For many years our household could not cover an unexpected bill in cash. We simply did not have a plan for our money even though we had a large income. We were living paycheck to paycheck. This meant no cash savings. When an unexpected bill popped up we relied on credit cards to bail us out. For years this strategy seems to work, as the added debt only increase our minimum payments slightly, not causing us too much pain.
This cycle went on for ten plus years before our creditors called our bluff. We had maxed out five different credit cards to the tune of $109,000 worth of consumer debt. With no more credit available and no cash on hand, we finally realized that our strategy had to change. There was no magic cash app to help mysteriously inflate our saving account. It would take hard work, budgeting and changing our money habits to finally build a cash reserve. So when I read a recent report by the Associated Press that stated Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, I can relate.
Reports Key Findings
The Associated Press-NORC Center for Public Affairs Research performed a nationwide poll of adults. Interviews were conducted during April 2016, online, and using landlines and cellphones. Here are some of the polls’ key findings:
- Most Americans, 57 percent, describe the national economy as poor and only 23 percent think it will improve over the next year.
- The public does not believe the economy has been restored since the financial crisis of 2008. Only 22 percent of people say the economy has mostly or completely recovered from the recession.
- More affluent Americans are inclined to have a rosier view of the economy, while those with lower incomes tend to be more doubtful. Two-thirds of people with annual household incomes over $100,000 say the economy is at least halfway back from the recession, while half of those with incomes under $30,000 say there has been little or no recovery.
- In general, Americans are more positive about their own finances with 66 percent describing them as good.
- However, most employed Americans have not seen a salary increase in recent years. Forty-six percent say their pay has stayed the same and 16 percent have experienced pay cuts.
- Only 28 percent of adults have confidence they would be able to find equal or better employment if they left their current position.
- Few workers expect to have enough savings to retire on their own timetable. About half, 54 percent, have little or no confidence that investments will enable them to retire when they want to leave the workplace.
- Two-thirds of Americans would have trouble immediately paying an unanticipated bill of $1,000. Eleven percent say they would not be able to pay an unexpected bill of $1,000 at all and another 45 percent report they would need to borrow money.
The result that stands out to me is the salary increase findings. In the profession, I work in and companies and vendors I work with this has not been the case. Even with family and friends, I can only recall one friend who took a pay cut to keep jobs at a company he works for. Also, polls conducted by CBS News and The New York Time in 1995, 2006, and 2007 reported similar overall finding that Two-thirds of Americans would have trouble immediately paying an unanticipated bill of $1,000. So over the last twenty years, the problem has not gotten better.
Is Education Is the Key
I can only think more education is the key. How many of us were taught financial literacy in high school or college? Has your company ever offered a financial education workshop? I realize for some being educated on financial topics will not change their bad behaviors with money, but for some, it will.
The personal finance community is a great community full of smart people who have many interesting and different stories of how they have dealt with money, debt, student loans etc. I’m just not sure blogging and podcasting will change the world. That’s why I got involved with my local school district and began championing financial literacy. We need to do more as individuals and as a community to get in front of real people and help them. If we don’t, another twenty years will go by and the finding will be the same or even worse.
So please tweet #Financialliteracy and tell me how you are going to get involved and change the course of personal finance for everyone.
[bctt tweet=”I’m helping others by… #Financialliteracy” username=”debtdiscipline”]
Could you cover an unexpected bill of a $1000 in cash? What approach would you take to try to improve your cash saving?
Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013. Who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. Brian is involved in his local community. As a Financial Committee Chair with the Board of Education of his local school district, he has helped successfully launch a K-12 financial literacy program in a six thousand student district.
I find it strange that 66% of Americans can say their financial situation is good – even though such high percent of people say they couldn’t fund a $1,000 emergency or how such a low percent believes they won’t having the savings to retire.
What in the world is the definition of a good financial situation if you can’t retire or have enough cash to pay for a small emergency?!
We have about 4-5 months of expenses in cash that we keep for emergencies only. This money sitting in a safe, liquid account allows us the security that we can invest a bit more heavily without having to worry what we would do if the furnace goes out at the same time the market takes a dive.
Good for you Thias.
I think for many people answering the poll they are just thinking short term day to day, week to week and from that point of view things are okay, but when they think longer term its not so good.
Those are some shocking stats. I agree, financial literacy needs to be stressed more in schools. Good for you for becoming active in fixing this huge problem. I think that is a great pursuit and something I’d be interested in someday as well.
Thanks! Let me know if you need any help getting started.
We very recently proved that we couldn’t cover the bill in cash (or at least weren’t willing to). We had $1,000 in savings but when I realized some things had been lost in the move, I put them on the credit card.
I think the lesson learned for me is that we need more than $1k in savings – otherwise I won’t feel secure enough to tap into the savings!
But no, I never learned anything anout financial literacy in school and I totally agree that schools / parents need to do a better job educating teens!
Thanks for sharing Kirsten. You and the family have had some out of your control circumstance. The difference is, you have the knowledge to get on track. Good luck building the e-fund!
The finding that only 28% of Americans feel they could get an equal or better job is a bit surprising. And it makes me sad. I can understand people in my age group (50+) feeling stuck but I would hope younger people feel more empowered.
I’m surprised at the tough time my seventeen year old son and daughter are having landing their first jobs, but would agree someone in their 20s or 30s with experience would/ should find it easy to increase pay.
I disagree with a lot of the key findings. I think the economy is doing great right now. I also feel bad for those who haven’t received salary increases. At least in my industry we get them every year. The inability to pay for a $1k bill is scary. I guarantee they have the income to do it, but just need to be educated on how to curb their expenses. You’re right – financial literacy is key.
I wounder if the small sample size of the poll has something to do with the outcome. Regardless I think it comes down to learning to living within your means no matter what you income.
Our company has given salary increases every year I have worked here for 5 years – I do know some people who get very low increases however (1%)
We could cover 1000 expense without any issues if we had to – would not have been the case 5 years ago though!
1% is better than nothing, but that’s not much. Glad to hear you’re on the right track!
Of course being a PF blogger, I can cover a 1,000 dollar bill. The stats to me are a bit worrisome, that people still feel we are in the same boat as during the financial crisis. In my opinion while real wages have not gone up as much as people would like I feel the economy has improved since then. Good luck and keep on saving.
I wouldn’t expect anything less EL! It is troublesome because I agree generally I think things have improved.
I can relate with the salary increases being on hold. I had been with my new company for 2 yrs before I got a modest 3% salary increase, just this past week actually. However, to put it in perspective, my company hasn’t done massive layoffs (yeah!) in the downturn (Oil and Gas industry) and it still beat Mrs. SSC’s $300/year “raise” she got before she left her company. I think that was effectively a 0.001% raise.
Like others, we could cover most emergencies with cash if needed and have a sizeable emergency fund now – again increased due to fear of dual layoffs. If you asked me this when I was still in school, I would have had to look and see when my next student loan was coming in, or tax refund was coming in, because short of that, the answer would be a resounding NO. My money habits have definitely changed a lot over the past 9 years.
Good for you Mr. SSC. I think many of is share that story, we all have come from a not so good place with money and turned things around. That’s give me hope for many of the other people out their still struggling.
We definitely could not cover an unexpected bill in cash right now! We are working on it and blogging about it at http://www.redtwogreen.com — we have more than $560k in student loan debt. We are side hustling like CRAZY and working full time to chip away at it, but definitely feeling the stress of not being able to afford if something unexpected were to happen.
I hope those large students loans led to big income. Good luck Amber!
The stats are pretty scary. You would think that this was limited to low income workers but I have co-workers with good incomes who can’t cover such an emergency. They’re living paycheck to paycheck and rely on their credit cards. It’s a dangerous path to be on because an emergency will really trip you up.
We were in that same position for years and I know too many people making six figure salaries with no savings or plan beyond a credit card if an emergency presented itself.
I can easily cover a $1,000 bill with cash, but there were times in my life when that would have been a stretch. It’s scary to think of so many households being that close to an emergency. We definitely need more financial literacy taught in schools as well as out of them. Certainly there’s a wealth of info online if you look for it, but I’d like to see it more where people don’t have to look for it…local talks and seminars, television shows, etc.
Agreed Gary. Sometime have support, accountability from others can really make a difference.
One of the main reasons we are getting out of debt is to help make our situation more stable in anticipation of another economic downturn. I feel like this country is on a fast track to a huge crash. These stats verify that things aren’t incredibly rosy. 🙁
I hope you are wrong Laurie, but it’s always a good idea to be prepared for the worse case.
WOW! I’m shocked but at the same time not surprised. We were in the same boat. Before last year, we scrambled. Today’s car repair bill is about $1,500, an amount that would have made us sweat before. Schools don’t provide much (if anything) in terms of financial literacy. Bloggers (like us!) do our best to shed light on finances. I think there is something more evergreen we could collaborate on–will think on this. 🙂
Thanks Claudia! I think with all of our collective knowledge and experience we can really make a difference.
We could cover a $1000 emergency, but have had times where it would have been difficult. As a blogger, of course I hope to make an impact, but, in order for that to happen, a person has to first see the need for financial change. Starting financial education in public schools from a young age is a great way to begin the change.
Great point Amanda. You have to be willing to be ready for that change. It took us a few years to get our minds ready to take that leap.
Wow, that’s some good and eye opening stuff right there. Thanks for summarizing the report. I’m shocked about how up and down the facts from the report are. Some aspects make it sound like the economy is great while others…not so much. The sad one is the salary increase line. A standard COLA isn’t enough to be inflation and the rising price of goods. In the end, consumers end up losing their purchasing power, which only hurts their ability to cover bills and maintain that $1,000 emergency fund. Luckly for me, I could have it covered. But I know many people out there that couldn’t. I hate seeing that people feel that way about things, so hopefully our economy can dig deep and find something to spark the engine soon .
Thanks again for sharing.
Bert
Thanks for commenting Bert. Generally I believe people need to react better to salary increase/decrease. I see too many family’s just spend it once it comes in on lifestyle upgrades or if they don’t receive an increase the continue to maintain their level of spending and not cut back.
Everyone show be paid what they’re worth, but sometimes you may need to make sacrifices until your situation improves.
In cash, maybe. From my bank account, yes. I don’t like to keep a lot of physical cash around most of the time, but we do have a solid emergency fund that we can use to cover these unexpected expenses.
I don’t keep $1k in cash laying around either. 🙂 but do have it in a saving account.
We couldn’t cover the $1,000 right in the second. We’d put it on the card until the next payday. If we couldn’t cover it with my check, we’d dip into savings. So… I guess that’s technically being able to cover it, right?
It’s pretty upsetting how many people are still struggling — and how few have optimistic views of the future. (Not that they necessarily should. Especially given how this election is shaping up.)
You’re on a path Abigail and that’s what counts.
I try not to get caught up in the election craziness, and just focus on what I can control.
I know bunches of people that don’t have an emergency fund. We didn’t for years, but we have for years now and it sure takes a lot of weight off the shoulders.
We’ve had a number of things happen over the past few years, and one just recently, that we’ve been able to write a check for and we will this new one.
Great article Brian! I sure wish more folks would see it and learn from it.
Keep up the great work!!
#FinancialLiteracyRocks
Thanks Keith!
This question was all too real for me this month. I had $1400 in unexpected expenses and I paid for them easily and without concern. It also reminded me why I keep $3,000 available at the ready instead of putting it away in a higher interest out of state account or investments.
The trouble for me these days isn’t how I’ll pay for things, it’s how I feel about spending money. I don’t want to give it up! Unfortunately sometimes things come up that just have to get paid.
Thanks for sharing Brian!
Good for you Elsie. I know the feeling once we had the e-fund built we didn’t want to part with the cash either. 🙂
I’m shocked in one sense. While I can see having $1000 sitting in cash is a good thing. I could see anyone trying to have it around be very tempting to use. We’ve been hit with some larger expenses the past few weeks and it’s our emergency/reserve funds that have bailed us out. I can see how it would be difficult to have to cover an extra $1000 expense when you are barely getting by. Education is definitely the answer. Thanks Brian!
I would recommend keeping it in cash under the mattress. 🙂 We keep our fund in an account with no card access, so if we need money from it we need to go to the bank. It makes us think twice about pulling cash out of that account.
Brian, I’m excited to see that you’re helping your local school district. I reached out to my local high school principal just last week to see what was needed in order for him to offer a robust, comprehensive personal finance education to his students. I’d love to hear what you’ve learned over the past two years working with your district.
Thanks Liz. Our district is open to the idea. I’ve been working with them for two years now. It has been positive, but slow to get things in place. We are a large district. We are moving in the right direction just not as fast as I have hoped. We are targeting in class curriculum and some speaking events.
I wonder how much financial literacy gets thrown around when I wonder if people know some of these important education points, but rather choose to ignore common sense in many cases. Weight loss and diabetes for example are an issue in the country/world and I believe people know what to do but rather avoid “fixing” this because it’s hard and they find a certain food/drink more important than overall health. People in general do just enough to get by. Just a couple thoughts.
I love your article, I just worry that most people have to fall down and get hurt before they make a change.
A great point Steven. It took a rock bottom moment for us before we change our bad behavior with money. I don’t think financial literacy fixes everything/everyone, but its a good place to start.
The average person always has been and always will be short sighted… and financial literacy is a long term proposition… Thus something most of the world population will never grasp onto.. No matter then approach whether it be parental guidance and educations, public school systems, or financial bloggers…
You simply can’t fix stupid.
You’re right Tim you can’t, but I really believe we need to better prepare students for life and financial education is a good place to start. Even if we move the needle by a few percentage points in the right direction I’ll take it.
Brian, I recall feeling shocked when I read the report you referenced in this post. My father-in-law emailed it to me, and I had a hard time believing it was true.
My wife and I could definitely cover a $1,000 emergency via our emergency fund and other savings. We could also simply cash flow the emergency.
I think, psychologically speaking, many people would rather hope that an emergency will not come rather than take steps to prepare for it. Breaking down that barrier is the key to changing this problem, IMO.
I could cover an unexpected bill, but not as neatly as I’d like. I’m working on that right now.
For many Americans, the economy has not improved. It does not impact John that Jay has stable pay that increases with inflation. If John hasn’t had a raise in 8 years, he is earning less. Individual economies and community economies matter a great deal. So many people are stuck or feel stuck in the city or town where they currently are. If that town does not have industry, it will be hard to advance. Not everyone is able to or desires to become an entrepreneur.
Wow, thank you for shedding light on the importance of financial literacy! I do think education is a great place to start, although opportunities for success are also important, so this knowledge can be used.
I remember the days when I could barely afford to buy groceries. An emergency savings was laughable. I was able to scrape together $600 over the course of 6 months for savings and I remember how proud I was.
Now I’m living on half of my income and I’m on my way to financial independence. 🙂 But that was only because I happened to stumble upon the world of FIRE. Otherwise I’d still be struggling to make ends meet!