People are financing their savings.
And here’s the scary truth about it. You see, the Federal Reserve Board has been conducting a survey since 2013. This survey monitors and reflects the financial and economic status of American consumers. Most of the results found through the survey are rather predictable and benign. One figure about emergency savings stood out in an alarming way, though. 47% of respondents said that they would have to borrow money or sell something to pay for a $400 emergency. Many of them said they would not be able to come up with the money at all. Yep. That’s right. Forty. Seven. Percent.
That means about half of American consumers are living check-to-check with no emergency savings, financial safety, or security. It means they are stressed out, unhappy and unfulfilled. They’re hanging on by a thread. And if that thread breaks, there’s nothing there to catch them.
They just simply don’t have any safety-net savings.
I told you it was scary.
Neal Gabler addresses the problem in his recent article, The Secret Shame of Middle-Class Americans. He generously pulls back the curtain on his own finances, so we can see how these numbers play out for the average individual. I find Gabler’s willingness to speak about his money woes refreshing and very much needed. It is utterly important for people to realize they are not alone in their struggles. The majority of people need help. And the sooner we talk about this, the better.
Here’s a few more numbers I pulled from the article for you to chew on:
- A 2014 Bankrate survey, echoing the Fed’s data, found that only 38 percent of Americans would cover a $1,000 emergency-room visit or $500 car repair with money they’d saved.
- Two reports published last year by the Pew Charitable Trusts found that:
- 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income.
- 56 percent of people said they’d worried about their finances in the previous year. And 71 percent of those people were concerned about having enough money to cover everyday expenses.
- Research funded by the Russell Sage Foundation, shows that the inflation-adjusted net worth of the average median household was $87,992 in 2003. By 2013, it had declined to $54,500, a 38 percent drop.
- An analysis of Federal Reserve and TransUnion data by the personal-finance site ValuePenguin, revealed that about 38 percent of US households carried some credit card debt. Among those households, the average was more than $15,000.
- Edward Wolff, an economist at New York University states that, “Families have been using their savings to finance their consumption”. In his assessment, the typical American family is in “desperate straits.”
And, like Gabler says, this isn’t just happening to the poorest among us. Even middle-class professionals, as well as those in the upper class, don’t have much in emergency savings.
A study by Lusardi, Tufano, and Schneider found that nearly 25 percent of households making $100,000 to $150,000 a year claim not to be able to raise $2,000 in a month.
These numbers are ugly. They’re depressing and defeating. They don’t exactly ooze hope and inspiration.
But here’s the thing: it doesn’t have to be this way. For those of you who are already working on your Financial Recovery, you know it’s true. There is hope. There is a way out. Things can be different.
I work with people to turn their financial lives around. Together, we build better habits and take meaningful action. I help them shift from an unconscious, consumer-driven mentality to a purposeful, self-nurturing one. We find what they truly need and we build on that, cutting through the noise and nonsense of everything they don’t need. Debt can be managed. Savings can be built. Financial health and happiness is possible! Find out about Financial Counseling today.
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