"40% of Americans unable to come up with $400 to pay for an emergency expense"

According to a recent CNBC article: "40% of Americans unable to come up with $400 to pay for an emergency expense"
https://www.cnbc.com/2019/07/20/heres-why-so-many…
Here are some takeaways

  • In households with more than $100,000 of income, 17% of respondents said they would be unable to cover a $400 emergency expense. The article admits that less than 1% actually have less than $400 in the bank but assume this is tied to fixed expenses.

  • 20% of all households have less than $400 in their checking account.

The article tries to use loans as an explanation for the problem but clearly there is something going wrong with the financial situation here.

Do you all have any comments regarding this? I personally think there is a serious problem regarding financial literacy in this country. Especially with the social media comparative culture, people are pressed on to buy something that he/she can show off to their network without fully understanding the role of debt and topics such as compounded interest.

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Comments (83)

Jul 21, 2019 - 2:53pm

Even if they do, I'd assume it's in a 401k or savings account that they wouldn't pull out of. I think the point of the article is that these people aren't able to cover 400 from checking or rainy day accounts. That said, you do have a point in that some save very little.

Jul 23, 2019 - 5:12pm
FinancelsWacc:

Would be interesting to see how many of these households have things like iPhones, Yeezy's, Jordans, etc.

I know a friend who hardly has a grand in his bank that just 0% financed a brand new gaming computer on his new Amazon card... people literally have no priorities.

I mean, this isn't entirely fair. Quality of life is a thing. I agree that if you've got a household spending tens of thousands of dollars on lottery tickets and luxury goods and whatever, that's not a group we should be overly concerned with protecting. But if a low income wage earner has an iPhone, that doesn't mean they're living a luxurious lifestyle or well above their means. Life needs to be more than meaningless drudgery for a living wage to work for people at the bottom of the system. I agree that buying "things" shouldn't be a proxy for happiness or fulfillment, but you often hear conservative politicians saying that anyone who can afford more than the cheapest gruel for dinner (essentially) doesn't need welfare or social support. That just isn't true.

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Jul 23, 2019 - 5:55pm

They are plenty of cheaper alternatives than having an iPhone for someone with a lower wage. To say that people without an iPhone are living a life of "meaningless drudgery" calls into question exactly what you find happiness in. If you have less money, you should buy cheaper things and try to make the most out of things that cannot be bought with a price (family, friends, relationships). To address your last statement, Dave Ramsey often advocates those he gives financial advice to live off "rice and beans" to come out of debt. I would argue they learn much more from that experience then the govt handing a welfare check.

Array

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Jul 23, 2019 - 9:18pm

I agree with the other two responses you got but I can see your point. I guess a more fair statement would be "the newest iPhone, Yeezys, or Supreme clothing".

I just think there is an inherent spending problem in the states and there is a complete lack of financial literacy. People think minimum wage means they "deserve" a lifestyle that they picture in their head. Well news flash would be that you can afford a 5 year old samsung over the newest Iphone, maybe eat rice and chicken instead of ordering in sushi a few times a week. I think perspective has been lost on what really is "Affordable" at given income levels.

Jul 21, 2019 - 4:03pm

Unless they're actually looking at bank account balances and other assets, this survey reeks of bullshit--especially considered the 100k minimum household income floor.

Jul 21, 2019 - 4:54pm

I know a couple living in a high COL In Cali who are living paycheck to paycheck because they go around and blow it on stupid shit...it's like they've never heard of what saving money is... like what will they do once they're in their 60s and have no retirements savings and still don't own a house

Jul 25, 2019 - 10:36pm
MissD:

Stupid shit like rent most likely.

Renting is not necessarily a bad thing. It allows you to be much more geographically mobile when looking at job opportunities. Given market inefficiencies and high transfer costs the break-even for choosing to buy is typically ~7 years.

Personally, renting allowed me to jump to different cities twice within the past five years, tripling my salary, and setting me up for another big boost if I jump again.

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
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Jul 24, 2019 - 2:46pm

agreed, the lack of financial literary plays a huge role in poverty and things like this but is never mentioned as part of the problem

Gun rights activist
Jul 21, 2019 - 5:18pm
quantgrunt:

has become a favorite rejoinder to U.S. President Donald Trump's boasts about a strong economy among Democratic politicians, including 2020 presidential candidate Kamala Harris, the U.S. senator from California.

You mean the woman that used her vagina to not be in this statistic.

Ah Ok.

Jul 21, 2019 - 6:04pm

Student loans + mortgage/rent + credit card debt + (multiple) auto loans

I guess it all adds up.

One thing that I think really fucks people up, is that housing has gotten considerably more expensive in places that were relatively cheap before, especially if you're renting. People seem to have gotten a bit too hung up with the ridiculously expensive cities (SF, NYC), and forgotten that many mid-sized cities have also experienced a tremendous growth the past 10-15 years, though they're nowhere near the most expensive places. If you don't have salaries that can match high rents, things can go downhill real fast for average people.

Most Helpful
Jul 21, 2019 - 8:08pm

Look, most people are just dumb. They're gonna do bad at life. They're gonna be broke, sick, and tired. They're not gonna know why. They're gonna blame the system. Smart people will write articles about how the problem is education. As if education is the antidote to idiocy. Stupid people aren't going anywhere anytime soon. Nobody in the USA is starving to death involuntarily. Let them live their little lives and scamper around. It's good for the economy.

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/
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Jul 22, 2019 - 10:17am

I mean I sort of understand your point but this is the USA. Don't you think something like this will have long term consequences?

Array

Jul 22, 2019 - 1:44pm

Long term I think it will, its a direct cause of income inequality. Smart people find ways to squeeze more money out of lower income individuals. Get people to buy things they don't need with money they don't have, then charge them interest/fees on that money.

People in power have real reason to stop this as the whole economy is now based on borrowing money and keeping people spending. For example, we all say its cheaper to make meals yourself, but what if everyone stopped all eating out. Every restaurant worker/owner would go out of business. That could ripple through the economy.

Jul 22, 2019 - 5:53pm

like what? people been doing people shit forever

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/
Jul 22, 2019 - 1:41pm

More than anything people don't lack education, they lack discipline. (esp at the current time, how easy is it to learn something new). They can't stop themselves from spending, from eating bad or from going to bed too late.

Also, companies do more research about you and know you better than yourself. Ads are are directly targeted to get people to spend more.

Jul 22, 2019 - 3:08pm

Hilarious as always Goldie. What are your thoughts on the well-being of the dumb people? Do you think the smart and strong have a sort of noblesse oblige to the less fortunate?

Not trying to say that this old phrase should be a model for our society, just that I think when you believe that everyone gets what he/she "deserves", then, well, the people who end up doing poorly are by definition SOL.

I like to strive, and I think that America still offers many opportunities for upward mobility. Of course in a capitalistic society, there will be stratification in individual outcomes. I just wonder if there is a way to have less "broke, sick, and tired" people.

Jul 22, 2019 - 6:00pm

Here's the thing. Well first off as a disclaimer, I'm a piece of shit and nobody should listen to me. With that said, I barely even feel bad for people with no discipline. Because I used to not have discipline. You know what motivates the acquisition of discipline? Fucking misery. When your life experience is going profoundly unpleasantly, all that is left to do is to change. So if some fucking idiot is running around complaining how they can't take stairs because they had a double knee replacement which by the way only works if you do excruciatingly painful rehab afterward which none of these fatties have the will to do, well you must e feeling quite alright. You must be fine. Because if you weren't fine, you would make drastic changes. If you don't know suffering, you're barely a human to me.

Seriousky, I've been drunk for 6 days straight. I'm in a very mean mode. I don't even know if those are my true feelings. I do mushrooms and my tune changes. I decide it's my duty to save the world. Shit like that.

With all that said, society has never been set up more perfectly to promote misery in the unmotivated individual. It's impossible to feel good unless you're either dumb as fuck or very smart and hard-working.

imo for whatever that's worth if anything

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/
  • 3
Jul 22, 2019 - 9:16am

How can you make more than $100k a year and not be able to cover a $400 expense? I say this as someone with student loans and wedding expenses.

I understand the struggles of those without means, but if you're making actual money...Jesus

Commercial Real Estate Developer

Jul 22, 2019 - 11:35am

I didn't read the article (famous last words) but if it's a household income of $100k then I would assume it's 2 people making $50k, not a single person making $100k. Not that I'm excusing not having savings, but shit adds up if you both have student loans, actually pay for a phone/car/insurance and live anywhere close to a major city.

Admittedly without my bonus I wouldn't exactly be saving a lot of money every year, and didn't have shit even a few years out of college before I made my way in banking.

Jul 22, 2019 - 9:30am

It's really a layered answer.

Literally everywhere you go, someone is trying to sell you something; people are compulsive; ads are targeted directly at people; things like instagram make people feel they are missing out; ppl are lazy/work more/want more free time.

It's also wants vs needs. What realllly do you need, do you need that extra pair of shoes, or a new shirt. Could you make every meal yourself and do your laundy and clean yourself (by why do those when you can pay someone to do them and watch Netflix.)

Also, 100K isn't a TON of money. ~70K take home, take out maybe another 10K for random other items (insurance), that's 60K a year, or 5K a month. Take out housing and cars (not saying you should lease a car), food. Theres not much left. I also feel that ppl have the mindset of "I make 100K, I should be able to afford x,y z" and thats how ppl get into debt.

Jul 22, 2019 - 9:33am
ironman32:
Also, 100K isn't a TON of money. ~70K take home, take out maybe another 10K for random other items (insurance), that's 60K a year, or 5K a month. Take out housing and cars (not saying you should lease a car), food. Theres not much left. I also feel that ppl have the mindset of "I make 100K, I should be able to afford x,y z" and thats how ppl get into debt.

Yes it is.

I'm sorry, just because most of here make more than that (or are highschoolers who aspire to) doesn't change how much it really is vs. the average person.

$400 means you have to save less than $20 a paycheck. It's inexcusable for someone making $100k to not be able to set aside a $20 every two weeks.

Commercial Real Estate Developer

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Jul 22, 2019 - 9:56am

I misspoke/typed.

I agree with you, 100K a lot of money, enough to cover what should be your expenses and have savings; greater savings, I feel, than the $400 mentioned.

What I meant was, 100K isn't a ton of money in what I think people perceive it as. I think a lot of people think its enough to not spend frivolously and not worry about budgeting. Similar to $1M dollars (also a lot of money), someone in the crowd will always tell you its not a lot of money because you still have to manage it correctly.

Jul 22, 2019 - 11:15am
ironman32:

Also, 100K isn't a TON of money. ~70K take home, take out maybe another 10K for random other items (insurance), that's 60K a year, or 5K a month. Take out housing and cars (not saying you should lease a car), food. Theres not much left. I also feel that ppl have the mindset of "I make 100K, I should be able to afford x,y z" and thats how ppl get into debt.

I think it's this. 100k just isn't what it used to be, especially with how high housing, healthcare, education, and childcare costs are. And psychologically, I think when you hit a number like 100k, you might have certain expectations, with a lot of pressure around you to keep up with the Jones's and that gets expensive.

Jul 22, 2019 - 11:56am

In a city like NYC 100k for a household might be somewhat difficult but most cities COL is way cheaper. Even with rising COL, In most cities a household making 100k should be able to live comfortably.

Array

Jul 22, 2019 - 10:51am

Stats like this would always baffle me when I was in high school and college. Then I made friends that worked professionally and it started to make sense. In addition to large irresponsible purchases (one too many vacations in a year, car that's outside of a reasonable budget, etc.) many people think they can afford their bagel and coffee in the morning, eating out at lunch, and then takeout for dinner. Those add up to an extra $15-$20 a day that doesn't need to be spent.

I also have listened to a bartender complain about their student loan payments and being "poor" yet they order $12 cocktails after their shift and get their nails done every other week.

Jul 26, 2019 - 12:55am
HopefulMogul:

In addition to large irresponsible purchases (one too many vacations in a year, car that's outside of a reasonable budget, etc.) many people think they can afford their bagel and coffee in the morning, eating out at lunch, and then takeout for dinner. Those add up to an extra $15-$20 a day that doesn't need to be spent.

Hey, those bagels and coffees adds up, both in calorie and cost count!

No pain no game.

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Jul 22, 2019 - 11:47am

I recall that during the one month gov't shutdown, so many people were put on the streets because they were always one paycheck from not making their payments

Jul 22, 2019 - 2:11pm

LOL. This is actually so true. Like TBH in hs i learned more life skills out of my PE/Art classes for the real world then any of the "advanced AP classes" that I took.

Array

Jul 22, 2019 - 2:12pm

Noticed that you are a certified financial advisor. What is your take on the status quo's knowledge of handling money? When you give advice do you think people listen to you?

Array

Jul 22, 2019 - 2:58pm

real quick - no such thing as a certified financial advisor, unfortunately my industry has no way to know if the person is any good aside from opaque ranking systems. CFP is better than nothing, but even that curriculum is a lot of bullshit. I'm betting you were talking about my certified user status, but just wanted to make that clear

as I mentioned before, I have no sweeping solutions. I'm a big advocate of personal freedom, meaning you should choose to handle your money how you wish and while the gov't should protect people from false advertising, personal responsibility counts. the biggest problem is the consumerism in society, and that's not solved by more education, new tax laws, or a "program," it's up to the individual to eschew material possessions and be smart financially.

it's why I'm more a fan of mentoring and small group volunteering for kids who don't have good role models at home. change happens in spaces like that, not with a new curriculum where financially illiterate teachers teach kinds how to act with money.

and ironman32 I agree it's not the teachers job, just hoping you weren't taking a meme too seriously

Jul 22, 2019 - 2:32pm

whenever I see someone mention something like this I think about three things:

  1. If a a teacher knew how to do taxes, they probably won't be a teacher. I do agree a lot of school is archaic, but I think school budgets don't allow for changing of the curriculum/making older teacher learn more things.

  2. I think ppl get too much crossed between what your teacher should teach you and what your parents should teach you. People have an attitude that school should be all encompassing on life skills; but thats why you have parents. Maybe some parents are the best, but thats the luck of the draw.

  3. Finally, if you really want to learn taxes, take a night to read about them on google. The instructions are right on the form, and additional advice can be found in further google searches.

Jul 22, 2019 - 3:56pm

I took a personal finance class back in college and it really is interesting to see how financially literate (or illiterate) some people are. We had to take an initial test to see how much knowledge we came in knowing and the average amongst college seniors in the U.S. was about 65% (our class was about 62%). Though there were some oddly-worded questions, many were nothing more than "Which investment would be considered the most risky?"

During this class full of mostly humanities majors, we learned about financial statements, budgeting, index funds, compound interest, and went in depth on student loans and how they work. Throughout all of this, I'd say about 50% (mostly the business majors who had taken accounting and finance courses) of the class took it all to heart, while the rest just went through the motions.

I definitely advocate for colleges teaching more personal finance classes, but at the end of the day, there will always be some who won't be intentional in saving money for their future or caring to learn more about it.

Many in the class just assumed saving money for the future depended on spending less on fast food or shoes rather than learning what a Roth IRA was.

Jul 22, 2019 - 6:53pm

people are brainwashed by consumerism thanks to instagram and the comparison culture. once this all falls to shit I think minimalism will be huge.

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Jul 22, 2019 - 8:19pm

-raises hand-

I grew up in the ghetto. I was not introduced to the middle/upper income household until my late 20s (late bloomer). Many poor people grow up with the mentality that they need nice things so they do not get looked down upon...so they end up buying brand name logos, iPhones, latest gadgets, etc. However, these are the same people living paycheck to paycheck, on Food Stamps/Welfare, Section 8 Housing. For these people, it is far easier to blame the system so they get free handouts because they lack discipline for a better future/life for their kids. I mean, why change if everything is being paid for by the govt? These are the same people standing in line on Black Friday and after Christmas buying things because they need it. It boggles my mind even today.

I grew up living paycheck to paycheck until I started making friends who are highly successful, who taught me a lot of things about finances, and inspired to become a better person (also WSO). I am considered a late bloomer on all accounts. earthwalker7 gave me solid advice, as did many here, and I am running full steam ahead. I am also planning on taking a tax class this fall so I can do taxes beginning 2020.

The past few months I spent cleaning up a lot of my credit, debts that I had, and other financials that gave me headaches. I have a 4.0 GPA right now that I am proud of (after being a college dropout), credit is climbing upwards, and saved up having had a negative bank balance to at least $1k already within a month and a half.

I know plenty of lawyers and doctors, bankers/accountants and nurses who are essentially a paycheck away from losing their houses/cars right now. I lost touch with many of them because it is just depressing talking to these people. It's eye opening when you see people you once knew, are now homeless on the streets. It motivates me to work harder to succeed.

No pain no game.

  • 7
Jul 24, 2019 - 10:06am

It's evident people cannot understand how to handle money or perform basic math. This is of course extremely concerning when it is a congressperson. $20/hr is ridiculously high as a minimum wage. Let's look at Investment Banking. Assume an analyst works 80 hrs/ week for 50 weeks (2 wk vacation) and makes ~ $100k all in (not unrealistic for a middle bucket analyst at an M&A group). This translates to $25/ hr. Even though people get in through "connections" still the kid most likely went to a target school (which implies often a loan of $100k+ ) and got stellar grades. Now if we consider the COLA of NYC/SF that $25 is probably equal to or worse then $20 in a random cheap city. So should we pay high school dropouts to flip burgers the same or even more as a target college grad?? Obviously not. Look at the USSR as a prime example. Equality for all meant equality for none. Also the idea that
$15/hr is unlivable is somewhat off Assume this person works 60 hrs/ week. Now assume there is no overtime pay (which often there is). Furthermore assume a 2 week vacation is taken. All in thats $45k ... People simply cannot say that this is an unlivable wage. This is a decent wage in most cities especially if both partners are working. High school teachers are paid around that or often less. Sure you aren't living like royalty, but you can def make ends meet with some budgeting. This is simple math that anyone should be capable of performing, especially a congressperson.

P.S. I know 60 hours is considered a lot in the US but maybe people should look at other countries where people work starting before dusk and ending after dawn and still live in huts with barely enough to survive.

Array

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Jul 24, 2019 - 2:42pm

I know a handful of people breaking $45-55k yearly and it was always the case they are constantly getting by - applying for all government benefits and such.

Wouldn't raising the minimum wage cause a large portion of job losses in the country? Isn't that going to create more homeless as opposed to ending poverty?

I have been following a simple, basic F-I-R-E model lately, and this added to help me save a lot of money (while cutting down expenses). I searched through various posts on REDDIT and found it interesting. I went through a lot of things and cut them off since it would help me further with either education/career.

No pain no game.

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Jul 24, 2019 - 10:31am

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Commercial Real Estate Developer

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