The $2,000 Question

$2,000 may not seem like a big amount of money, but if an emergency were to happen in your life, could you come up with that $2,000 quickly without having to borrow?

It turns out that half of the American population can’t. According to a research by the National Bureau of Economic Research, a quarter of Americans reported that they would certainly not be able to come up with the $2,000. Another 19% reported that they would have to rely on selling some of their possessions or taking a payday loan.

This is a scary figure since all of us have to face some form of financial stress at some point in life. If you think about it $2,000 might not even get you through the whole month. What happens if one day your car broke or you lost your job? Do you have enough money saved up to help yourself get by let alone your dependents?

Thoughts?

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To answer your questions, no, but that is because I haven't needed to yet but once I start working this fall, saving will be a huge priority of mine. I agree that the info you presented is very scary and even $2,000 isn't really enough to get by on for long especially if you have a family. I think saving up is one of those things that if you do not start doing early in your career, you will never be able to start. For me, I think about it this way, starting out in MBB this fall, I am going to send 25% of comp after taxes to saving, possible to do because I am non NYC and consulting provides nice per diems, by having that money taken out before I can touch it, I am "forced" to live on $3,500 instead of $4,800 a month and such my monthly budget it set based on after taxes comp of $3,500 which still leaves plenty of money to spend and also save. It is easier to build a budget around 3,500 and increase as my comp increases than it would be to start off living off $4,800 and trying cut my "expenses" later in attempt to save.

 

Agree that saving is important. #1 is the emergency fund. After that, most important thing is to max 401k contribution, especially whatever match you get. Not surprised by the above $2k statistic - # of ppl living paycheck to paycheck is surprisingly high, you definitely get a skewed view as a young person working in tech / finance / consulting. On another note $4800 after tax per month seems pretty high ... are you calcing that correctly?

 

It is actually around $4,300 after taxes and health insurance deductions (flat state tax helps) but I averaged signing bonus and relocation bonus over 12 months (roughly $500 a month after taxes are paid). While it is given at one time, it is earned over 12 months. hence why I averaged it out to $4,800. Maxing out on 401k contribution is also planned but I am going begin contributing once company match kicks in.

 

@"brooj14" you can live easily on 3,500 a month. even 2,500 a month is easy if your rent is cheap (outside of nyc 300-400$).

Saving isn't hard if you limit your expenses. Dont go on crazy shopping sprees, buying expensive name brand items. And try cooking your own meals as much as possible. I cook my own breakfast lunch and dinner 4-5 days a week and honestly after a certain point I stop buying clothes. I simply dont care about having a huge wardrobe but that doesnt mean I am wearing the same shirt every day.

I am also able to "live it up" a little when I go out with friends and not worry about my bank account, because I know I am saving $$ by cooking my own food and limiting my expenses elsewhere.

Compare that to my fellow co-workers and family members who probably spend

breakfast & lunch -$20*5= $100 a week if they cook dinner ---400$ a month weekend charades 150-300$+ a weekend (taxi for the ballers)---400-800$ a month monthly shopping expenses 300$ a month

shit starts adding up.

 

Completely agree with your post. Granted $300-$400 rent is not possible in near downtown Chicago and so I am looking at $1,000 living by myself and like $800 with a roommate (likely plan). Plus in consulting, you have to have a car because relying on public transportation/taxi to get to airport for red-eye flights every Monday morning and back from the airport every Thursday night is not convenient/expensive (total monthly taxi fare nearly equals car loan and insurance). Also, local projects requiring a car are possible and so I have to include loan on a newer used car and insurance, luckily those expenses are cancelled out by monthly value of per diem. So all I have to worry about it cooking for myself Fridays-Sundays which is nice and very doable.

 
Best Response

Saving early and consistently is key. This is probably the biggest lesson my parents taught me. Through disciplined saving and investing, they managed to own their house, car, etc. without any debt to their names and without a spectacular level of income.

I aspire to do much the same and currently save half of my income every month and allocate a significant portion of my benefits package to a pension plan with my employer matching my contribution and general living expense reduction. I live in Europe in a fairly low-cost city, thereby I can save a greater portion of my income than if I were in London or other large financial centers.

My SO does the same, and it looks like we will be able to build up a considerable savings base by the time we hit our mid-30's, which to me is more appealing than building up a collection of name-brand non-essentials and potentially accumulating a shit ton of debt.

 

I personally believe that everyone in society needs to do better at money management. Many times individuals are consumed with what society places in front of us, so many individuals have the opportunity to save because he/she is trying to keep up. For instance, each time Apple releases a product everyone feels incline to go purchase. More importantly, individuals must conduct self-evaluation and learn how to become more frugal. I always felt that it is necessary to have money put up for a rainy day.

 

Not targeting anyone here, but the whole "loving in nyc makes it hard" is a total BS cop out.

Even if you work in NYC, $70k a year should let you EASILY max your 401k and build an emergency fund. Living in ridiculous neighborhoods like the west village to feel like you're in sex and the city, paying $12-15 per drink for 10 drinks, and boozy brunching every weekend at $50 per are all choices. And for investment bankers you don't even have time, so I don't see where your money is going. You're never at home, so why get even an Ok place and black cars take you home so why live in expensive apts near work?

As far as not have $2k saved for emergencies, I don't anything will ever change. The combination of strong advertising, social media and entertainment, and a consumer culture isn't going anywhere and that is a huge hurdle to overcome. If we haven't learned anything from 2008, then it shows that mentality is here to stay.

 
CreditAnalyst85:

Not targeting anyone here, but the whole "loving in nyc makes it hard" is a total BS cop out.

Even if you work in NYC, $70k a year should let you EASILY max your 401k and build an emergency fund. Living in ridiculous neighborhoods like the west village to feel like you're in sex and the city, paying $12-15 per drink for 10 drinks, and boozy brunching every weekend at $50 per are all choices. And for investment bankers you don't even have time, so I don't see where your money is going. You're never at home, so why get even an Ok place and black cars take you home so why live in expensive apts near work?

As far as not have $2k saved for emergencies, I don't anything will ever change. The combination of strong advertising, social media and entertainment, and a consumer culture isn't going anywhere and that is a huge hurdle to overcome. If we haven't learned anything from 2008, then it shows that mentality is here to stay.

I agree that people can save living in NYC if they really want to (esp. people in finance etc) but the majority of people don't earn $70k, and the survey wasn't just people who do...

 

let's be honest, who needs to have $2,000 in cash when we all have credit cards.

Kidding aside, It is scary actually how little most people save. That said, I will say the Brofessor's thread the other day made me realize that I need to prioritize an emergency fund rather than my current prioritization of retirement funds.

 

It shocks me the extent to which the population in the western world spends virtually all their income on frivolous material possessions that only provide temporary distraction and escape from the litany and meaninglessness of their existences.

You know you've been working too hard when you stop dreaming about bottles of champagne and hordes of naked women, and start dreaming about conditional formatting and circular references.
 
thebrofessor:

being a saver's culture really worked well for Japan, huh?

in all seriousness, this is never going to change. get used to/ready for higher taxes on the wealthy to pay for all of these idiots who will have to survive on social programs later in life.

Japan's saving culture is an extreme. I think at one point the average household in japan had like $120k in savings. If the situation was the same here in the US it'd probably be the proverbial equivalent of decapitating the economy.

The level of consumerism in the West is perverse though, especially in the US. US GDP per capita is about $52k - I don't think I really need to spell out why the average American not being able to come up with $2k in spare cash is a big big problem. One of the primary benefits of increasing saving being that the impacts of the recent recession would not have been as great in the US if the average consumer had more "rainy day funds".

You know you've been working too hard when you stop dreaming about bottles of champagne and hordes of naked women, and start dreaming about conditional formatting and circular references.
 

Oh god, another thread where frugal cock measuring commences.

Pissing away all of your money on bullshit is dumb. So is saving every damn penny so you'll die rich. Get an emergency fund (can be a combination of cash, credit, liquid assets or parents if they are ok with it) and save a decent amount of your money (personal preference). The rest, live on it.

Whenever a thread like this pops up there will be probably 2-3 rational voices. Everyone else will "brag" about eating ramen and stuffing gold coins up their ass.

 

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Go East, Young Man
 

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