Comments:"Hand-to-mouth living from a credit card company perspective — Eduardo Mourão"
URL:http://eduardo.intermeta.com.br/posts/2013/5/10/hand-to-mouth-living-from-a
I went back to built a chart from the last 6 years and the same pattern was present, even when the economy was not so bad. Because my company also offers employee benefits, I got interested in how people were actually spending that money and what would imply a hand-to-mouth living. After some hours working on the data I think I found an interesting pattern. I cannot disclose the actual numbers because it includes the average salary of our account holders, but this is the good information:
It seems that people living pay check by pay check would spend their whole benefits and salary in only a dozen places. In fact, they would spend more than 20% of their income in one single purchase on large retailers. At the same time, another large chunk of their salary is spent on small trips to gas stations. Most people that spend their full salary do never put more than 20$ of gas at a time. At the end, they spend around the same amount than others, but they seem to prefer to go the gas station many times instead of just filling up the tank.
Because hand-to-mouth means loss of liquidity and concentration of spending in one single place, the whole situation is actually beneficial to larger retailers. It also means small businesses are in trouble, because there is only a few (sometimes just one) cycles every month, if customers don't knock on your door on 1st, it means you won't sell anything for the rest of that month.
In conclusion, volatility itself is not enough to detect if people are living pay check by pay check. It seems that volatility together with lack of liquidity and strange behaviors are the signs people are in trouble. That phenomenon is actually beneficial to large retailers and means small businesses are doomed.
And that's it. I hope you liked this post. If you have an idea on how I could make more sense of the data I have just drop me an email.
[1] http://www.ft.com/intl/cms/s/2/f5763610-b2bb-11e2-8540-00144feabdc0.html#axzz2Spb1IruT