By Daniel Brunty
The Winston County Journal
With the economics of the country in their current situation, finances can be one of the most troubling items we as Americans have to consider on a daily basis. With bills to pay and families to feed, thinking about your finances can be all too consuming.
To get a better understanding of how our finances affect our lives, a research study titled the U.S. Financial Diaries met regularly with over 200 low and moderate income households across the country and gathered information about how families earn, spend, save, borrow, and share money in addition to facets of their overall financial lives.
The study offers a combination of data and household stories that explore the ways in which households’ financial positions shift over time, and how peoples’ financial choices influence – and are influenced by – other aspects of their lives.
The project was jointly created by Jonathan Morduch of the Financial Access Initiative at NYU Wagner, Rachel Schneider of The Center for Financial Services Innovation, and Daryl Collins of Bankable Frontier Associates. Morduch and Schneider are the principal investigators for the ongoing data analysis. USFD received leadership support from the Ford Foundation and Citi Foundation, with additional support and guidance from the Omidyar Network.
Through the considerate support of community partners and the generous participation of families willing to share their stories, Winston County was one of the research sites.
To allow for the findings of this study to be revealed, a luncheon meeting was held at Lake Tiak O’Khata on October 23 at 11:30 a.m. The purpose of the luncheon was to take a close look at the regional findings from the Winston County sample, and to hear about how volatile and uncertain income and expenses are, and the financial systems families use to earn, spend, save, borrow, and manage their financial lives.
The day began with a delicious lunch provided by the staff at Lake Tiak O’Khata. Next, Hope Credit Union Chief Operating Officer Alan Branson addressed all attending. Bransom thanked everyone that was in attendance as well as explaining his role on the Advisory Board to the project. Branson then asked everyone to make personal introductions to familiarize everyone with each other.
Jonathan Morduch, Professor of Public Policy and Economics at New York University, followed Branson as he began to present his findings from the study.
The complete study addressed the families’ month-to-month ups and downs regarding incomes, assets, and cash flow. In the cash flow category, 244 households and 316,763 were surveyed every 2-4 weeks in 100 spending categories, 38 income types, and 69 financial instruments.
The study was performed in five different states including California, New York, Mississippi, Ohio, and Kentucky. In Mississippi, 55 households with 87 adults were surveyed.
The self-reported month-to-month incomes for the families revealed that most families experience high and low months regarding their income. “There is a lot of volatility in all families across the country regarding their monthly income,” Morduch said.
Next, the discussion focused on the shift of the jobs that are available for all. As the social climate changes, so does the type of jobs the average American works. “We are experiencing some big changes in America across the country,” Morduch said. “One of those changes is manufacturing jobs are getting harder to find. What is changing is these middle skilled jobs are really disappearing.”
Lower-wage jobs and higher wage jobs are becoming more prevalent at this time.
Morduch then discussed the group in Winston County that was surveyed. One group was predominately African-American, and the other group was Caucasian American.
The first item he discussed was “spikes and dips.” Morduch explained that most workers in today’s workforce earn a steady income over a year. Most families see their incomes move from month-to-month, which causes a lot of challenges for them.
When viewing the average income, if the income falls below the average, it is considered a “dip”, while an income rising above the average is called a “spike.”
“We saw on average across our sample all across America households were experiencing 2.7 months where their income was 25 percent above the average, and 2.7 months where it was below average,” Morduch said. “That is a lot of movement.”
In Mississippi, the families experienced the same spikes and dips as other families in the country. “When we think about families, the first thing you ask is how much do you earn?” Morduch said. “Really the question is how steady and how viable is that. That is the question that is really critical to this.”
The volatility of income has causes. Some of those causes are work hours rising and falling, lumpy payments (tax refunds, etc.), health problems and emergencies, predictable childcare and transportation needs, and shifting household membership.
Morduch also discussed how economic equalities such as income and wealth play a modest part in finances. “There is another kind of inequality that is hard to see but it is very important,” Morduch said. “That is the inequality of a steady, reliable, and predictable income and finances.”
Morduch also revealed a question that was asked in a national survey that asks what is more important to them, financial stability or moving up the income ladder. “What we saw was 92 percent of the families said they would choose financial stability over moving up the income ladder,” Morduch said. “That is America today.”
The participants in the Winston County survey also agreed with the national survey as well and would choose financial stability.
Morduch then proceeded to allow Ms. Joyce Roberson, field researcher, to give an example of how one family from the survey managed their expenses. Roberson through her interaction with the families was able to demonstrate through the example how a typical family experiences the “dips” and “spikes” in their income, displaying the volatility that this cycle brings.
Morduch then discussed health and its role in a family’s financial plan. “This is some place where the sample in Winston County looks different than what we see in other places,” Morduch. “Samples of people we got to know are struggling with some very serious health issues.”
The survey also revealed the number of family members with chronic health conditions. The African-American group of the survey saw 31 percent of the households with at least one member of the family with a chronic health condition, and about 15 percent with four or more family members having a chronic health condition.
The Caucasian American households show 33 percent have art least one family member, and four percent with four or more.
Insurance coverage was then discussed. “There is more insurance coverage here than what we see in general,” Morduch said. “People here have more health and life insurance. Particularly life insurance.”
Morduch continued. “What is striking relative to the rest of the sample, we saw very little Medicare and Medicaid here.”
Morduch also revealed part of the survey, which displayed how households control health care costs in regards to prescription medication. Some of the findings showed that 42 percent of the participants asked their doctors for a lower cost medicine to save money.
Other ways households that households control health care costs are taking less medicine than what the doctor prescribed, skipping medicine doses to save money, and delaying filling their prescriptions to save money.
The next topic of the survey displayed where people are getting their suggestions and information regarding managing their finances. “Our parents are the most important choice,” Morduch said. In the African American group and the Caucasian group, parents were the first choice.
The survey concluded with topics of financial literacy and the use of loans. Morduch then opened the floor for all to have open discussion regarding the findings.
If you would like to learn more about the survey, or more information regarding the U.S. Financial Diaries, you may visit the website www.usfinancialdiaries.org.