The sad story is that most Americans can’t. CNN is reporting that 64% of Americans couldn’t come up with $1,000 in an emergency, according to a recent study done by the National Foundation for Credit Counseling.
That’s scary. An $1,000 expense isn’t even all that representative of a real emergency. That figure is a minor fender bender in a parking lot or a new refrigerator. It’s not even the tip of the iceberg for a major medical condition, a natural disaster, or an extended period of unemployment.
According to the study, most of those folks who can’t come up with $1,000 would be forced to put the expense on a credit card, or borrow the money from friends or family. I’m guessing that if you don’t have the money, chances are your friends and family don’t either.
If you’ve ever followed money expert Dave Ramsey, you know that having at least $1,000 in an emergency fund is one of the major things you need to do to get out of debt and achieve financial success. Having that $1,000 starter emergency fund will help you to keep your debt from growing as you’re working to dig your way out of your money troubles.
Many other financial experts say you should have at least enough money saved to handle 6 months of unemployment. Finance guru Suze Orman says you should have at least 8 months.
But how do you get to an 8-month emergency fund when you can’t even save $1,000?
You’re going to have to get tough. You’re going to have to get tough on every single expenditure you make. You’re going to have to start hammering away at your debts and locking up your credit cards so that you don’t dare add a single penny more to what you owe. You’re going to have to squeeze every penny you can from your budget.
It will not be easy. But I can promise you this: When you get that first $1,000 saved, you will feel better about your situation. When your car needs to be fixed, it will sting to take money from your savings, but you will sleep better at night knowing that the repair is paid for and that you will not owe any interest on that repair to a credit card company.
And just imagine how you would feel if you had that 8-month emergency fund in your bank account.
More money won’t solve all your problems. And we all know that money does not buy happiness. But it does offer some security during these tough economic times. And who couldn’t use more of that?
Is “getting tough” really the answer? Or is the answer getting a second or better job that pays more? I think it is a mistake to see income as always fixed, but expenses as always malleable. For a lot of people, the opposite is the case. They are borrowing money just to keep up with necessities. The only real solution is to earn more. The real “get tough” part is abandoning the things you do with your time that don’t bring a monetary return.
True, it is not always about trimming your expenses… but in this current economy it is VERY difficult to increase your income. My husband hasn’t had a pay raise in 4.5 years. We both have various side gigs… but many of those opportunities have dried up as the economy has soured. It’s not always so easy to say “Just make more money.” It really needs to be a combination of the two. You need to make more money, but you also need to curtail spending… and live within your means.
No, the answer is not living beyond your means. That’es precisely how we got in to the economy we did…
Imagine how much better off we would all be if our elected officials lived within their means!
I think that’s how our parents built the richest country on earth. By insisting that they were going to create the means to live the life they wanted, rather than accepting the life that was within the meager means offered to them. When my parents lacked the means for the life they wanted, my father took an extra job over his lunch hour and mother went back to work. Their three sons all delivered newspapers.
We live within our means. I volunteer a lot more than I work, but that is both a result of a lack of paid work and a choice I make. It is a luxury I can afford because my wife has a good job. But it is important to recognize that sometimes cutting back on other things that are important to you to save money isn’t really the best choice. The best choice is to go find the resources to pay for them.