As always, it's best to invest sensibly and maintain a stop loss amount. Whenever the debt-to-equity ratio deviates from your aim, switch between the two. For the goal, I suggest using a ratio similar to this one. Your debt percentage should match your years of age. Debt is 20% when you're twenty, and equity resets. Your loan percentage will fluctuate depending on how much the market rises or falls; you should adjust it to 20% and increase your equity to 80%. Consequently, according on whether it was a crash or a bull run, you would have either bought low or booked profit.
Efficient management of personal finances is more significant than the quantity of savings, irrespective of whether income is derived from investments or a job. To maximise financial results, people can consult a certified financial advisor, who can offer specific guidance and strategies to reduce costs and increase income.
@@debbielockhart7762So did I, before I lost my job, had a baby, and couldn’t find another job that paid as much, and my expenses were greater than my income. “Assistance” doesn’t “assist” as much as you would like to think. Money from family tends to have MASSIVE strings attached. Life isn’t predictable, unfortunately (I’m not in debt anymore, after pandemic, disability, inheritance, and “sorry for the loss of your husband” money; most people aren’t so fortunate, though!). 🤷♀️
@@debbielockhart7762 -- You don't give a sht... but I bet that you TAKE a sht! 😁 Anyway, same here (about taking a ...?) No! I mean that I also pay my charge card in full when due!
@@debbielockhart7762not everyone can though, sometimes something comes up it costs 2 grand, then a month later something else breaks another 2 grand, and it snow balls. I’ve been there and it sucks, when you are trying to save but then things happen and things break faster than you can recover from.
40% of Americans can't afford a $400 emergency yet 17.5% of new car purchase have over a thousand dollar payment. I'm going to go out on a limb here but maybe if most people didn't spend everything they made they could cover $400 lol. I get there are some low income etc, but big car payments will prevent you from saving money. You do not need a $65k vehicle to drive 10 miles to work every day.
Okay first of all, I absolutely need a brand new F750 with off-road capable tires and a 50,000-lb towing capacity to go to the grocery store and back, thank you very much.
@@thomaslunden lol Of course, and you deserve it lol. Make sure you buy all the extras too and the warranties lol jk. You might need a boat and jetski too. You only live once lol. I don't get that mind set. I sleep better at night with money in the bank. I get it someone needs that for their business, but too many people are broke because their car/truck.
@@thomaslunden I've always said the same people who are buying all the expensive high end stuff will be the same ones at 65 saying how can anyone afford to retire. I get some people make a lot but the majority do not. I get hobbies are expensive, and if cars are your hobby and you can afford it fine. I could have bought a ton of hamburger for what I paid for my wooded 80 for hunting.
I can afford any emergency around $10,000 and yet I do NOT feel good or even comfortable. The problem with America is even those of us who are frugal and responsible can be literally wiped out by a bad enough emergency especially medical. A disease or injury could take me from prince to pauper or homeowner to homeless in no time and that is just wrong in this "SUPPOSED" greatest country on Earth!
I was once very seriously injured in a car accident and was in critical condition for some time. I was in the hospital for 6 weeks, including three weeks in intensive care on ventilators. I underwent an 8-hour surgery, but it was unsuccessful and I became dependent on a wheelchair. A year later, I had another surgery and received a knee replacement. I stayed in the hospital for 2 weeks that time. Because of very severe pain, I was given heavy painkillers for 3 months. For a year and a half I went by cab 4 times a week to a rehabilitation center where I learned to walk again. At home I got an expensive machine with which I could train the muscles and tendons around my knee. My financial contribution to this medical treatment and transportation by cab? : $0.00 (yes, zero).... Why: I live in Europe (the Netherlands) where health care is considered a basic human right.
@@GAFB1122 you could spend 40 - 50 years working hard and saving for retirement. All those savings could be wiped out due to the need for nursing home costs, assisted living needs etc. later in life. Yep. America is a wonderful place.
Borrowing from friends and family should not be a first response. From my personal experience, no matter how apparently sincerely the borrower promises to repay the loan, month after month becomes year after year without even a token repayment...and is often followed by further requests for loans... Never lend the money. If you're willing and have the cash, make it a gift.
Great video Erin. I tell people who ask me for financial advice is to first pay off all their outstanding credit card balances and then make sure they only use the credit cards to the extent that they can pay off the balance in full every month. Then I tell them after their credit cards are in order to start saving for an emergency fund of at least 3 months of their expenses. After these two hurdles are cleared they can start saving for other things, like retirement or a child’s education. Once again, your message is spot on.
Admittedly, it took me too long to learn what the point of credit cards were if not to spend money you didn’t have. Debt is far too normalized. Thankfully I learned and am debt free now.
Should be 3-6 years emergency fund in 2024! A new furnace was estimated for me to be $12-15k, a new roof would be $10-12k, the list goes on if you have a house. If you have kids even more. Food for thought
As far as a roof or hot water heater goes, the best way to do it is to figure out how long you have until you’re going to need to replace it. Roof can be 20-30 years depending, hot water heater is about 10 years, etc. figure on what that cost is today (including any necessary labor), plug the number into the inflation calculator and then divide that by the number of paychecks you have until you get there and that’ll get you your number for how much you should be putting aside each pay period.
A new roof or furnace should not require the use of the emergency fund unless there is an unexpected catastrophe. Housing repairs and maintenance expenses should be budgeted based on the age and condition of your home, so you have the funds ready when needed. These expenses are expected when you own a house.
People need to get off social media and reassess their priorities. Cars, vacations and clothes are ridiculous things to go in debt for. Hopefully you don’t burying yourself too far before you realize this
My neighbor laughed at me when I planned 15k/yr travel expenses in retirement. I said I don't need 42 countries under my FOMO belt buckle like he does to feel fulfilled or to breathe the air near the McDonald's by the Eiffel Tower to be happy. Some people are easily convinced that they're gonna miss out on all the "fun"... and then the real fun begins... "Account Balance: $3.23"
Mostly cause cars are horrendously over priced. America is mostly based on car infrastructures so to get a great paying job you're most likely gonna drive. Or probably take public transit if it is available.
Very interesting that you touched on the reluctance to tap into emergency savings even in an emergency. This is real. I HAD $2000 in emergency savings and had actual emergencies come up. It took several months to get that $2000 and the security of having it felt really good. I’ve spent the majority of my life not having enough money for the basics so the scarcity mentality is real. If I spend that $2000 I will no longer have $2000. What if I need it? It’s a horrible vicious cycle that’s really hard to break out of.
But that's the point. The survey claim stands. It should read can you comfortably pay cash for a $400 emergency. In your case that's almost 25% of your savings! Thus I'd say you fall no you can't afford it. I don't think it should be read as absolute financial ruin but if 400 cash up front make you uncomfortable then yeah you're struggling. 400 is small nowadays and you can have 2+ of these emergencies in just 1 month.
I feel that, lol. I’ve taken it a set further and have cash prepared for future big expenses (replace car when needed, roofing, HVAC) and am not looking forward to the day I actually use it, even though I already have it. Guess it’s hard to feel differently about money even when your situation changes for the better.
Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
Agreed, I’m quite lucky exposed to personal finance at an early age, started job 19, purchased first home 28. Going forward, got laid-off at 36 amid covid-outbreak, and at once hired an advisor to help stay afloat. As of today, my portfolio has yielded over 300%, just about 10% shy of a million dollar.
Once you have built an emergency fund, and I hope you are keeping that in a separate account, you don't have to keep building the fund. Just set it up to cover what ever your target amount it. 3 to 6 months or what have you.
Got to start somewhere. It is hard to save by the time you pay for your bills, 401k, kids, etc. Keep you expenses low and it helps. Also if you are young, I would recommend investing it in the S&P500. HIstorically speaking the stock market erases all it's gains for the year from now until election day. After that it goes up over 10% in the next year. You can buy something like VOO or VOOG after the election. 10% is an additional $500. Also high yield savings accounts are good too. Keep plugging away at it.
I am OCD when it comes to debt. In fact I pay my CC off as soon as a charge post to the account. Since paying off our house in 1992, my wife and I have had zero debt for the last 32 years. If I can’t afford to pay off something immediately I don’t buy it and that includes the cars we have purchased over the last 30 plus years. We always keep plenty of money in our emergency fund, so fortunately we never worry about emergencies we can’t pay for.
I know A LOT of people who can’t pay cash for a less than $1000 unexpected expense. Sure most people can just charge $400 to a credit card, but coming up with a few hundred dollars cash is hard for a lot of people ho budget everything they have just to make rent/mortgage, car payments, food, school, etc expenses.
Regarding help from a relative: My son, who just graduated from college as an engineer and has a job, but is under 25, is getting totally hammered by the car insurance company. I told him to up the collision deductible to $2,000 and that if he got in a bad accident I would kick in the 2K. (He's got a good credit rating and he's never been in an accident.) But he is still paying something like two and a half thousand dollars a year for his one car. By contrast, us old folks are paying $1,600 a year and that covers two cars! One of the reasons people don't have funds for an emergency is that the oligopoly insurance companies are squeezing every dime out of us to keep us on the edge of desperation. All is not well in middle class America.
Great video, and I loved the bloopers! That's an adorable name for a dog by the way! I feel as if it is imperative that we all have at least 10K in a "rainy day" fund, preferably one that yields 4% interest or more. One little trick that I figured out was after I paid my car off in 2022, I continued to make a mock car payment into a savings account. Now, I can cover any car repair that the Subaru gods may throw at me.
It took a while to build our emergency fund and things just keep popping up! We just replaced our 22 year old a/c unit and we have mounting medical bills. I’m just exhausted trying to take care of things cash only at our income level. We’ve probably depleted our emergency fund about 9k this month alone. I hate debt but at the same I hate seeing my accounts diminish knowing that there’s no way I rebuild them fast enough before the next emergency.
I'd use a CC to pay for an emergency even with the cash, so I get the cash-back bonus from the card. If needed, it pushes out the due date so you can consider where to pull the money from; savings, selling stuff you don't need, etc.
Going into debt to cover an unexpected expense is not being able to cover it. The point of an emergency fund is to protect yourself from going into debt. The people who say they would use a credit card, family help, sell something, or get a loan rather than use their emergency fund, don't have an emergency fund. They might have cash, but it's only an emergency fund if you're prepared to use it when you need it and then rebuild it afterwards.
I love bloopers.Thanks for the smiles I had, Erin! Anytime I have a large expense, including emergency, I put it on my credit card that gives me 5% back for every dollar I spend. Then I pay the credit card off from my cash account as soon as it appears on my cc statement. Thank goodness for online accounts! It takes a lot of discipline, but when I redeem that 5% a month later, it feels really good 😁
@@thomaslunden i have a Capital One card that is giving me 5% back. Also, my Amazon card from synchrony gives me 5% back. I'm not sure how much longer that will last, Capital One keeps sending me offers for a different credit card, but I really like the 5% back. I suspect they want me to get rid of that card
Citi custom cash does for your highest spend category. My wife has one and buys all our groceries with it. I have one and buy all our gas with it. 5% back on both of those for years now.
Need to increase that emergency money question to 1000.00. I had to go into savings for a 10,000.00 roof repair. Took 8000.00 from savings and got a 2000.00 personal loan. Paid off the loan early last month.
Good video and discussion Erin. Your analysis and discussion points are all valid IMO. This will ruffle some feathers but IMO, we have a huge segment of our society that are financially ignorant and simply don't know what to do or the ability to see what they are doing is harmful. We don't teach about basic finances or money handling in schooling and few will receive it at home. Additionally, there are basic differences in humans and kids raised in the same household can emerge vastly different in the life choices. Keep up the great content Erin, for those that find your channel, you will be very helpful if they listen, learn and implement the change in their behavior. Have a blessed week Erin. Larry, Central Valley, Ca.
I agree there's plenty of financial ignorance out there, but still think the problem isn't a comprehension one, but rather an attitude one. It's BASIC to understand if you want to accumulate wealth, you'll have to spend less than you make. Delayed gratification is no longer in fashion, and hasn't been for decades. Debt has been normalized, social media has mental midgets spending themselves into the poorhouse... These people can't see 24 hours into the future, nevermind a few decades when they're old and destitute. I do have empathy for them though. It's harder than ever to get ahead. But that's just more reason to get on it immediately. Cause it's also harder than ever to climb out of a debt hole, so don't go there in the first place!
@@dstevens518 I agree with most of your comments and it's what I meant when I said there are basic differences in humans (without elaborating). I do strongly feel it is a combination of lack of knowledge/understanding and attitude.
I teach math to kids. MOST kids HATE hate hate word problems, but since the THIRD grade we teach saving, interest, compound interest, book-keeping, "How many apples can you afford if you only have XXX money?" , car financing, depreciation, house financing, lottery winnings, you name it. Nearly EVERY financial situation an adult can have, we've teach for EIGHT years or more. This has been going on for at least 6 decades, if not longer. If one or two of your teachers miss it, the other SIX will catch it. If the teachers forget, the word problems are in EVERY SINGLE MATH textbook as a reminder. I teach these kids, use examples, and try everything, but they are just too "cool" or "consumed by fun" to ever bother learning these lessons. As a middle-aged person, I see videos like this and just think "We tried to tell you." What's the trope of the math teacher?...not sexy, not cool, glasses, bad clothes....DEFINITELY not a cool person to listen to. It's not lack of education....it's kids being kids. Maybe they should listen to SOME of their elders and start blaming themselves instead of the 8 years of people who tried to teach them.
I don't think the problem is teaching since most of us know how to use tools like calculators..... But I do feel there is an income issue rather than a behavior problem. I have always though we can't save, spend etc. what we don't generate!!!!
I know a couple of those people, and almost without exception, they do have money to stop at Starbucks every morning. They have the money to lease a big truck for $600 - $800 a month! They always have money for non-essential expenses! I understand there are people hurting, but from my experience, most that I know could easily fix the problem by changing their spending habits.
Yup, easy as in there is enough income and expense flexibility to change things up immediately, so there's a positive cash flow to pay off debts and accumulate savings. BUT not so easy for them cause they're slaves to their conveniences, lifestyle toys, and social media competitiveness.
That's the comment I was looking for. I know people that swear they are being thrifty but, when they are stressed for money they say they have no food at home so they "save" money by eating fast food at a restaurant. Personally, I almost never eat at a restaurant even though I can afford it. I make much healthier choices at home. $2 for a healthy meal at home always beats $12 at McDonalds for me.
@@jerrym3261 Pretty hard to have a $2.00 meal, even at home these days. Even when they’re in season and on sale you’d be hard pressed to buy a head of lettuce and a bag or carrots for two bucks.
@@1971_Chevelle_SS My meals average less than $2 and I really like what I eat. 350 days out of the year I eat oats for breakfast. I buy 50 lbs of thick rolled oats or oat groats from Azure Standard at about 70 cents a pound so less than 30 cents for what I eat per day. Milk, salt, imitation vanilla and saccharin can't add much cost. The other meals, I like but, limit myself to every other day dried beans made in several day batches in a Instant Pot. Milk is $1.85 a gallon here and I make Greek yogurt in the Instant Pot. Meat I buy on sale and keep a supply in the freezer. A pound of frozen vegetables is a dollar on sale, canned less than 50 cents on sale. My beverages are a morning coffee and tap water. In a nut shell, I buy and eat what my mom did 60 years ago, avoiding most processed and convenience foods. I should eat less than I do so, I don't need things I would eat more of. Eat to live not live to eat.
I am so fortunate to be earning interest on interest instead of having to pay interest on interest. Thanks for your video some months ago on HYSA’s. What’s the old saying? Those who understand compound interest….earn it; those who don’t…pay it. Thanks so much.
As a Greek, I really do not know anyone here unable to afford a $400 emergency. This can not be true for America, where salaries are x3 - x10 more, UNLESS you mean that they had already spent everything on Uber and DoorDash and impulse purchases, etc.
And that's what Americans do. They maintain 5 figure credit card debt because they can't resist consumerism. Few respect concepts such as compound interest and budgeting
The pink elephant in the middle of the cocktail party that that no one want's to see but is in the room, is you have the haves and the have not's. We use this information either side of the coin to gas light ourselves. This is and has always been thru all of time the bell weather of a race to the bottom.
...and always having a cigarette going. I know of someone like that. Cigarettes, tattoos, trying to get pregnant with #6, but she's always complaining about "struggling!" ...while the family gets hundreds in "food stamps" and other handouts.
Americans are way too comfortable treating debt as cash in their pockets. Second only to us Canucks up north! Ironically enough, for a long time I'd be the type to sell something, even if I had five figures in reserves.
'... tension or strain on a relationship'? I'm now at breaking-point with my 'Prodigal Brother'. Can I afford to help him? Yes. But can he do simple things to manage his affairs better? Yes, yes, yes. Good video.
Cards are a handy tool for unexpected or high value ticket items. I have two cards that are lay away cards, one gives a zero interest on a $1000 purchase once a year- for this you pay 1/12 of the purchase value every month. My largest costs are seasonal, big in the spring and big in the fall. All these go on the credit card, and what I cannot pay off goes onto a 3 month term at 0.9% a month for that card, and 0.5% for the second card. Mostly, I can pay these off in under 3 months, so basically under a 3% interest rate for the big ticket items. Absolutely everything I buy goes through these cards, cash back, plus it is my lazy way to monitor my budget. I make sure that all of the small items are paid at the end of the month, plus the monthly layaway items.
That's a great point about how people might have individual weird situations where they would use a credit card even if they have cash to cover an emergency expense. In my case I have a $5000 minimum balance requirement at each of two banks (worth it, for the enormous perks they provide), but there's a sizable penalty if your balance drops below that mark. $10000 is already 3 months expenses so I have the emergency fund covered. But if I run into any unexpected expenses, the credit card doesn't charge interest if I pay the full balance every month, so on to the credit card they go (and I invest less money next month to compensate).
Yeah, there's not enough words in the question to really be clear and to make sure everyone interprets it the same way. I don't carry a credit card balance from month to month, but I exclusively use credit cards for all daily purchases and expected or unexpected expenses. I pay for virtually nothing directly with cash or debit, but I pay off my credit cards before I'm charged interest. So depending how the question is phrased and how I interpret it in that moment, I might represent myself as someone who can handle the $400 emergency "in cash" in the sense that I won't run up and keep debt to handle it, or I might just be like, "Oh, no, I don't use cash." and say I couldn't. And there are a lot of other ways to interpret/misinterpret the question. I could imagine someone assuming the question was asking if they were literally carrying around $400 or more of cash in their wallets that they could use, and then many people would presumably be like, "I don't keep that much cash on me." I think using more words and rephrasing it to something like, "Could you cover an unexpected $400 expense without incurring debt that you couldn't pay off in full before accumulating interest." would be better. Although still not perfect, since the person might intend to borrow an interest free loan from friends or family. It's a really tricky thing to ask without taking a lot of time to explain exactly what you mean and what information you want.
Wrong message. People can't afford a $400 emergency fund because an emergency is a job loss. Once you loose your job rent/mortgage, childcare, food, gas etc. you are already under the water with a huge negative balance.
Only now after 16 years of working a 9-5 have I finally reached nearly 15k savings after getting rid of some toxic people in my life. I feel like my life can now begin, which is a relief but also makes me feel sad for all the wasted time.
I watch a lot of personal finance videos. One glaring and common problem with a lot of people is that they spend a large majority of their money on BS they can't afford. Fast food, expensive cars, subscriptions, and other stuff adds up over time. Even with that in mind, emergencies happen and safety nets only work when people go vote to make it better and readily available..
Credit cards, used properly, can actually make you money in rewards. I used credit cards for everything, unless the vendor charges a credit card fee. I earn about $1,000 a year in rewards.
The money and source depends on the emergency too. Am I traveling with my family and the minivan transmission just blew up? Break piggy bank and cry as I drain saving to pay to get home. Or did my computer just fry? Same as cash for a year to distribute the pain with an earlier than planned upgrade. Both are emergencies of different scope, urgency, and payment methods.
Ha, don't get cancer. In just a few months the medical bills are over $70,000. Treatment has not even started yet. Just one test had a coinsurance amount of $877 and I have good insurance!
Autoimmune disease. It’s wiped out my life savings and devastated my retirement, and now I’m $12000 in debt. I spend $1200 a month on supplements that keep me alive.
I feel for you. And I'll try and not make this political but no matter which side you are on, anyone who says that what you're experiencing is ok should be your foe!!! I don't care how it gets paid, in the SUPPOSED greatest country on earth, what is happening to you is WRONG!!
@@darinherrick9224 I was once very seriously injured in a car accident. I was in critical condition for some time. I was in hospital for six weeks, including three weeks in intensive care on ventilators. I underwent an eight-hour surgery, but it was unsuccessful and I became dependent on a wheelchair. A year later, I had another surgery and received a knee replacement. I stayed in hospital for 2 weeks that time. Because of very severe pain, I was given heavy painkillers for 3 months. I was in a rehabilitation centre 4 times a week for a year and a half to learn to walk again. At home, I was given an expensive machine to train the muscles and tendons around my knee. My financial contribution to this medical treatment: $0.00 (yes, zero).... Why? : I live in Europe (The Netherlands) where healthcare is considered a basic right.
I had a subdural hematoma (brain bleed) 6 years ago. The medical bills alone were $275,000. I also lost tens of thousands in lost income. The 2 miracles that saved me were a full recovery and the VA finally covering the medical expenses. It still cost me my second home to cover everything while I recovered. What I learned, is that one real big emergency can wipe almost anybody out.
That’s so sad in America today. If you suffer an unfortunate medical catastrophe even with decent insurance potentially you could end up bankrupt due to co-pays, deductibles, out of network expenses, non-covered services. If you don’t pay you die. Health care for profit is a deadly scam.
$400 ? I am thinking that is low. If your water heater goes out and you need to buy one, the cost of just the water heater is going to be closer to $800 and that is if you are driving to your favorite building supply company, buying the hot water heater and installing it yourself. Which is what I would do. I don't even know what it would cost to do that if you had to pay someone, I am thinking closer to $2,000. I almost don't know how someone can function without a minimum of $10,000 in an emergency fund.
Lots of the people in question with little to no emergency funds, also have no house to maintain. They can't come up with the down payment. Some likely have no car to maintain either.
@@SpookyEng1 An emergency fund should cover 3 months expenses minimum. Meaning three months rent or mortgage. 3 months utility bills. Any household expense on a minimum should be included in the emergency fund. For me I don't see basic repairs or maintenance as emergency issues. I know I need to service my truck and car so I wouldn't call that an emergency. I would call a water heater going out an emergency because you don't always see that happening. I am betting most people with a solid emergency fund will hardly ever have a credit card balance as they aren't using credit to get out of emergencies. My thoughts anyway.
Here's the thing, if you have to take debt or ask someone for money cuz its not easy to take $400 out, then the survey stands. 400 is a small nunber that if finances are good should be a no brainer. Access to credit is not the same as having easy access to enough cash savings.
@jsivco3sivco785 now, no need to be salty. I just pointed out the facts. I am living alone, and it costs me 300 bucks a week on food. I rented a night in Melbourne for a family gardering recently, 1000 bucks I spent. So when I said that you are not doing well, being unable to afford 400 bucks for emergency. I was not horrible, I was just simply stated the facts. 400 is nothing these days
Seems like the economic well-being of households should be held up by the mainstream media as to whether the economy is doing well, not the stick market.
To frame it a little differently. We spend $400 a day, every day, every year, forever, on average. That's $12,000 a month, a very normal upper-middle class, non-extravagant but nice lifestyle in many places. Since I grew up poor, my parents faced a similar hurdle as Erin describes and that was my existence. I understand it perfectly. With the correct mindset, very hard work and or course some luck, you can move past it and you work in a new context where $400 is "tonight's entertainment."
yep ..... please stop .... < face > .... please stop LOL !! so great -- hmm, peanut buttercup ----- is that like using the first + middle names to call down a child?
I know some folks who had to liquidate all their assets including homes to cover assisted living costs. Medicare does not cover long term care and unless you have long term care insurance you have to pay OOP. There no safety net for folks near end of days. Yes America is the greatest country (sarcasm)
giving yourself a little bit of time to pay something in the realm of $400 is the only reason I have a credit card at this point, you can give yourself over a month at times depending on your next closing date
i had something wrong with my car nice thing it was the beginning of the month giving me max amount of time to pay off my credit card before the end of the month
Thank you for looking into how the question might actually be interpreted by the survey takers. I am struck by how vague "sell something" is. A guitar (for someone who is not a professional guitar player)? A kidney? A car? Shares in a money market mutual fund? Lumping all of those things together under one option is a pretty useless. Although since only 7% of people chose that option, maybe making a survey longer to break it down further would not be worthwhile.
So many fiddley distinctions on this. Main thing that comes to mind is the difference between an "emergency" vs "unexpected expense". I mean, I have kids and adhd... It took me a looong time to properly budget and account for normal expenses that I simply wasn't expecting. Field trips, lost jackets, school supplies, clothes outgrown or trashed earlier than my ideal, lab supplies, art projects... Lots of things that are unknown unknowns and highly variable year to year that are hard to budget for.... But not exactly emergencies. An none of these are typically all that expensive in the $20-100 range, but there might be 5-6 of them in a given month, so it could be anywhere from $20-1200 in a given month. It took a few years of these expenses and averaging them out to include in the "fudge factor" of the budget. Meanwhile emergencies are things like car accidents, broken durable goods or home repairs... Things that have to be done because of broken required functionality in life rather than merely not ideal. And at least in my experience these things are often in the $1-4000 range these days. Knock on wood, this year my items have so far been kind to me, but just a couple years ago we had a water pipe burst, the stove, dishwasher, clothes drier, and had a car repair in a 2 month period... I mean... That sucks lol. When it rains it pours. We put it all on the credit card and ended up Dipping into half of our emergency fund for the bulk of it, and paying about $100 in credit card fees to cash flow the rest of it over a few months. But I'd rather pay that $100 in credit card interest than to totally drain the emergency fund to $0 and have nothing left if the emergencies kept piling on. I mean sure, odds are that the bad luck ends at some point... But I've had far worst stints of bad luck in the past, so I don't leave much to chance any more. If I had lost my job or something next, then I wouldn't want to be totally out of reserves. So yeah... I think that people on a more limited income would handle things much more like I did when my assets were far more limited. Be it an unexpected expense or emergency, it's going to happen, and it's going to happen more than once a year, and there isn't going to be cash in the account to pay for it. So in that case it all goes on the credit card, and "responsibility" becomes paying down the credit card as quickly as possible without being so cash poor that you dig yourself into a hole. Until your income rises above your day to day and expenses, that is just the best you can do. In other words the Stat isn't that you can't cover a $400 experience, because they happen to you all of the time. It is that you can't or wouldn't cover those $400 experiences with real-time cash holdings, and that you are going to end up using debt to average costs out over time instead of covering them fully each month. The problem is when the credit card payment becomes a budget item as an expected partial payment every month instead of the individual items going through the credit card being fully part of the monthly budget. Carrying that debt out more than a couple months becomes problematic and inefficient real quick. And the whole thing about a personal loan being 12%... I'm not sure that is quite the negative that you make it out to be. When credit cards are 24-32%, moving longer term debt off to a 12% card is a massive step forward. I'm pretty sure than most people considering a personal loan have more than a enough other debts or bills to meet the $1-3k minimum of a personal credit line. And more than halving the interest paid helps gain traction on turning the debt burden around and getting on the right side of finances than stubbornly paying credit cards down for years like I did. I mean, I'm proud that I did it... But could have shaved a year or two off of my efforts if I had used appropriate tools and offloaded to lower cost credit options during the pay down period. 😅 Ideal would be not getting that upside down in the first place.. But when it happens it is "more ideal" to use appropriate tools than just using what is convenient and available like a credit card.
agree w/ other commenter - thanks for sharing. I think it would be good to have someone address your first scenario of first identifying the 'unexpected' but soon-to-be-normal expenses as candidated for a sinking fund in which you keep a category of cash to cove them, just like putting in money to cover the quarterly insurance payment which is an exact amount. You seem to also be poiting out that you can't budget what you don't go back to meaasure --- " few years of these expenses and averaging them out to include in the "fudge factor" " > a great description of the process i've never seen from a finacial planner . for broken durable goods aroound the house i have seen the extimate of 1-2% of a home's FMV used for upkeep ----- i actually had a fund for some major items, like every financial planner recommends, but to fund them i committed to the 1% saved per year into a house-upkeep fund ----- seems to work. ahh ---- the old credit card arbitrage ---- i thiink in this comment section about people using cash-back credit cars to decrease the hit, as well as your idea of using a lower (12% cc) instaead of the standard revolving one at +20%. yep - used that myself, also getting credit cards w/ 0% interest (they used to waive the 3% trasaction fee - no more i don't believe) for a stipulated amount of time. if you need to stretch out payments until your money catches up ---- you do what you have to do. thanks for the comment.
if a person was not stupid and had financial discipline, then have 4 credit cards with statement close dates set 7-8 days apart. Use each card on in the first 7-8 days of each statement period. There are 3 remaining weeks of the statement period, then 3 + half week to payment, for a free float of 6 weeks. It all hinges on not being stupid
So wait, you are saying that inflation in 2023 was 37.5 percent? Where did that number come from? I thought inflation was more like 2.5 percent. So a 400 dollar emergency last year would be 410 dollar emergency today.
Go to a grocery store or a Walmart in a not so upscale area. Walk around the parking lot and look at the car tires. You will see that even in states with annual inspection requirements, there are a lot of people running around on bald tires. This is my indirect indicator that there are more people out there who can't make the $400 threshold than this review of survey data indicates. And of course this does not take into account the people who can't afford cars at all. The real underclass in suburban areas is forced to take the abysmal public transportation. Even if the bus is clean, you only see one every 2 hours. Finally, there is no mention of medical emergencies, which is absolutely the number one thing that wipes people out and forces them to make economic decisions that are absolutely not in their best interest, but they feel their hand is forced.
Erin, another great segment. The fact that most people *have* the money, but instead put it on a credit card, shows just how well the CC companies are marketing their product to us.
I find the wording of the question rather odd. Why not just ask do you have at least $400 in your bank account or at least that much available on a credit card limit? The question itself leads to interpretation and not much use imo
I still don't know how to interpret this data, because (of course) there is a wide range of people and life stage. Honestly, I feel like it is completely normal for someone in their 20's to not be able to afford a $400 emergency. Furthermore, I would guess that a majority of lower income folks too. I find it hard to believe that many/any middle aged, suburban family couldn't afford $400 in a pinch.
I would have to agree with this. Both of my children had saved up $20,000 each by working in high school. Both of them opened Roth IRAs and contributed $5,000 by the time they graduated. They did not buy a car or designer clothes. They did use some of their income to go out to the mall, shop, eat, see movies and buy boba. They both drive older hand me down cars. I remember being a kid and never having more than $300 to my name. I spent the money as soon as it came in.
welllll --- you pulled out $200 on a trip ------ then paid the $200 to your mom when you got back ------ OK, if you say so ----- eeems that Erin understood what you said. 🙂
I'm new to financial literacy. I have a question about when you said, 'just get rid of the credit card." I was told that this would decrease the average credit age of open accounts, so is this really an optimal option?
This is important. I’ve been hit with higher rates because I closed my oldest accounts in the past. I recommend freezing the card (you can do this in apps) and then cutting up or hiding the card. Distance yourself from it as much as possible!
I use a credit card for recurring cost like gas and groceries. I earn 5% and use that to pay down the balance. I also maintain a zero balance at the end of each month. That pattern helps to build a credit history. As you become more financially literate, credit cards can be useful as long as you treat them like cash.
I listen to a lot of these financial videos and I'm almost calling bs. Most everyone I know around me seems to be doing just fine and hell even comments on UA-cam seem to be pretty good. I barely have $9k between savings, investments and retirement accounts. Paid off cars for years at the age of 31 with a 100kish house. I'm struggling myself to support a wife and 2 kids and my student loan debt. Im beginning to be really suspicious of these numbers. Sounds like everyone around me is doing way better than me and idk how the hell they do it. It honestly blows my mind. No CC debt either.
"But if you are forced to sell something you need in life..." Let's be honest, as Americans there is like a 99.99999 percent chance that whatever it is, it isn't something we need. ;-)
so around 50% can pay up to 2000$ and 50% have at least a 3 month expence saved. But people stupidly take up a credit or simular loan to pay unexpected expences
$400 EMERGENCY when factoring in BIDENOMICS= $530. That seems about right when reports are showing Americans today pay $28,000 per year MORE for same lifestyle 4 years ago. Stimulus and other deficit spending is why everything is inflated. Surly there's something that be sold for $500 so interest charges aren't also financed. But what I don't get is 94% of Americans can afford a $800 smartphone. Kinda of sounds like priority issue.
Normally you should take articles like the one mentioned with a grain of salt the size of a Himalayan salt lamp. Normally someone has an agenda although some truth will be sprinkled in here or there.
If one says “I prefer to reserve the cash for other emergencies”, he/she does not have enough emergency fund. The key is to have enough buffer/cushion, not a one time coverage. But I don’t think a lot of people have the discipline to save that much of cash in this crazy economy full of consumerism.
As always, it's best to invest sensibly and maintain a stop loss amount. Whenever the debt-to-equity ratio deviates from your aim, switch between the two. For the goal, I suggest using a ratio similar to this one. Your debt percentage should match your years of age. Debt is 20% when you're twenty, and equity resets. Your loan percentage will fluctuate depending on how much the market rises or falls; you should adjust it to 20% and increase your equity to 80%. Consequently, according on whether it was a crash or a bull run, you would have either bought low or booked profit.
Efficient management of personal finances is more significant than the quantity of savings, irrespective of whether income is derived from investments or a job. To maximise financial results, people can consult a certified financial advisor, who can offer specific guidance and strategies to reduce costs and increase income.
@@Mrshuster Ahh, c'mon, man, you're just full of crap. Prove me wrong. 😘🤑😜
Looking at those credit card rates, I’m reminded of the old adage, “Being poor is expensive.”
I don't give a shit (or even know) what my credit card rates are. I pay them off in full each month.
@@debbielockhart7762So did I, before I lost my job, had a baby, and couldn’t find another job that paid as much, and my expenses were greater than my income. “Assistance” doesn’t “assist” as much as you would like to think. Money from family tends to have MASSIVE strings attached. Life isn’t predictable, unfortunately (I’m not in debt anymore, after pandemic, disability, inheritance, and “sorry for the loss of your husband” money; most people aren’t so fortunate, though!). 🤷♀️
@@debbielockhart7762 -- You don't give a sht... but I bet that you TAKE a sht! 😁 Anyway, same here (about taking a ...?) No! I mean that I also pay my charge card in full when due!
@@debbielockhart7762not everyone can though, sometimes something comes up it costs 2 grand, then a month later something else breaks another 2 grand, and it snow balls. I’ve been there and it sucks, when you are trying to save but then things happen and things break faster than you can recover from.
@@Averagegunenthusiast That's what an emergency account is for. Two to five thousand, depending on your personal situation and what you have at risk.
40% of Americans can't afford a $400 emergency yet 17.5% of new car purchase have over a thousand dollar payment. I'm going to go out on a limb here but maybe if most people didn't spend everything they made they could cover $400 lol. I get there are some low income etc, but big car payments will prevent you from saving money. You do not need a $65k vehicle to drive 10 miles to work every day.
Okay first of all, I absolutely need a brand new F750 with off-road capable tires and a 50,000-lb towing capacity to go to the grocery store and back, thank you very much.
@@thomaslunden lol Of course, and you deserve it lol. Make sure you buy all the extras too and the warranties lol jk. You might need a boat and jetski too. You only live once lol. I don't get that mind set. I sleep better at night with money in the bank. I get it someone needs that for their business, but too many people are broke because their car/truck.
Or feel the need to upgrade everytime a "new" iPhone comes out.
@@ehderguyyashootadeerorno2313 Too many people can't control their egos any more than they can control their expenses.
@@thomaslunden I've always said the same people who are buying all the expensive high end stuff will be the same ones at 65 saying how can anyone afford to retire. I get some people make a lot but the majority do not. I get hobbies are expensive, and if cars are your hobby and you can afford it fine. I could have bought a ton of hamburger for what I paid for my wooded 80 for hunting.
I can afford any emergency around $10,000 and yet I do NOT feel good or even comfortable.
The problem with America is even those of us who are frugal and responsible can be literally wiped out by a bad enough emergency especially medical. A disease or injury could take me from prince to pauper or homeowner to homeless in no time and that is just wrong in this "SUPPOSED" greatest country on Earth!
I was once very seriously injured in a car accident and was in critical condition for some time. I was in the hospital for 6 weeks, including three weeks in intensive care on ventilators. I underwent an 8-hour surgery, but it was unsuccessful and I became dependent on a wheelchair. A year later, I had another surgery and received a knee replacement. I stayed in the hospital for 2 weeks that time. Because of very severe pain, I was given heavy painkillers for 3 months. For a year and a half I went by cab 4 times a week to a rehabilitation center where I learned to walk again. At home I got an expensive machine with which I could train the muscles and tendons around my knee.
My financial contribution to this medical treatment and transportation by cab? : $0.00 (yes, zero).... Why: I live in Europe (the Netherlands) where health care is considered a basic human right.
@@geenmakkiehealth care for profit in America is destroying people’s lives
Being frugal is just a waste of time/energy. It does nothing. Invest.
@@GAFB1122 you could spend 40 - 50 years working hard and saving for retirement. All those savings could be wiped out due to the need for nursing home costs, assisted living needs etc. later in life. Yep. America is a wonderful place.
Borrowing from friends and family should not be a first response. From my
personal experience, no matter how apparently sincerely the borrower promises to repay the loan, month after month becomes year after year without even a token repayment...and is often followed by further requests for loans...
Never lend the money. If you're willing and have the cash, make it a gift.
I simply tell them to get another job or pick up more shifts..Do I look like a walking ATM. 😂
I agree. I tell myself the money a gift to prevent resentment from ruining the relationship. If they pay me back, it’s a nice surprise.
I borrowed $16k from a wealthy uncle and paid him back monthly until I had paid it all down.
Great video Erin. I tell people who ask me for financial advice is to first pay off all their outstanding credit card balances and then make sure they only use the credit cards to the extent that they can pay off the balance in full every month. Then I tell them after their credit cards are in order to start saving for an emergency fund of at least 3 months of their expenses. After these two hurdles are cleared they can start saving for other things, like retirement or a child’s education. Once again, your message is spot on.
Admittedly, it took me too long to learn what the point of credit cards were if not to spend money you didn’t have. Debt is far too normalized. Thankfully I learned and am debt free now.
Should be 3-6 years emergency fund in 2024! A new furnace was estimated for me to be $12-15k, a new roof would be $10-12k, the list goes on if you have a house. If you have kids even more. Food for thought
U mean months
@TharsanJeyachandran I think they actually did mean years (which I don't agree with, but to each their own).
As far as a roof or hot water heater goes, the best way to do it is to figure out how long you have until you’re going to need to replace it. Roof can be 20-30 years depending, hot water heater is about 10 years, etc. figure on what that cost is today (including any necessary labor), plug the number into the inflation calculator and then divide that by the number of paychecks you have until you get there and that’ll get you your number for how much you should be putting aside each pay period.
A new roof or furnace should not require the use of the emergency fund unless there is an unexpected catastrophe. Housing repairs and maintenance expenses should be budgeted based on the age and condition of your home, so you have the funds ready when needed. These expenses are expected when you own a house.
@@MyMovie5858 okay. So it’s my emergency fund than!
People need to get off social media and reassess their priorities. Cars, vacations and clothes are ridiculous things to go in debt for. Hopefully you don’t burying yourself too far before you realize this
Just bought a new Toyota Tacoma. Woohoo. 6 year loan
My neighbor laughed at me when I planned 15k/yr travel expenses in retirement. I said I don't need 42 countries under my FOMO belt buckle like he does to feel fulfilled or to breathe the air near the McDonald's by the Eiffel Tower to be happy. Some people are easily convinced that they're gonna miss out on all the "fun"... and then the real fun begins...
"Account Balance: $3.23"
Keeping up with Joneses is older than social media
Mostly cause cars are horrendously over priced. America is mostly based on car infrastructures so to get a great paying job you're most likely gonna drive. Or probably take public transit if it is available.
@@katondragonrider house prices are worse
I followed Erin's tips and I have an emergency fund!
Good decision! 👍
I’m curious who has $400 emergencies anymore, it’s usually a couple thousand dollars and it usually happens multiple times.
Very interesting that you touched on the reluctance to tap into emergency savings even in an emergency. This is real. I HAD $2000 in emergency savings and had actual emergencies come up. It took several months to get that $2000 and the security of having it felt really good. I’ve spent the majority of my life not having enough money for the basics so the scarcity mentality is real. If I spend that $2000 I will no longer have $2000. What if I need it? It’s a horrible vicious cycle that’s really hard to break out of.
But that's the point. The survey claim stands. It should read can you comfortably pay cash for a $400 emergency. In your case that's almost 25% of your savings! Thus I'd say you fall no you can't afford it. I don't think it should be read as absolute financial ruin but if 400 cash up front make you uncomfortable then yeah you're struggling. 400 is small nowadays and you can have 2+ of these emergencies in just 1 month.
$2000 is inadequate for a proper emergency fund. Keep saving.
I feel that, lol. I’ve taken it a set further and have cash prepared for future big expenses (replace car when needed, roofing, HVAC) and am not looking forward to the day I actually use it, even though I already have it. Guess it’s hard to feel differently about money even when your situation changes for the better.
Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
no one gets rich by saving in a time of high inflation, true wealth is through investing and ideally carried out by financial advisors
Agreed, I’m quite lucky exposed to personal finance at an early age, started job 19, purchased first home 28. Going forward, got laid-off at 36 amid covid-outbreak, and at once hired an advisor to help stay afloat. As of today, my portfolio has yielded over 300%, just about 10% shy of a million dollar.
bravo! mind if I ask you to recommend this particular advisor you using their service? i'm a complete noob at investing
Karen Lynne Chess is the licensed advisor I use. Just research the name. You’d find necessary details to work with and set up an appointment.
thanks for putting this out, just did a web search on Karen Lynne Chess, and she appears to be valid.
It’s taken me 2 years to save $5k for my EF…and that’s being aggressive. Ugh. So hard to save!
Once you have built an emergency fund, and I hope you are keeping that in a separate account, you don't have to keep building the fund. Just set it up to cover what ever your target amount it. 3 to 6 months or what have you.
Congrats on saving $5,000. Keep it up
I hope you’re keeping it in a high interest savings account, to help it keep up with inflation.
Got to start somewhere. It is hard to save by the time you pay for your bills, 401k, kids, etc. Keep you expenses low and it helps. Also if you are young, I would recommend investing it in the S&P500. HIstorically speaking the stock market erases all it's gains for the year from now until election day. After that it goes up over 10% in the next year. You can buy something like VOO or VOOG after the election. 10% is an additional $500. Also high yield savings accounts are good too. Keep plugging away at it.
@@ib12541hysa, at least for now, is above inflation rate
I am OCD when it comes to debt. In fact I pay my CC off as soon as a charge post to the account. Since paying off our house in 1992, my wife and I have had zero debt for the last 32 years.
If I can’t afford to pay off something immediately I don’t buy it and that includes the cars we have purchased over the last 30 plus years.
We always keep plenty of money in our emergency fund, so fortunately we never worry about emergencies we can’t pay for.
I don't care!
I can't make myself be born 40 years sooner!
I know A LOT of people who can’t pay cash for a less than $1000 unexpected expense. Sure most people can just charge $400 to a credit card, but coming up with a few hundred dollars cash is hard for a lot of people ho budget everything they have just to make rent/mortgage, car payments, food, school, etc expenses.
Regarding help from a relative: My son, who just graduated from college as an engineer and has a job, but is under 25, is getting totally hammered by the car insurance company. I told him to up the collision deductible to $2,000 and that if he got in a bad accident I would kick in the 2K. (He's got a good credit rating and he's never been in an accident.) But he is still paying something like two and a half thousand dollars a year for his one car. By contrast, us old folks are paying $1,600 a year and that covers two cars! One of the reasons people don't have funds for an emergency is that the oligopoly insurance companies are squeezing every dime out of us to keep us on the edge of desperation. All is not well in middle class America.
Great video, and I loved the bloopers! That's an adorable name for a dog by the way! I feel as if it is imperative that we all have at least 10K in a "rainy day" fund, preferably one that yields 4% interest or more. One little trick that I figured out was after I paid my car off in 2022, I continued to make a mock car payment into a savings account. Now, I can cover any car repair that the Subaru gods may throw at me.
Very nicely presented! Thank you for helping us understand what the survey really says.
Very well done, I feel many people can learn from your content. I especially enjoy the miscues at the end....we are all Human.
Thanks so much! 😊
It took a while to build our emergency fund and things just keep popping up! We just replaced our 22 year old a/c unit and we have mounting medical bills. I’m just exhausted trying to take care of things cash only at our income level. We’ve probably depleted our emergency fund about 9k this month alone. I hate debt but at the same I hate seeing my accounts diminish knowing that there’s no way I rebuild them fast enough before the next emergency.
I'd use a CC to pay for an emergency even with the cash, so I get the cash-back bonus from the card. If needed, it pushes out the due date so you can consider where to pull the money from; savings, selling stuff you don't need, etc.
Fair point
The key is to pay it off, not many people can or do
Yep, it’s a tool you can use.
@@danielponder690 Paying off the balance in full every month is not rare.
@@jjjjj479 maybe in your circle. It is not rare in my circle. But sadly I hold high balances right now.
Going into debt to cover an unexpected expense is not being able to cover it. The point of an emergency fund is to protect yourself from going into debt. The people who say they would use a credit card, family help, sell something, or get a loan rather than use their emergency fund, don't have an emergency fund. They might have cash, but it's only an emergency fund if you're prepared to use it when you need it and then rebuild it afterwards.
I love bloopers.Thanks for the smiles I had, Erin! Anytime I have a large expense, including emergency, I put it on my credit card that gives me 5% back for every dollar I spend. Then I pay the credit card off from my cash account as soon as it appears on my cc statement. Thank goodness for online accounts! It takes a lot of discipline, but when I redeem that 5% a month later, it feels really good 😁
What card, excluding store-specific 5% back cards, is giving you 5% back?!
@@thomaslunden My capitol 1 card did until about 1.5 years ago now it is 2%
@@thomaslunden i have a Capital One card that is giving me 5% back. Also, my Amazon card from synchrony gives me 5% back. I'm not sure how much longer that will last, Capital One keeps sending me offers for a different credit card, but I really like the 5% back. I suspect they want me to get rid of that card
Citi custom cash does for your highest spend category. My wife has one and buys all our groceries with it. I have one and buy all our gas with it. 5% back on both of those for years now.
@@MeltingRubberZ28 Thnx for the info
Need to increase that emergency money question to 1000.00. I had to go into savings for a 10,000.00 roof repair. Took 8000.00 from savings and got a 2000.00 personal loan. Paid off the loan early last month.
Good video and discussion Erin. Your analysis and discussion points are all valid IMO. This will ruffle some feathers but IMO, we have a huge segment of our society that are financially ignorant and simply don't know what to do or the ability to see what they are doing is harmful. We don't teach about basic finances or money handling in schooling and few will receive it at home.
Additionally, there are basic differences in humans and kids raised in the same household can emerge vastly different in the life choices. Keep up the great content Erin, for those that find your channel, you will be very helpful if they listen, learn and implement the change in their behavior. Have a blessed week Erin. Larry, Central Valley, Ca.
I agree there's plenty of financial ignorance out there, but still think the problem isn't a comprehension one, but rather an attitude one. It's BASIC to understand if you want to accumulate wealth, you'll have to spend less than you make. Delayed gratification is no longer in fashion, and hasn't been for decades. Debt has been normalized, social media has mental midgets spending themselves into the poorhouse... These people can't see 24 hours into the future, nevermind a few decades when they're old and destitute. I do have empathy for them though. It's harder than ever to get ahead. But that's just more reason to get on it immediately. Cause it's also harder than ever to climb out of a debt hole, so don't go there in the first place!
@@dstevens518 I agree with most of your comments and it's what I meant when I said there are basic differences in humans (without elaborating). I do strongly feel it is a combination of lack of knowledge/understanding and attitude.
I teach math to kids. MOST kids HATE hate hate word problems, but since the THIRD grade we teach saving, interest, compound interest, book-keeping, "How many apples can you afford if you only have XXX money?" , car financing, depreciation, house financing, lottery winnings, you name it. Nearly EVERY financial situation an adult can have, we've teach for EIGHT years or more. This has been going on for at least 6 decades, if not longer. If one or two of your teachers miss it, the other SIX will catch it. If the teachers forget, the word problems are in EVERY SINGLE MATH textbook as a reminder.
I teach these kids, use examples, and try everything, but they are just too "cool" or "consumed by fun" to ever bother learning these lessons. As a middle-aged person, I see videos like this and just think "We tried to tell you." What's the trope of the math teacher?...not sexy, not cool, glasses, bad clothes....DEFINITELY not a cool person to listen to. It's not lack of education....it's kids being kids. Maybe they should listen to SOME of their elders and start blaming themselves instead of the 8 years of people who tried to teach them.
I don't think the problem is teaching since most of us know how to use tools like calculators..... But I do feel there is an income issue rather than a behavior problem. I have always though we can't save, spend etc. what we don't generate!!!!
Fabulous job unpacking this survey data, and the consequences of using various kinds of credit:-)
I know a couple of those people, and almost without exception, they do have money to stop at Starbucks every morning. They have the money to lease a big truck for $600 - $800 a month! They always have money for non-essential expenses! I understand there are people hurting, but from my experience, most that I know could easily fix the problem by changing their spending habits.
Yup, easy as in there is enough income and expense flexibility to change things up immediately, so there's a positive cash flow to pay off debts and accumulate savings. BUT not so easy for them cause they're slaves to their conveniences, lifestyle toys, and social media competitiveness.
Well said, most people spend money on the things they want instead of preparing for their needs.
That's the comment I was looking for. I know people that swear they are being thrifty but, when they are stressed for money they say they have no food at home so they "save" money by eating fast food at a restaurant. Personally, I almost never eat at a restaurant even though I can afford it. I make much healthier choices at home. $2 for a healthy meal at home always beats $12 at McDonalds for me.
@@jerrym3261 Pretty hard to have a $2.00 meal, even at home these days. Even when they’re in season and on sale you’d be hard pressed to buy a head of lettuce and a bag or carrots for two bucks.
@@1971_Chevelle_SS My meals average less than $2 and I really like what I eat. 350 days out of the year I eat oats for breakfast. I buy 50 lbs of thick rolled oats or oat groats from Azure Standard at about 70 cents a pound so less than 30 cents for what I eat per day. Milk, salt, imitation vanilla and saccharin can't add much cost. The other meals, I like but, limit myself to every other day dried beans made in several day batches in a Instant Pot. Milk is $1.85 a gallon here and I make Greek yogurt in the Instant Pot. Meat I buy on sale and keep a supply in the freezer. A pound of frozen vegetables is a dollar on sale, canned less than 50 cents on sale. My beverages are a morning coffee and tap water. In a nut shell, I buy and eat what my mom did 60 years ago, avoiding most processed and convenience foods. I should eat less than I do so, I don't need things I would eat more of. Eat to live not live to eat.
I am so fortunate to be earning interest on interest instead of having to pay interest on interest. Thanks for your video some months ago on HYSA’s. What’s the old saying? Those who understand compound interest….earn it; those who don’t…pay it. Thanks so much.
Thank you for clarifying this 👏🏼
As a Greek, I really do not know anyone here unable to afford a $400 emergency. This can not be true for America, where salaries are x3 - x10 more, UNLESS you mean that they had already spent everything on Uber and DoorDash and impulse purchases, etc.
And that's what Americans do. They maintain 5 figure credit card debt because they can't resist consumerism. Few respect concepts such as compound interest and budgeting
Living paycheck to paycheck no matter what one makes is the probkem.
Yes, living paycheck to paycheck, regardless of income, is a sign that the real issue lies in financial management, not just the amount earned.🙂
Recognize, change, reap the rewards of changed behavior.
Nah, you need to get a better job that requires a skill. Get into the trades.
I did not have my first CC until I was 28 and by then I had already saved up 100k
Work.
One option missed was the local corner loan shark.
The pink elephant in the middle of the cocktail party that that no one want's to see but is in the room, is you have the haves and the have not's. We use this information either side of the coin to gas light ourselves. This is and has always been thru all of time the bell weather of a race to the bottom.
Thank you! Also, love the blooper reels.
My dad used to have a $800 credit card he never used and kept hidden for emergencies. Other than that, he only ever used cash.
But I bet they have 500.00 for a tattoo! Or a weekend out on the town.
...and always having a cigarette going. I know of someone like that. Cigarettes, tattoos, trying to get pregnant with #6, but she's always complaining about "struggling!" ...while the family gets hundreds in "food stamps" and other handouts.
Loll that is very true
Americans are way too comfortable treating debt as cash in their pockets. Second only to us Canucks up north! Ironically enough, for a long time I'd be the type to sell something, even if I had five figures in reserves.
hey now...if the bank or credit lender says I can spend $30k on my credit card, that means I have $30k in my pocket to spend.
@@hanwagu9967So if you have your relative's card in your pocket, you can spend all their money? 😂
'... tension or strain on a relationship'? I'm now at breaking-point with my 'Prodigal Brother'. Can I afford to help him? Yes. But can he do simple things to manage his affairs better? Yes, yes, yes.
Good video.
Cards are a handy tool for unexpected or high value ticket items. I have two cards that are lay away cards, one gives a zero interest on a $1000 purchase once a year- for this you pay 1/12 of the purchase value every month. My largest costs are seasonal, big in the spring and big in the fall. All these go on the credit card, and what I cannot pay off goes onto a 3 month term at 0.9% a month for that card, and 0.5% for the second card. Mostly, I can pay these off in under 3 months, so basically under a 3% interest rate for the big ticket items.
Absolutely everything I buy goes through these cards, cash back, plus it is my lazy way to monitor my budget. I make sure that all of the small items are paid at the end of the month, plus the monthly layaway items.
I owe my soul to the company store.
That's a great point about how people might have individual weird situations where they would use a credit card even if they have cash to cover an emergency expense. In my case I have a $5000 minimum balance requirement at each of two banks (worth it, for the enormous perks they provide), but there's a sizable penalty if your balance drops below that mark. $10000 is already 3 months expenses so I have the emergency fund covered. But if I run into any unexpected expenses, the credit card doesn't charge interest if I pay the full balance every month, so on to the credit card they go (and I invest less money next month to compensate).
Yeah, there's not enough words in the question to really be clear and to make sure everyone interprets it the same way. I don't carry a credit card balance from month to month, but I exclusively use credit cards for all daily purchases and expected or unexpected expenses. I pay for virtually nothing directly with cash or debit, but I pay off my credit cards before I'm charged interest. So depending how the question is phrased and how I interpret it in that moment, I might represent myself as someone who can handle the $400 emergency "in cash" in the sense that I won't run up and keep debt to handle it, or I might just be like, "Oh, no, I don't use cash." and say I couldn't.
And there are a lot of other ways to interpret/misinterpret the question. I could imagine someone assuming the question was asking if they were literally carrying around $400 or more of cash in their wallets that they could use, and then many people would presumably be like, "I don't keep that much cash on me."
I think using more words and rephrasing it to something like, "Could you cover an unexpected $400 expense without incurring debt that you couldn't pay off in full before accumulating interest." would be better. Although still not perfect, since the person might intend to borrow an interest free loan from friends or family. It's a really tricky thing to ask without taking a lot of time to explain exactly what you mean and what information you want.
Wrong message. People can't afford a $400 emergency fund because an emergency is a job loss. Once you loose your job rent/mortgage, childcare, food, gas etc. you are already under the water with a huge negative balance.
great job breaking down the statistics and giving a true picture....numbers can be so deceiving. thank you
Why would a $400 emergency be $500 in the present?? Things are LESS affordable and pay is stagnant. Logically, people's threshold will be lower.
I love the outtakes!
Only now after 16 years of working a 9-5 have I finally reached nearly 15k savings after getting rid of some toxic people in my life. I feel like my life can now begin, which is a relief but also makes me feel sad for all the wasted time.
I watch a lot of personal finance videos. One glaring and common problem with a lot of people is that they spend a large majority of their money on BS they can't afford. Fast food, expensive cars, subscriptions, and other stuff adds up over time. Even with that in mind, emergencies happen and safety nets only work when people go vote to make it better and readily available..
Credit cards, used properly, can actually make you money in rewards. I used credit cards for everything, unless the vendor charges a credit card fee. I earn about $1,000 a year in rewards.
that's what credit card companies want you to believe. The fact is, you pay more because of reward chasing, higher cost of goods and services, etc.
The money and source depends on the emergency too. Am I traveling with my family and the minivan transmission just blew up? Break piggy bank and cry as I drain saving to pay to get home. Or did my computer just fry? Same as cash for a year to distribute the pain with an earlier than planned upgrade. Both are emergencies of different scope, urgency, and payment methods.
Good point.
The last time I couldn't afford a $400 emergency I was nine years old. Forty-eight years ago...........
ahh cool --- Ritchie Rich... LOL
Ha, don't get cancer. In just a few months the medical bills are over $70,000. Treatment has not even started yet. Just one test had a coinsurance amount of $877 and I have good insurance!
Autoimmune disease. It’s wiped out my life savings and devastated my retirement, and now I’m $12000 in debt. I spend $1200 a month on supplements that keep me alive.
I feel for you. And I'll try and not make this political but no matter which side you are on, anyone who says that what you're experiencing is ok should be your foe!!!
I don't care how it gets paid, in the SUPPOSED greatest country on earth, what is happening to you is WRONG!!
@@darinherrick9224 I was once very seriously injured in a car accident. I was in critical condition for some time. I was in hospital for six weeks, including three weeks in intensive care on ventilators. I underwent an eight-hour surgery, but it was unsuccessful and I became dependent on a wheelchair. A year later, I had another surgery and received a knee replacement. I stayed in hospital for 2 weeks that time. Because of very severe pain, I was given heavy painkillers for 3 months. I was in a rehabilitation centre 4 times a week for a year and a half to learn to walk again. At home, I was given an expensive machine to train the muscles and tendons around my knee.
My financial contribution to this medical treatment: $0.00 (yes, zero).... Why? : I live in Europe (The Netherlands) where healthcare is considered a basic right.
I had a subdural hematoma (brain bleed) 6 years ago. The medical bills alone were $275,000. I also lost tens of thousands in lost income. The 2 miracles that saved me were a full recovery and the VA finally covering the medical expenses. It still cost me my second home to cover everything while I recovered. What I learned, is that one real big emergency can wipe almost anybody out.
That’s so sad in America today. If you suffer an unfortunate medical catastrophe even with decent insurance potentially you could end up bankrupt due to co-pays, deductibles, out of network expenses, non-covered services. If you don’t pay you die. Health care for profit is a deadly scam.
$400 ? I am thinking that is low. If your water heater goes out and you need to buy one, the cost of just the water heater is going to be closer to $800 and that is if you are driving to your favorite building supply company, buying the hot water heater and installing it yourself. Which is what I would do. I don't even know what it would cost to do that if you had to pay someone, I am thinking closer to $2,000. I almost don't know how someone can function without a minimum of $10,000 in an emergency fund.
Lots of the people in question with little to no emergency funds, also have no house to maintain. They can't come up with the down payment. Some likely have no car to maintain either.
I think for most people $2k would be reasonable. Now if you have an unstable job, old house and drive old cars= 10k emergency + 3-6 months expenses.
@@SpookyEng1 An emergency fund should cover 3 months expenses minimum. Meaning three months rent or mortgage. 3 months utility bills. Any household expense on a minimum should be included in the emergency fund. For me I don't see basic repairs or maintenance as emergency issues. I know I need to service my truck and car so I wouldn't call that an emergency. I would call a water heater going out an emergency because you don't always see that happening. I am betting most people with a solid emergency fund will hardly ever have a credit card balance as they aren't using credit to get out of emergencies. My thoughts anyway.
@@SpookyEng1what you say is true but it boils down to this: the less money you have, the more money you need.
You make good quality videos that are informative and enjoyable to watch. Keep up the good work.
Thank you very much! 😊
I'm retired in the USA and just spent $10,000 on dental work. Nothing is cheap ! No dental insurance for retirees !!
Ouch! For my day job, I actually have a dental insurance claim processing company 😊 I like teeth 🦷
I paid 10,000 for my implants,my insurance wouldn't cover them
My dental insurance is worth $0.25 to $0.30 on the dollar. If you had dental insurance, you still would be looking at a $7,000 bill.
Here's the thing, if you have to take debt or ask someone for money cuz its not easy to take $400 out, then the survey stands. 400 is a small nunber that if finances are good should be a no brainer. Access to credit is not the same as having easy access to enough cash savings.
Regardless of the situation, if u can not afford 400 bucks for an important item, u are not going well.
Regardless of the situation, if YOU cannot spell a simple word, YOU are not going well.
@jsivco3sivco785 now, no need to be salty. I just pointed out the facts. I am living alone, and it costs me 300 bucks a week on food. I rented a night in Melbourne for a family gardering recently, 1000 bucks I spent. So when I said that you are not doing well, being unable to afford 400 bucks for emergency. I was not horrible, I was just simply stated the facts. 400 is nothing these days
Seems like the economic well-being of households should be held up by the mainstream media as to whether the economy is doing well, not the stick market.
Insane to think $400 is an emergency. I spend that on groceries every 10 days
Yes that’s a weekend out with the family.
You're spending too much on groceries.
@@MusiKo14 family of 4 plus dog here and $400 every 10 days is on par.
Family of 4 here plus big dog, we spend about $300 weekly on groceries, all at Costco.
To frame it a little differently. We spend $400 a day, every day, every year, forever, on average. That's $12,000 a month, a very normal upper-middle class, non-extravagant but nice lifestyle in many places. Since I grew up poor, my parents faced a similar hurdle as Erin describes and that was my existence. I understand it perfectly. With the correct mindset, very hard work and or course some luck, you can move past it and you work in a new context where $400 is "tonight's entertainment."
Hi Erin, great video! And I’m loving your outtakes! 😊 How is your son doing? Hope you have a blessed week 😊
Everyone is doing well over here! I hope you are doing well, Mark! I hope you have a great week 😊
yep ..... please stop .... < face > .... please stop LOL !! so great -- hmm, peanut buttercup ----- is that like using the first + middle names to call down a child?
😂 unfortunately, I raised a dog to realize that he’s a never in trouble for anything that he does 😂
@@ErinTalksMoney😂
@@ErinTalksMoneyI’m glad to hear that. Everything is going well with me also. You look amazing in purple. Have a blessed day 😊
"It's never about how much you earn but how much you've SAVED is the key to Survival!"- John Antonelli, my ex employer's father and my best friend.
I know some folks who had to liquidate all their assets including homes to cover assisted living costs. Medicare does not cover long term care and unless you have long term care insurance you have to pay OOP. There no safety net for folks near end of days. Yes America is the greatest country (sarcasm)
giving yourself a little bit of time to pay something in the realm of $400 is the only reason I have a credit card at this point, you can give yourself over a month at times depending on your next closing date
Well this is interesting. You sure dug further into this than I was ever interested in. Lol
i had something wrong with my car nice thing it was the beginning of the month giving me max amount of time to pay off my credit card before the end of the month
Thank you for looking into how the question might actually be interpreted by the survey takers. I am struck by how vague "sell something" is. A guitar (for someone who is not a professional guitar player)? A kidney? A car? Shares in a money market mutual fund? Lumping all of those things together under one option is a pretty useless. Although since only 7% of people chose that option, maybe making a survey longer to break it down further would not be worthwhile.
So many fiddley distinctions on this.
Main thing that comes to mind is the difference between an "emergency" vs "unexpected expense". I mean, I have kids and adhd... It took me a looong time to properly budget and account for normal expenses that I simply wasn't expecting. Field trips, lost jackets, school supplies, clothes outgrown or trashed earlier than my ideal, lab supplies, art projects... Lots of things that are unknown unknowns and highly variable year to year that are hard to budget for.... But not exactly emergencies. An none of these are typically all that expensive in the $20-100 range, but there might be 5-6 of them in a given month, so it could be anywhere from $20-1200 in a given month. It took a few years of these expenses and averaging them out to include in the "fudge factor" of the budget.
Meanwhile emergencies are things like car accidents, broken durable goods or home repairs... Things that have to be done because of broken required functionality in life rather than merely not ideal. And at least in my experience these things are often in the $1-4000 range these days. Knock on wood, this year my items have so far been kind to me, but just a couple years ago we had a water pipe burst, the stove, dishwasher, clothes drier, and had a car repair in a 2 month period... I mean... That sucks lol. When it rains it pours. We put it all on the credit card and ended up Dipping into half of our emergency fund for the bulk of it, and paying about $100 in credit card fees to cash flow the rest of it over a few months. But I'd rather pay that $100 in credit card interest than to totally drain the emergency fund to $0 and have nothing left if the emergencies kept piling on. I mean sure, odds are that the bad luck ends at some point... But I've had far worst stints of bad luck in the past, so I don't leave much to chance any more. If I had lost my job or something next, then I wouldn't want to be totally out of reserves.
So yeah... I think that people on a more limited income would handle things much more like I did when my assets were far more limited. Be it an unexpected expense or emergency, it's going to happen, and it's going to happen more than once a year, and there isn't going to be cash in the account to pay for it. So in that case it all goes on the credit card, and "responsibility" becomes paying down the credit card as quickly as possible without being so cash poor that you dig yourself into a hole. Until your income rises above your day to day and expenses, that is just the best you can do.
In other words the Stat isn't that you can't cover a $400 experience, because they happen to you all of the time. It is that you can't or wouldn't cover those $400 experiences with real-time cash holdings, and that you are going to end up using debt to average costs out over time instead of covering them fully each month. The problem is when the credit card payment becomes a budget item as an expected partial payment every month instead of the individual items going through the credit card being fully part of the monthly budget. Carrying that debt out more than a couple months becomes problematic and inefficient real quick.
And the whole thing about a personal loan being 12%... I'm not sure that is quite the negative that you make it out to be. When credit cards are 24-32%, moving longer term debt off to a 12% card is a massive step forward. I'm pretty sure than most people considering a personal loan have more than a enough other debts or bills to meet the $1-3k minimum of a personal credit line. And more than halving the interest paid helps gain traction on turning the debt burden around and getting on the right side of finances than stubbornly paying credit cards down for years like I did.
I mean, I'm proud that I did it... But could have shaved a year or two off of my efforts if I had used appropriate tools and offloaded to lower cost credit options during the pay down period. 😅 Ideal would be not getting that upside down in the first place.. But when it happens it is "more ideal" to use appropriate tools than just using what is convenient and available like a credit card.
Thanks for sharing. Clearly someone talking with real life experience.
agree w/ other commenter - thanks for sharing.
I think it would be good to have someone address your first scenario of first identifying the 'unexpected' but soon-to-be-normal expenses as candidated for a sinking fund in which you keep a category of cash to cove them, just like putting in money to cover the quarterly insurance payment which is an exact amount. You seem to also be poiting out that you can't budget what you don't go back to meaasure --- " few years of these expenses and averaging them out to include in the "fudge factor" " > a great description of the process i've never seen from a finacial planner .
for broken durable goods aroound the house i have seen the extimate of 1-2% of a home's FMV used for upkeep ----- i actually had a fund for some major items, like every financial planner recommends, but to fund them i committed to the 1% saved per year into a house-upkeep fund ----- seems to work.
ahh ---- the old credit card arbitrage ---- i thiink in this comment section about people using cash-back credit cars to decrease the hit, as well as your idea of using a lower (12% cc) instaead of the standard revolving one at +20%. yep - used that myself, also getting credit cards w/ 0% interest (they used to waive the 3% trasaction fee - no more i don't believe) for a stipulated amount of time. if you need to stretch out payments until your money catches up ---- you do what you have to do.
thanks for the comment.
if a person was not stupid and had financial discipline, then have 4 credit cards with statement close dates set 7-8 days apart. Use each card on in the first 7-8 days of each statement period. There are 3 remaining weeks of the statement period, then 3 + half week to payment, for a free float of 6 weeks.
It all hinges on not being stupid
So wait, you are saying that inflation in 2023 was 37.5 percent? Where did that number come from? I thought inflation was more like 2.5 percent. So a 400 dollar emergency last year would be 410 dollar emergency today.
Something’s telling me to hang on to my job no matter what right now.
It’s not a myth sweetheart I’m out here living the reality and so are a lot of other people.
Getting a loan is a hassel for sure! I keep my credit locked at all times.
400 dollars lol that's a Trip to the grocery store.
this makes me laugh and want to cry at the same time because of how true it is 😂
One full cart lol. Sad. As a family of 4 we have to do that a few times a month.
Every visit to Costco results in a $300 bill or higher.
again, so, so true. But it makes me feel better to realize that I am not alone here.
sushi bill.
Excellent video.
Thank you very much!
Go to a grocery store or a Walmart in a not so upscale area. Walk around the parking lot and look at the car tires. You will see that even in states with annual inspection requirements, there are a lot of people running around on bald tires. This is my indirect indicator that there are more people out there who can't make the $400 threshold than this review of survey data indicates. And of course this does not take into account the people who can't afford cars at all. The real underclass in suburban areas is forced to take the abysmal public transportation. Even if the bus is clean, you only see one every 2 hours. Finally, there is no mention of medical emergencies, which is absolutely the number one thing that wipes people out and forces them to make economic decisions that are absolutely not in their best interest, but they feel their hand is forced.
Erin, another great segment. The fact that most people *have* the money, but instead put it on a credit card, shows just how well the CC companies are marketing their product to us.
Let's set the goal of being able to handle a $400k emergency anytime without dipping into the retirement fund!
Peanut butter cup is the man of house, and he wasn't having it that day.
So true 😆
Great ep
I find the wording of the question rather odd. Why not just ask do you have at least $400 in your bank account or at least that much available on a credit card limit? The question itself leads to interpretation and not much use imo
You should always have 6-12 months worth of bills, mortgage or rent in savings
Easy on the eyes and a wonderful voice speaking finance is a melting point for me. Great material!
I still don't know how to interpret this data, because (of course) there is a wide range of people and life stage. Honestly, I feel like it is completely normal for someone in their 20's to not be able to afford a $400 emergency. Furthermore, I would guess that a majority of lower income folks too. I find it hard to believe that many/any middle aged, suburban family couldn't afford $400 in a pinch.
I would have to agree with this. Both of my children had saved up $20,000 each by working in high school. Both of them opened Roth IRAs and contributed $5,000 by the time they graduated. They did not buy a car or designer clothes. They did use some of their income to go out to the mall, shop, eat, see movies and buy boba. They both drive older hand me down cars. I remember being a kid and never having more than $300 to my name. I spent the money as soon as it came in.
I heard it was $500 or $1,000. Hard to come up with this amount when over 60 percent of people live paycheck to paycheck.
I pulled $200 emergency cash from brokerage for a socal trip this weekend without blinking. Gave it to my mom when I got back.
welllll --- you pulled out $200 on a trip ------ then paid the $200 to your mom when you got back ------ OK, if you say so ----- eeems that Erin understood what you said. 🙂
very confusing...you pulled emergency cash out for a non-emergency trip?
I'm new to financial literacy. I have a question about when you said, 'just get rid of the credit card." I was told that this would decrease the average credit age of open accounts, so is this really an optimal option?
This is important. I’ve been hit with higher rates because I closed my oldest accounts in the past. I recommend freezing the card (you can do this in apps) and then cutting up or hiding the card. Distance yourself from it as much as possible!
@@abbyabroad oh ok, I see. Thank you for giving me an alternative. I'll make note of this.
Alternatively, never borrow money. Ever. You don't need a credit card.
Debit card for car rentals.
Manual underwritten mortgage for house.
Tada
I use a credit card for recurring cost like gas and groceries. I earn 5% and use that to pay down the balance. I also maintain a zero balance at the end of each month. That pattern helps to build a credit history. As you become more financially literate, credit cards can be useful as long as you treat them like cash.
Wow! Looks like half of Americans don’t know how to save and money unfortunately!
I listen to a lot of these financial videos and I'm almost calling bs. Most everyone I know around me seems to be doing just fine and hell even comments on UA-cam seem to be pretty good. I barely have $9k between savings, investments and retirement accounts. Paid off cars for years at the age of 31 with a 100kish house. I'm struggling myself to support a wife and 2 kids and my student loan debt. Im beginning to be really suspicious of these numbers. Sounds like everyone around me is doing way better than me and idk how the hell they do it. It honestly blows my mind. No CC debt either.
@aaroncalvert3922 impossible to tell. We're in a trillion dollar credit card debt
"But if you are forced to sell something you need in life..."
Let's be honest, as Americans there is like a 99.99999 percent chance that whatever it is, it isn't something we need. ;-)
😂
The only benefit to a payday loan over a mafia loan shark is that the payday lender won't break your legs for non payment.😳
so around 50% can pay up to 2000$ and 50% have at least a 3 month expence saved. But people stupidly take up a credit or simular loan to pay unexpected expences
Seems like a lot of mental gymnastics to get out of saying people are broke.
Nice.
$400 EMERGENCY when factoring in BIDENOMICS= $530. That seems about right when reports are showing Americans today pay $28,000 per year MORE for same lifestyle 4 years ago.
Stimulus and other deficit spending is why everything is inflated. Surly there's something that be sold for $500 so interest charges aren't also financed.
But what I don't get is 94% of Americans can afford a $800 smartphone. Kinda of sounds like priority issue.
Normally you should take articles like the one mentioned with a grain of salt the size of a Himalayan salt lamp. Normally someone has an agenda although some truth will be sprinkled in here or there.
Great video!
Thanks! 😊
Erin : I am so broke that I cant even pay attention let alone afford a $500.00 dollar emergency.I am so broke that even ducks throw bread at me.
that is sad -
LOL, sorry, but especially the duck part ....
Live below your WAGE
So what you are actually saying is that 40% of US residents can cover a $400 emergency or they can't...right...
If one says “I prefer to reserve the cash for other emergencies”, he/she does not have enough emergency fund. The key is to have enough buffer/cushion, not a one time coverage. But I don’t think a lot of people have the discipline to save that much of cash in this crazy economy full of consumerism.