Are you recession ready?
Most Americans are not.
How Recession Ready Are You?
47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all.
His article cites more statistics making the same point.
Financial impotence goes by other names: financial fragility, financial insecurity, financial distress. But whatever you call it, the evidence strongly indicates that either a sizable minority or a slim majority of Americans are on thin ice financially. How thin? 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, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses. A similar study conducted by Annamaria Lusardi of George Washington University, Peter Tufano of Oxford, and Daniel Schneider, then of Princeton, asked individuals whether they could “come up with” $2,000 within 30 days for an unanticipated expense. They found that slightly more than one-quarter could not, and another 19 percent could do so only if they pawned possessions or took out payday loans. The conclusion: Nearly half of American adults are “financially fragile” and “living very close to the financial edge.” Yet another analysis, this one led by Jacob Hacker of Yale, measured the number of households that had lost a quarter or more of their “available income” in a given year—income minus medical expenses and interest on debt—and found that in each year from 2001 to 2012, at least one in five had suffered such a loss and couldn’t compensate by digging into savings.
This fits what I see in my practice.
It relates to another statistic in his story, 65% of Americans are financially illiterate.
Over half of 401(k) accounts have loans taken out against them.
We listen to the spiel from the gal human resources has in to explain it, and sign up.
It is a good deal. If it is money you can afford to save.
“Buy now, pay later” has replaced delayed gratification.
When I was growing up, and I am in the baby boomer demographic, we were taught to save for what we wanted, then buy it. That has been gone for a while.
You can check my student loan blog for my rants about raising a generation to borrow piles of money that they have no real understanding on how to pay back.
What would it take to put you in a financial hole?
More on this next week.