“If a financial emergency struck — say, a health problem or a car that needed repair — would you be able to come up with $400? According to the Federal Reserve Board, 47 percent of Americans would have trouble doing so — they would have to sell something, borrow money or simply couldn’t pay.”
$400 in an emergency? Of course!
Without borrowing it? Sure, just put it on my credit card! (um…)
Yesterday on Weekend Edition, NPR reported the startling findings that almost HALF of US Citizens couldn’t come up with an emergency $400 without borrowing it or selling something to get it.
And think of what “in an emergency” means:
- $400 is a simple car repair.
- $400 is an airline ticket to your Aunt Ruth’s funeral.
- $400 is Fido’s vet appointment.
- $400 is a chipped tooth.
- $400 is Jr’s emergency room visit.
Before we got control of our finances, a $400 emergency would have caused us to go into a panic! And then we would have sucked it up and charged it on our already-maxed-out credit cards.This is why we have a $1,000 starter emergency fund before we do anything else. Click To Tweet
Before you can save for college, before you can budget, before you can start aggressively paying off debt, before you can invest, before you can vacation, before you can be truly generous, you must have a baby emergency fund. If you don’t, every little $400 emergency will set your whole plan back by a year!
These 47% of Americans aren’t all poor people. These are the American middle class. And they’re living paycheck-to-paycheck.
Here’s another quote from the interview:
“We have been taught that a middle-class existence is … maybe a $250,000 house, and a vacation every year, and a car for each adult, and education for the children. And, indeed, those are the very metrics that the commerce department has used in defining what a middle-class life is. But as I point out in the article… the price tag for that middle-class life is $130,000. Only 1 in 8 Americans makes $130,000. So the middle-class life that we’ve all been taught is ours — if only we work for it — is out of the reach of all but a very small number of us.”
So some of this is about contentment:Would you be content living a lifestyle you can actually afford? Click To Tweet
And some of this is about processes:Are you doing the right things in the right order to win with money? Click To Tweet
If you find that you wouldn’t have $400 in an emergency, you may need help with contentment or help organizing your finances. Who do you know that could help you with that?