Income Volatility, Psychological States, and Saving Decisions
Investigate how within-year income volatility drives financial stress, risk aversion, and suboptimal financial decision-making
Zafira Shabrina
Income volatility, common among freelancers and gig workers, is an invisible form of financial vulnerability. Even when annual income is adequate, unpredictable fluctuations within the year can erode psychological well-being and undermine sound financial decisions. This project investigates how within-year income volatility affects psychological states and decision-making. Using the Freelance Finance Simulation (FFS), an experimental paradigm we developed and validated, participants experience simulated volatile or stable income streams and make real-time financial decisions. Across three preregistered studies, we test whether volatility, independent of income level, drives financial stress, risk aversion, and whether structured versus flexible saving heuristics can buffer these effects.