tankersley

One feature of having big banks in your economy is that they have access to some really big data, which, when parsed and studied, can hopefully give you some big insights into how your economy works. This is a hope behind the JPMorgan Chase Institute, which formally launches Wednesday with a report that sheds new light on how volatile personal finances are for many Americans.

The think tank's researchers started with data from 27 million Chase bank accounts, for a time period beginning in 2012 and ending in 2014. From that they narrowed their focus to 100,000 randomly selected people. The researchers tracked these customers' monthly balances in checking and savings accounts, credit cards, auto loans, mortgages and home equity loans; their transactions, down to day and time and where they shopped; credit bureau data; and general characteristics such as gender, age and Zip code. Add that up, and you get very clear pictures of what people -- individually (though not identified) and as a whole -- earn and spend, and how that changes over time.

Both income and spending change a lot, the researchers found, but they don't always change in the same direction: Just because people earn more money in a particular month doesn't mean they ramp up spending, and just because they earn less, they don't necessarily spend less.

From 2013 to 2014, the institute found, one in four people saw their incomes rise or drop by 30 percent or more. That's a big swing. About one in three people saw relatively little swing, plus or minus five percent. Everyone else was somewhere on the mild-to-major volatility scale. Consumption was even more volatile. Almost no one experienced month-to-month consumption swings of less than five percent: "Our data suggest that following a monthly budget that sets strict parameters on spending is extremely difficult," the report finds.

Liquid Assets Needed for U.S. Households in Each Income Quintile to Weather Income and Consumption Volatility For One Month
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High- and low-income earners alike experience similar volatility, though institute officials say there's reason to think their sample underestimates volatility for the very poor. What's clear from the numbers, though, is that poorer people have less cushion to ride out a typical income drop. Those in the bottom two income quintiles had only half of what they needed to sustain their spending in the face of income fluctuations. Those at the top had nearly enough.

These findings are "the tip of the iceberg" of what the institute is capable of studying, said Diana Farrell, its president. Future projects include "financial behavior of individuals, insights on the small business sector and expert profiling of global trade and capital flows," officials say. Those are big topics -- but perhaps big data can help cut them to size.