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Most Americans can't afford a $1,000 emergency expense

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Proletariat.
Posts: 1797 - Karma: 45

NEW YORK (CNNMoney) -- When the unexpected strikes, most Americans aren't prepared to pay for it.

A majority, or 64%, of Americans don't have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday.

Only 36% said they would tap theirrainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card.

"It's alarming," said Gail Cunningham, a spokeswoman for the Washington, DC-based non-profit. "For consumers who live paycheck to paycheck -- having spent tomorrow's money -- an unplanned expense can truly put them in financial distress," she noted.

That's the case for Allyson Curtis, 35. "I think about it every day," she said.

Curtis was unemployed for only three months last year, but in that time she accumulated $5,000 in credit card debt that she's now struggling to pay down. In the case of an emergency, Curtis said she would likely postpone other payments and pile on additional debt.

She is already putting off $450 in dental work and a car inspection due to a crack in her windshield, which will cost $300 to replace, she said.

Budgeting for an emergency fund

Many respondents, 17%, said they would borrow money from friends or family. Another 17% said they would neglect other financial obligations -- like a credit card bill or mortgage payment -- in order to free up some funds.

Alternatively, 12% of the respondents said they would have to sell or pawn some assets to come up with $1,000 and 9% said they would need to take out a loan. Another 9% said they would get a cash advance from a credit card, according to the NFCC.


Cunningham finds that particularly troubling. Neglecting other debt obligations -- or worse piling on more debt -- "really exacerbates the problem," she said.

An earlier study by the same organization found that 30% of Americans have zero dollars in non-retirement savings. A separate study by the National Bureau of Economic Research found that 50% of Americans would struggle to come up with $2,000 in a pinch

Aug 11 2011 1:46AM
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californiagrown
Posts: 9794 - Karma: 2,014
or a ballin job, and are content to live like a poor college student for the first few years...
Aug 11 2011 4:48PM
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Barefootin_Fiend
Posts: 7618 - Karma: 4,727
Chances are though that you're not going to have a ballin' job right out of college. Sure, they sell you on the idea that you're going to make 100k right out of college, but I've got news for ya....that's not the reality of the situation in today's economic climate (for most people). We by no means live a lavish lifestyle...definitely middle class america...but shit adds up quick man. Don't get me wrong, we don't live paycheck to paycheck and have a rainy day fund capable of sustaining several months, but a year's worth of savings isn't even close to reality. I don't know anyone in their late 20's who isn't wealthy by birth that has that kind of savings. College is expensive. Grad school is expensive. Life is expensive. Even by mid-class standards.
Aug 11 2011 5:01PM
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Static
Posts: 8553 - Karma: 4,089
I'm probably older than you, I didn't really want to make it personal (because I'm pretty much an angel), but yes I had 50k in savings between me and my so within a few years of school (we both continue to pay student loans, I actually sent my FIL money last week so no, not from wealthy families). The point is, that a responsible person should have enough money to float themselves when running into unexpected things in life. You don't have to... like I said, go on welfare if you want, but you run the risk of losing a lot of assets. A young person isn't going to have a lot of money, so they shouldn't have a lot of debt. The debt to income ratio is what really matters, how long (or well) you want to survive without stealing from the rest of us is up to you.
Aug 11 2011 5:03PM
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californiagrown
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im making 75k 6 months out of college because i picked a useable major, busted my ass in school, and then out of it trying to find a job. All the connections i made, and interviews i got were because i pounded the pavement, not because i had friends or family in the right places. i have very little in loans because i hunted down all sorts of scholarships, and then had a few side jobs in college. I plan on having the company i work for now pay for my MS.

in 6 years, i will be shocked if i dont have atleast 100k in investments.



My living expenses in college were less than 12k/year, and i could cut a lot out of that if times got tough. Life is very expensive, but trying to keep up with the jones' and buying nice new shit makes it way more expensive.
Aug 11 2011 5:12PM
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andstuff
Posts: 1118 - Karma: 61
Props to you sir. Just curious: what exactly is your major, and where did you go to school?
Aug 11 2011 5:19PM
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Mike-O
Posts: 14593 - Karma: 1,089
Gotta ask, what is small by your standards? For a relationship? Because I know housing is much cheaper in many parts of the states than around here.
Aug 11 2011 5:49PM
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Barefootin_Fiend
Posts: 7618 - Karma: 4,727
I won't argue that a person should be able to float themselves when the unexpected arises, but I think a year's worth of expenses is unrealistic. To have 50k sitting in a savings account earning little interest while you continue to accrue interest on your student loans & mortgage isn't how I'd invest my money. If I did that, I'd end up spending tens of thousands of dollars in additional interest expense by not paying them off sooner than the due date.

And to answer your prior question - we actually put more than 20% down on our house and pay several hundred dollars more than the minimum payment each month. This has us slated to not only pay the loans off several years early, but we will also save close to 30k in interest expense over the course of the loan.

I'll also add that it's certainly not personal - not for me at least. Just friendly discussion.
Aug 11 2011 5:50PM
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VT_FLO
Posts: 3806 - Karma: 147
You're wrong. my dad lost his job at the beginning of the recession, we had savings for a year. It took him 8 months to get another job set up and thankfully we didn't lose the house in that time. It takes different times for different professions but organic chemistry research positions aren't exactly that common since many of the companies in this county decided in the 90's they didn't need to research and became outcompeted by japan and china, leading to lower profits and downsizing production. meaning DHEY TOOK OUR JERBS!


But if you seriously think that you only need 3 months supply for an emergency you have definitely only considered optimum circumstances. When you are laid off you lose your benefits, so your expenses actually rise. The time it takes to find a new job varies, and if you are supporting anyone you have to plan for possible medical bills.


that being said I am living off of school loans and wouldn't be able to come up with 1000$ extra anyways.
Aug 11 2011 5:51PM
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Mike-O
Posts: 14593 - Karma: 1,089
I'm from Finland and were filthy socialists, so I don't have to worry about losing any benefits, I get benefits if all goes to hell and survive to rise again.
Aug 11 2011 5:52PM
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skiminnesota
Posts: 9093 - Karma: 429
this.

thankyou.
Aug 11 2011 6:19PM
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.Emerson.
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Click for larger image


mfw this thread
Aug 11 2011 6:47PM
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californiagrown
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Civil engineer, Washington State University, Now living back in the Bay area
Aug 11 2011 7:11PM
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VT_FLO
Posts: 3806 - Karma: 147
by filthy socialist you mean that you live in a country where the governing wealthy actually give a shit about everybody else. and yes, i am jelly.
Aug 11 2011 7:52PM
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