The Liquid Hand-to-Mouth: Evidence from Personal Finance Management Software

Arna Olafsson, Michaela Pagel

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review


We use a very accurate panel of all individual spending, income, balances, and credit limits from a personal finance software to document spending responses to the arrival of both regular and irregular income. These payday responses are robust and homogeneous for all income and spending categories throughout the income distribution. Moreover, we find that few people hold little or no liquidity. We then analyze whether people hold liquidity cushions to cope with future liquidity constraints. However, we find that peoples’ responses are consistent with standard models without illiquid savings, in which neither present nor future liquidity constraints are frequently binding.
TidsskriftThe Review of Financial Studies
Udgave nummer11
Sider (fra-til)4398–4446
Antal sider49
StatusUdgivet - nov. 2018