Emergency Financial Habits

Remember that post a while back I asked about where you learn your personal financial habits and tools?

Check out this story from CNN, in a survey %64 of Americans couldn't scratch together $1000 in cash for a sudden emergency.

http://money.cnn.com/2011/08/10/pf/emergency_fund/index.htm?iid=HP_LN

Wow... that is pretty scary. I have some liquid savings, but it bothers me I don't have more and I've been trying to build that up this year. I know it makes literally pennies in interest, but I like having that emergency fund just in case. I also have a (dwindling, since I can't put into right now) HSA for unplanned medical expenses.

Scary...

madmallard wrote: Remember that post a while back I asked about where you learn your personal financial habits and tools? Check out this story from CNN, in a survey %64 of Americans couldn't scratch together $1000 in cash for a sudden emergency. http://money.cnn.com/2011/08/10/pf/emergency_fund/index.htm?iid=HP_LN

Wow. Scariest part to me was how many people said they'd borrow it from somewhere. Mallard, I know you & I disagree on a lot of political/economic stuff..but surely we agree that you can't "borrow your way out of debt"?

Notice that the "emergencies" they used were dental work and car repairs.

Those are budgeted items in my household.

That is where you can get real economy!

Needing tires to pass inspection...not an emergency! That is a known expense headed your way and they forgot to plan.

Wife crashes into the garage door..not an emergency! Kitchen makeover budget (household repairs) may be set back a while.

Stuff happens, things break...surprise!

If people pay 1/2 as much attention to financial stuff as they do their golf game or makeup or American idol or some Kardashians butt they would be in MUCH better shape.

Bruce

In reply to friedgreencorrado:

Its just troubling because the knee jerk reaction of most people hearing this is along the lines of :

"man its really some tough times for people, all having to live from paycheck to paycheck."

But my first thought instead is:

"How many people have had bad financial habits that have been glossed over by their relative low debt levels in the past, but now their habits are causing cracks in the armor?"

....peripherally related, a friend was going to 'will' his car to a young adult girl going to school and working full time, but some stuff happened and he needed his car back.

I had been her friend too and was teaching her about how to care for cars and drive and such. When I saw the condition she let that vehicle get to when he got it back I was very cross.

Among other things, I asked why its 3000 over on the oil change. I didn't like the answer.

You can't afford a car if you can't afford its maintenance. Reading this article made me think about that again...

Funny how things changes. I remember when having a steady buffer of $100 in my bank was a big deal. Now if I only had that much I'd be freaking out, living on ramen and riding MARTA to work.

Heard an interesting idea on Boortz. Any time you have a dollar bill at the end of the day, put it in a box. Pretty much put all of your dollar bills away for a year. Of course, if you do debit cards all the time that work work very well. In that case you can do an auto draft into a savings account. I do $25 a month automatically every month. Tempted to up it to $50 to see if I notice it.

In reply to madmallard:

Well, I'm sure there are people out there who are living paycheck to paycheck..but if your income's not at the poverty level, there's not much excuse, IMO.

I really like what Bruce said about the difference between an emergency and stuff you should plan for. Some of the good ol boys out here fit their trucks with lift kits & mud tires, and then complain about how terrible life is when it's time to replace tires that size. My solution: put the stock wheels back on it, buy some Sears Roadhandlers, and move on.

Coming at this from the "librul" angle, I really think one way to attack this problem is to stop participating in the consumption game. We don't buy much of anything "new". Food, toiletries, socks, underwear, consumables for the cars..and that's about it! I bought one new pair of pants and a cheap Wal-Mart tie to interview in, and that's the only new clothing we've had to buy in 5 years. Everything else is from thrift stores..and we don't look anything like the starving orphans of Bosnia. We also take good care of what we have. Do you know how much longer you can keep a piece of clothing healthy just by following the directions for how to wash it properly on the tag? I'm sure the relative rarity of the Corrado has a lot to do with it, but I'm still approached by people who think it's new.

IMO, there is simply no reason on Earth for people to be spending as much as they are for the sake of simple vanity. Would I like a new car? Of course. Can I afford it? No. The solution I choose is to drive the cool cars of the past. It seems like too many others decide to try what kind of lease they can find. I know there's a lot of folks who have very good reasons for leasing, but I'll betcha two Euros a lot of people do it just to be seen in a premium import instead of a Buick. That money ought to be going into the bank.

egnorant wrote: Notice that the "emergencies" they used were dental work and car repairs. Those are budgeted items in my household. That is where you can get real economy! Needing tires to pass inspection...not an emergency! That is a known expense headed your way and they forgot to plan. Wife crashes into the garage door..not an emergency! Kitchen makeover budget (household repairs) may be set back a while. Stuff happens, things break...surprise! Bruce

Ehh, I'm guilty of occasionally using a little bit of the emergency fund as a "slush" fund. It's then a priority to fill it back up, though!

I agree wholeheartedly. We've been brainwashed to become consumers. Once I stopped watching television and being exposed to constant yammering to "buy, buy, buy" I realized just how insidiously we've been programmed to "need" the constant flow of crap. I'm a wholehearted supporter of buying good, used goods - from appliances to clothing. Very rarely do I shop in a department store other than for basic necessities - and 99% of the time, the bargains that I find at a fraction of the price are of a much higher quality than what I could afford if I'd purchased brand new. Used to make good money in the old halcyon days of union newspaper shops, but now I subsist on a fluctuating freelancer's wage.
My emergency nest egg doesn't extend to my blown KLZE or the starter on my dakota... or the dental work I just scrimped to pay.

I just had a similar conversation this weekend at a family dinner. I was getting teased about driving my "old" car (1994 Probe GT), when everyone else in my Aunt's driveway had a car less than 5 years old.

They have no problem paying 4 or 5 hundred bucks or more a month on a car payment, yet think something older is an unreliable money pit because there's no warranty on it.

My main argument basically was, using all that money I was saving on car payments, I can afford to put a grand or two in the car every few years if I had to. And I actually have been able to build up my savings account the last 18 months!

Don't get the wrong idea, I have nothing against new cars...and was even considering a new Mazda2 myself. I just started that whole GRM way of thinking, and tried to find a fun car that does the same thing as the M2, for a fraction of the cost.

That mindset works for a LOT of things, and it's a bit more fun to look for a deal.

brainwashed? I reject this because its condescending and patronising, as tho we have no judgement or control over ourselves...

Keep in mind that most of the readership of GRM, per the last survey I saw, makes well over the national average. I would really have a tough time coming up with a $1000 without borrowing it in an emergency. Of, course the only emergency I can think of that would cost $1000 would be the deductible on my house if it burned to the ground. Or maybe an short notice flight for a dying relative. Everything else is a budgeted expense. Car repairs and medical bills aren't emergencies. I have woefully underfunded budget lines for that. But at least they are there. And, by this time next year, almost all of my debt (mortgage excluded) should be paid off.

43 years ago when we got married our bank had free checking accounts if you carried a $600 balance in your checking account. We certainly didn't at that point have an extra $600 to leave in the account.

So we decided that when we deposited our pay checks we would enter $10-$20 less than the amount of the check in the checkbook register. We eventually got the free checking and continued to do that until we had $1000 in the account that wasn't "on the books". Since the bank started paying interest on the checking account that money ($3-$4 a month) doesn't get entered either.

That money has come in handy several times. The last was a couple years ago when the refridgerator died on a Friday night. Bank wasn't open on Saturday to get money out of savings but we could and did go out Saturday and get a new fridge. Of course the money was replaced as soon as I could transfer the money from the savings account.

At the advice of my old boss, I have been taking $150 out of every check I have gotten since I entered the real world and putting it in a "do not disturb" account. Its pretty impressive by now. Unfortunately our leadership is gonna tank all that wealth, so I have also been accumulating guns, ammo, and canned goods. At least I was, until I lost all my guns in a boating accident.

$1,000? It seems a little hard to believe. Wow. Then again, maybe I get it.

When I go home and have to spend time with my wife's family I realize how dirt poor huge, huge expanses of people are. They're not the folks who come on sites like this talking about their cheap version of an expensive hobby - the version that only costs several thousand dollars. I'd guess the lot of them together couldn't come up with a grand. And there's a lot more neighborhoods like theirs across America than the one I live in.

I gotta tell you , though, it's not by and large because they waste a lot of money. Sure they waste some, but they just don't have anything. They don't make squat. They all made some stupid decisions, to be sure. Dropping out of school, having babies as teenagers- that kind of crap. But they don't have any money. Jobs like bagging groceries and such.

Yeah. I'm going to stop thinking about that now. It's pretty depressing.

How can you expect them to have an emergency fund when that new TV just went on sale.

A proper emergency fund is 3-6 months of expenses in cash. That's food, housing, power, and gas. Non-essentials can wait till after the emergency is over. Most people will never do it. They will reel from crisis to crisis their entire lives.

madmallard wrote: brainwashed? I reject this because its condescending and patronising, as tho we have no judgement or control over ourselves...

Dude, you'd be surprised. Not everyone looks at life with the clarity that you & I do. There are people out there that honestly believe that "putting up appearances" is somehow "important". I know personal anecdotes aren't really evidence..but sometimes they contain small grains of reality.

I learned how to live on less when I got divorced, and made the decision to actually pay my child support. At the time (early 1990s), in Georgia..that was between 17-25% of your gross pay-decided by the judge. The judge I got decided on 20% for me. So what happened to the $628 dollars a month I spent?

Did any of it go to a college fund for my daughter? No. (my daughter, now 20 and trying to leave a community college for a "real" one, confirms it..the tank is empty, on her mom's side) Did any of it go into a personal savings account? No. It went for "designer label" clothing for my daughter, it went for the latest & greatest electronics (phones & laptops) that money could buy, and eventually it went for part of the mortgage on the new house when (the ex's words) "..too many blacks moved into our old neighborhood..".

Waste, waste, waste! And all for nothing but the kind of "consumerist" crap Leslie & I were talking about. Throwing away the future for social posturing in the present. Odd thing is..it would have worked, if I hadn't been laid off until 2yrs from now. I've got $7K in the bank, and an additional $4K in my personal stock holdings. If my daughter's successful at getting into the university, I'll spend about $5K on it this year. Next year? Dunno. Depends on how soon I can find another job (not going so well at the moment), and what it will pay.

Apologies in advance, dude..especially about the length of my reply, and the TMI on my personal situation. I just wanted to show that "consumerism" isn't simply a knee-jerk comment that liberals make about the current social environment. There really are people who fall for that E36 M3. I actually pity the ones that aren't personally costing me money..

I have been painfully poor, I Know young people that go to bed hungry, I will not comment further.

Toyman01 wrote: How can you expect them to have an emergency fund when that new TV just went on sale. A proper emergency fund is 3-6 months of expenses in cash. That's food, housing, power, and gas. Non-essentials can wait till after the emergency is over. Most people will never do it. They will reel from crisis to crisis their entire lives.

Don't forget beer, drink, cigarettes, the latest iphone or e-gadget, team jackets and $100 tennis shoes the kids will out grow in months... and yea that TV

A $1000 emergency is a minor one. For the uninsured the ER, dental work or car repairs will go through that like popcorn.... then they say.. we so poor

fasted58 wrote: Don't forget beer, drink, cigarettes, the latest iphone or e-gadget, team jackets and $100 tennis shoes the kids will out grow in months... and yea that TV

I'm sure there are folks like that, but if you think that accounts for 60% of America, I just think you're wrong. I know too many people who haven't even thought about a beer in decades. And they're what we used to call "middle class". Something happened. It worked out well for some. Not so much for others.

[opens wallet]

my emergency fund is about $15 until friday.. but i do have about 4 bags of pop cans i could take in if it was a real emergency.

I too grew up painfully poor and that led to VERY conservative spending habits and a very large chip on my shoulder for anyone who was born on third and thinks they've hit a triple.

I have a checking account for emergencies only, a savings account and a checking account that is used for day-to-day expenses which my paycheck is direct deposited into. Any time I make over a certain amount the extra is distributed between the emergency fund and the savings account. I get paid every two weeks and one check pays all of the bills (mortgage included) and still has a fair amount left over so I'm no budgeting guru, we just live well UNDER our means. It's actually very liberating, I wish more people would do it.

I paid cash for our family vehicle ('01 Suburban), I just finished a $1,000 total cost (including the re-purchase price) rebuild of my Brighton and upon selling the wife's L she picked up a Yamaha XS400 with $100 left over. I wasn't very keen on that last purchase because I viewed it as a single purpose vehicle that couldn't transport the whole family, but, at this point it's okay to have a "want" or two instead of just needs.

At my current rate of pay it is VERY easy to save. The summer of '09 was a bit scary but we made it through and if we had to face that again it would be much easier this time around.

I also have a "Psycho Survival Stash" of canned food, weapons and cold weather gear. I've been looking into either dehydrated food or MRE's.

One of the vehicles is going to get a mild Z.A.V treatment ...maybe it should be F.A.V. (Financial Apocalypse Vehicle).

It seems people don't understand priorities. We don't have a lot of money left over each month, but earlier this year we had a storm take a bunch of siding off the house. We paid out of pocket since it was only a bit more than the deductible, and they gave us a good price on replacing a section of roof that we were going to do later in the year. We paid it and then the next few months cut back on doing some things we had planned to build back up our savings, and decided we could put off a new car for next year. People thought we were crazy because we could have charged it, paid it off at "our leasure" and not had to go without things.

My mother and stepfather built a house (really, we swung hammers) for around 105K. They sold a house that had not very much equity in previously, so let's assume the $105K plus the 20K for land was all debt. They sold it for 275k and moved into a 170k house. How much was mortgaged???

170k.

Yup.

She bought a different car when she moved (moved to SC, although not near me) - her criteria was as follows: red, convertible and 2002 or newer.

They have a TV that's size is somewhere between 50-60".

In talking about some poor homeless guy that I helped at some point, she said "you know, we're all one paycheck away".

Yup, Eddie, I believe that is the majority, right there.