Do you ever feel like your wallet is stuck in an endless game of ping pong?
If so, you're far from alone. Many Americans have trouble keeping up with their month-to-month expenses, and it's not just about income or spending habits. It's also about financial volatility, because the average bank account fluctuates a lot over the course of a year.
"Expense volatility" is an accountant's way of talking about the unexpected costs that hit a household, like a parking ticket or needing to replace your phone. It can pose a huge threat to household finances because it flips the table on personal budgeting. The average person plans his money out on a month-by-month basis; having to suddenly divert funds into something unforeseen can throw that into chaos.
Income can provide some buffer, and certainly high-earners are better prepared to deal with the unexpected in life than those who live paycheck-to-paycheck. That said, one truth about money is that expenses tend to rise with income… someone who makes more will spend more, and will usually have higher potential expenses.
Really, coping with volatility is all about how close to the bone a household lives. This is the area of personal finance that involves emergency funds and savings accounts, and to a small degree most people can take on some additional unexpected expenses. Minor volatility is little more than an inconvenience and a chance to gripe about the vagaries of municipal enforcement (or, perhaps, your city's catastrophically ill-advised decision to privatize the parking meters).