2/3 of Americans would have difficulty with a $1K emergency

A study was done by the Associated Press NORC Center for Public Affairs states that 75% of households making less than $50 K would have trouble with a $1K emergency and about 67 % of households making between $50 -100 K would have trouble. While the country's wealthiest $100K or more and they are about 20% of the population would have almost 2/5 (38%) difficulty the the 1K emergency. Caroline Ratcliffe, a senior fellow at the Urban Institute found this to be alarming. What surprises me is that those making more than 100K didn't do that much better than the $50 -100 K.

 

Probably has a lot to do with where you live. If you make $100k but pay $3000 a month for rent like in the Bay Area or NYC it would be hard to save money.

 

I think what happens is that people's lifestyles are determined by how much they make, and everybody lives on the edge of what they can afford. So unexpected bills will hurt most people quite a bit unless it is a fraction of a percent of what they make. Lifestyle changes are probably one of the toughest things to change; even people who win the lottery sometimes aren't able to handle it responsibly.

 

I know of some people with modest incomes do very well despite living in high cost of living areas. Hawaii is one of them. Realistic lifestyle decisions that grow in line with income and budgeting helps but it needs to start at an early age.

Those who choose to live beyond their means get whacked. I was one of them and luckily realized and brought myself back to reality.

 

Whether you save or spend is a personality trait with higher income people. I've been an engineer my entire career and I've run into both kinds of people my entire career. No matter what their income is, some people just spend everything they earn. Others save. If you spend every dime when you earn it, then you're going to have issues with unexpected expenses.

 

The trick is NOT to keep up with the Joneses! I have never changed my lifestyle just because I received a promotion or a raise. Other than Vegas trips (which I consider a necessity, LOL), I really haven't changed my lifestyle from what it was shortly after I got my first real job out of college.

 

This. The best money management advice i ever received from my older brother when i got my first salaried job after law school was "just keep living like a broke s.o.b. and you'll be fine" lol. It was partly in jest, but happiness isn't about buying more things.

 

What one makes per year is far less important than what one spends.

The most important thing I learned in college was how to live while I was broke as shit and manage the little money I did have. I think it would be hugely beneficial to all people in their late teens or early twenties to have to live for a week with just $20 or a month with $100.

I've been fortunate enough in the few years since then that my profession, side hustles, hard work, and some good old fashioned luck have given me a nice life. The refusal to ever go back to being broke inspires me more than anything else.

I feel badly for the people in the lower and middle income population of this study, because saving can be very difficult in that situation. I have less sympathy for the people with the higher incomes stated. Regardless of the cost of living in their area, if they had anything above piss-poor money management strategies they'd be alright if a 1K surprise popped up- especially those at 100k+.

 

So the other 1/3 would have no problems at all to a 1k emergency? Its not all the money in the world but usually these things are related to things like an applicance or tires or something that was working perfectly well yesterday. wait a minute, now that I think about it, would being without a washer and dryer for a while be an emergency? it would suck bt not emergency. I could take the bus if I had to so that would not be one either. I suppose a refrigerator would be as I need to keep foods cold for safety reasons.

Your computer breaking would not be an emergency unless you make your living that way. sort of makes one think, what would constitue a 1k emergency and what would just suck to have to re buy or pay to fix.?

I have a problem with any unplanned spending.

 

Sometimes, there truly is no choice. Many of us have received the phone call to fly back quickly to see a parent before they pass away. Another time, a very good friend of mines brother suddenly passed away (his brother was also a friend). I was happy to be in a position to cover the funeral costs (funeral homes want to be paid before they render service) until he was able to pay me back (which he did). Sad occasions like this is why you really, really need an emergency fund.

 

I can't say that this study surprises me even in the slightest. Over on the LV Strip Hotels sub-forum, people consistently complain about $200 holds on their credit card, because either A.) They are using a debit card linked to their checking account and they don't have enough money to cover it in that account, B.) They only have one credit card which they don't pay off in full each month and they don't have enough of their credit line left to cover the $200, or C.) They are afraid of credit and all other aspects of personal finance so they don't even have a card of any kind. Then I get yelled at when I try to warn them that if they are having those kinds of financial difficulties then they probably shouldn't be gambling or going on a vacation right now. There is a really troubling psychological aspect to this problem and it's affecting a huge portion of the United States right now.

 

While a $1000 "emergency" bill would suck....it wouldn't KILL us (we have $10k in "available" credit, with ONE SPECIFIC card JUST FOR EMERGENCIES that has a $1500 limit)

 

I have to disagree with you..some people didn't get credit at 18 years old...so therefore the first time they DID get it, they may have not managed it correctly, which basically FUCKS you.
The ONLY way to have good credit, is to get laced-up at 18 years old (credit card, retail store card, auto loan) and NEVER miss a payment (not even ONCE!). Then when you're 25, you can have an 800+ FICO and should have no problems with anything you want...
BUUUT, I don't know a whole lot of people that their parents told them about credit (and high school doesn't teach that anymore)..so a lot of people (myself included) get fucked with credit....and it's really hard to UN-fuck yourself.

 

While it's certainly possible to make bad credit decisions when the first time you go at it is as an unsupervised "adult", it's not inevitable. i got my first credit card at around 25 because i was at Costco and they were giving away swag if you signed up for their Amex. Even as an "adult" who got tricked into signing up for a credit card to get a free widget, i never carried a balance. I didn't really even see it as a "credit" card, because i refused to spend what i didn't have...i just basically used it to shop at Costco. Now I'm kind of into credit card signup bonuses etc, but i still refuse to carry a balance.

 

Considering that I did in fact mess up my credit when I was 18, I know that what you just said is completely untrue. It takes some work but it is completely possible to fix your credit. I went from a 400 FICO to currently being able to purchase four fully loaded luxury cars at the same time only using the available credit on my credit cards (which would be stupid to do but it is an option that's available to me.) I am currently writing a book on personal finance for real people so I can teach other people not to be afraid to improve their financial lives.

Sent from my SM-G920V using Tapatalk

 

I would buy that book!
I'm just saying, it's NEAR impossible to crack an 800 FICO if you've E-V-E-R fucked up.
In the 700's? Sure (Hell, I'm at 697 now) but the magic 800+...no

 

Tim, you cant speak in absolutes on this matter. It is very possible. The FICO formulas factor many things. The breakdown includes: 35% payment history, 30% debt load, 15% length of credit history, 10% new credit and 10% credit mix. Credit scores fluctuate based on the Fair Isaac calculations and each of the bureaus weighs items slightly differently, hence the slightly differing scores.

Your other comment that you can't have good credit unless you've NEVER missed a payment also is untrue.

Nick

 

So no one really lives by the adage to keep 6 mos salary in reserve? I know it's tough but putting 1k on a credit card and paying 1500 later due to interest, etc. is even tougher.