Volatility refers to household financial flows that are inconsistent and sometimes unpredictable.

Volatility appears to be highest among the lowest-income households. The degree to which it is problematic depends in large part on the portfolio of assets available to the household.

For those who can fall back on wealth or a robust support network or highly-marketable skills or experience, income volatility is more likely an inconvenience than a serious burden or obstacle. For those with less asset protection, volatility can present a significant challenge.

Managing income volatility encompasses a spectrum of strategies to prevent it from happening and to mitigate its effects when it does occur. Workers can seek jobs with more consistent hours and pay. A secondary earner can move in and out of the labor force as needed. Unemployment compensation can cushion the blow of a layoff.

Other insurance can protect against large, unpredictable expenses such as health care. Savings built up during good times can help with meeting expenses when times are tough. Borrowing can bridge a gap and takes many forms, from tapping credit cards, home equity, and retirement accounts, to putting off bill payments, incurring overdrafts, or leaning on family and friends.

Read the full article on volatility at Aspen Institute