When your cash flow is strong, it’s easy to skate along without paying much attention to how your monthly income and spending bounce around. As long as the checking account looks good, you’re good—until you’re not, because an unexpected expense or drop in income, perhaps at the same time, makes what seemed a perfectly fine cash cushion look alarmingly thin.
It happens to all of us, even those making six-figure incomes, according to a new report from the JPMorgan Chase Institute, a think tank the bank launched in 2015 to do deep-dive economic analysis drawing on its proprietary customer transaction database.
The database shows about a 30 percent median fluctuation in levels of both family income and spending from month to month across income brackets. That determined the amount of cash a household would need to weather typical swings in income and spending.
The greatest amount turned out to be a $5,300 monthly variation, for households of people between the ages of 35 and 54 with household income above $104,600. The $5,300 is the cash that household would need to have on hand if its income declined by 30 percent and its spending increased by 30 percent in the same month.
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