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Friday, August 11, 2017

Income Volatility



Uncertainty of income would be worrying for all. In a company, sales growth is tracked closely to understand how well revenue is growing. In an individual context too, income volatility matters. If you are in a government job, income is a given and so is pension. But if you are working with a private enterprise-especially one that's newly formed-your income growth will depend on company policies, and job security can be an issue.


Volatility of income and certainty of job also have an impact on the asset allocation strategy. Investors who have jobs with high incentives components or bonus need to have a more conservative investment strategy than those with jobs that are more certain and less volatile


Income volatility can be due to other reasons as well. Bonuses are an annual windfall and difficult to account for. But many people bunch insurance payments during particular months, and in those months, other investments become difficult. In festival months, sometimes there is irrational expenditure, which can change the overall money plan


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