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Large Share Of Americans Are Unprepared For Financial Emergency

RDS

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Sounds like a rich country but most live from paycheque to paycheque. So whom do you blame.
For 47-year-old mom Kim Norton, it’s a “constant battle” to find enough money to even pay her bills, let alone save up.
“I rob Peter to pay Paul; I don’t spend my money frivolously on crap; I just make sure my kids have what they need,” Norton, who works part time as a research coordinator through a temp agency, told The Huffington Post. “I get really wound up thinking about how you just can’t get ahead.”
A single mother of four living in Bangalore, Maine, Norton says she often writes checks for bills without enough money in her bank account to pay them, hoping the check won't clear until her next paycheck arrives. Between rent, child care and other necessities, Norton says her expenses cost more than she earns, leaving her without a cushion to fall back on in case of emergencies.
More than three-fourths of Americans don’t have enough money saved to pay their bills for six months, according to survey results released Monday by Bankrate. Half of the survey respondents said they had less than three months’ worth of expenses saved up, and more than one-quarter -- like Norton -- have no reserves to draw on in case of emergency.
75 Percent Of Americans Don't Have Enough Savings To Cover Their Bills For Six Months: Survey
 

ChunkySalsa

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Sounds like a rich country but most live from paycheque to paycheque. So whom do you blame. 75 Percent Of Americans Don't Have Enough Savings To Cover Their Bills For Six Months: Survey
They're all lazy entitled freeloaders who take their paycheck for granted and waste money on luxuries like refrigeration, indoor plumbing and microwaves. The country and the economy would undoubtedly be much better off if they stopped spending money and learned to live like 3rd world peasants.

We should definitely not take a macroeconomic approach and talk about why people in general don't have much money, what industries are laying claim to these stifling debts, and how laws were written to favor those industries to the detriment of every other facet of the economy.
 
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gavinfielder

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They're all lazy entitled freeloaders who take their paycheck for granted and waste money on luxuries like refrigeration, indoor plumbing and microwaves. The country and the economy would undoubtedly be much better off if they stopped spending money and learned to live like 3rd world peasants.
I've been thinking this myself. It looks like the best (only) way to accumulate capital is to simply be homeless.
 

RDS

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I've been thinking this myself. It looks like the best (only) way to accumulate capital is to simply be homeless.
You do have about 600,000 homeless people there. So I guess they are all budding millionaires.
 

mak2

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About 6 years ago I was saving 17% of my gross and had about 5k on hand all the time, we make great money and had insurance. then my wife had a major medical event that went over 1 million. We are just about caught up. Nobody can save enough for medical problems.
 

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You do have about 600,000 homeless people there. So I guess they are all budding millionaires.
We have over 300 million people, so 600,000 homeless is is like two tenths of one percent. most of them are homeless because they chose to be, or because of metal illness of some sort. Many of those homeless people stay in government or private shelters, so they probably even shouldn't be called homeless.

There are several reasons that our savings rate is so low. First is that we have become accustomed to the expectation that every generation should have a higher standard of living that the previous generation. Yet the real median income stopped increasing in the late 1970's, thus for my generation to have a better standard of living than our parents, that means less savings and more debt.

The second reason is related to the first. We have growing income disparity in the US. The mean average income has increased quite a bit since the late '70's, but it's all gone to the top few percent. These leaves the top few percent with more money than they have a need for, and the median income earner with the inability to have the same real income as our parents did. Those with excess wealth seek to obtain a rent on their wealth by renting it out (loaning), and those who don't have the wealth that we would have expected seek to obtain wealth, so we borrow from the rich. Our high level of personal debt is probably the best measure of income disparity.

The third reason is that many of us are tending to wait longer in life before we start saving. We spend our money, and more, on providing a nice childhood to our children (because just as we expected to live a better standard of living, we expect our children to have a better standard of living).

Another reason is that we have saftey nets. We have unemployment compensation, welfare, foodstamps, SCHIP, the emergency room can't turn us down for care, and we also have medicade, medicare, and social security. I suspect that if we did away with our safety net system, we would tend to save more.
 

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Villiage Idiot
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About 6 years ago I was saving 17% of my gross and had about 5k on hand all the time, we make great money and had insurance. then my wife had a major medical event that went over 1 million. We are just about caught up. Nobody can save enough for medical problems.
$5,000 was enough for you to live 6 months?

Anyhow, I feel your pain. During late 2008 and early 2009 I blew through my savings trying to keep my employees. The recession hit us late, but when it hit, it was devistating to my business - we lost over 50% of our business overnight. I kept paying employees, just because I expected the economy to have a more rapid recovery, and I was concerned that when the recovery did come, I would need them. As it was, we never really saw a recovery, and we had to gradually cut our staff. Anyhow, I never had a lot of savings, but what we did have was gone in less than 6 months.
 

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I leave the "who" alone to try to not be too partisan, and change it to "what". I blame one of two things:
1) Declining wages, longer hours, and higher prices for the middle and lower classes. In a period of record profits and growth, this is just plain silly. The article even mentions this:
The annual wages of the bottom 90 percent of workers declined between 2009 and 2011, according to a January analysis from the left-leaning Economic Policy Institute. The wages of the top one percent rose 8.2 percent during the same period.
2) The idea that lack of birth control somehow stops people from having sex (covering the "Kim Nortons" of the world, that had kids a little earlier she expected to) :p.
 

RDS

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We have over 300 million people, so 600,000 homeless is is like two tenths of one percent. most of them are homeless because they chose to be, or because of metal illness of some sort. Many of those homeless people stay in government or private shelters, so they probably even shouldn't be called homeless.

There are several reasons that our savings rate is so low. First is that we have become accustomed to the expectation that every generation should have a higher standard of living that the previous generation. Yet the real median income stopped increasing in the late 1970's, thus for my generation to have a better standard of living than our parents, that means less savings and more debt.

The second reason is related to the first. We have growing income disparity in the US. The mean average income has increased quite a bit since the late '70's, but it's all gone to the top few percent. These leaves the top few percent with more money than they have a need for, and the median income earner with the inability to have the same real income as our parents did. Those with excess wealth seek to obtain a rent on their wealth by renting it out (loaning), and those who don't have the wealth that we would have expected seek to obtain wealth, so we borrow from the rich. Our high level of personal debt is probably the best measure of income disparity.

The third reason is that many of us are tending to wait longer in life before we start saving. We spend our money, and more, on providing a nice childhood to our children (because just as we expected to live a better standard of living, we expect our children to have a better standard of living).

Another reason is that we have saftey nets. We have unemployment compensation, welfare, foodstamps, SCHIP, the emergency room can't turn us down for care, and we also have medicade, medicare, and social security. I suspect that if we did away with our safety net system, we would tend to save more.
We have a high savings rate here simply because there is no such thing as free lunch here.
 

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Is there a Bangalore in Maine? As far as I know Bangalore is the capital city of the Indian state of Karnataka.
I think the city in Maine is "Bangor".
 

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I suspect that if we did away with our safety net system, we would tend to save more.
Interesting quote here that I missed. I agree, but I also think a stronger safety net would promote more "real" (not based on the financial sector) entrepreneurship? Would you have done things differently with your savings if you knew there was something to protect you or your workers? Would a stronger unemployment system allowed you unload your workers earlier in good conscience and let you keep your savings for your business? Maybe put you on even footing with a competing business that was more cutthroat, and dumped its workers on the first sign of trouble?

I've become increasingly more hostile to the free market - nearly 180 from where I once was. I'm really leaning towards stability over absolute efficiency.
 

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I missed one more reason - the "normal" savings rate is almost nill these days in favor of complicated financial instruments. There needs to be an option for the average joe between a mattress and a mortgage backed security. Of course that's driven largely by monetary policy right now, but that doesn't mean it's not a disincentive to save.
 

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Sounds like a rich country but most live from paycheque to paycheque. So whom do you blame.
:shrug: when we were a young family making the kind of income that rated us foodstamps, we always had an emergency fund. If I lost my job tomorrow I could live - barring anything catastrophic - for almost a year off of our savings.
 

RDS

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:shrug: when we were a young family making the kind of income that rated us foodstamps, we always had an emergency fund. If I lost my job tomorrow I could live - barring anything catastrophic - for almost a year off of our savings.
I will be worried with just one year. Right now I have 10 years.
 

CanadaJohn

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Sounds like a rich country but most live from paycheque to paycheque. So whom do you blame. 75 Percent Of Americans Don't Have Enough Savings To Cover Their Bills For Six Months: Survey
As they say, the proof is in the details:

1. How much money does she make in a year and how much government support is she receiving as a single mother of four children? - I'm guessing she pays no federal income taxes and probably gets a fair number of credits to boot.

2. How is it that a 47 year old woman is a single mother of four? Did her husband die without life insurance, or some other tragedy, or is she just a free spirit who likes piling up the offspring that she can't afford to raise on her own? What about child support if the father/fathers aren't deceased?

3. Is she only working part-time because of economic circumstances or because she chooses to work part-time? Why does she have significant childcare bills - don't her children go to school and can't she manage her part-time employment around her children? Has she no extended family supports.

I agree that in today's economy and society it's hard to have the lifestyle you desire meet the lifestyle you can afford - most people manage to do just that. And most people in my generation gave up personal wants and desires to fund the needs and requirements of our families when we started having children - having a family was not a detriment to our livestyle, it was our lifestyle.

A 47 year old single woman with four young children and a part-time job is, thankfully, not the norm in society today and represents personal failure more than it represents a failure of society as a whole.
 

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i've saved up as much as i can, but i can see how people with kids can't do it. wages just haven't kept up with the cost of necessities, and the reduced need for labor has eliminated much of the ability of a worker to demand a higher salary.
 

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I will be worried with just one year. Right now I have 10 years.
:) well, the rest of my savings I'm dumping into longer term things - IRA's, ESA's, etc. Plus, we're still pretty young, I have several decades of work in me left.
 

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:) well, the rest of my savings I'm dumping into longer term things - IRA's, ESA's, etc. Plus, we're still pretty young, I have several decades of work in me left.
That's awesome.
 

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About 6 years ago I was saving 17% of my gross and had about 5k on hand all the time, we make great money and had insurance. then my wife had a major medical event that went over 1 million. We are just about caught up. Nobody can save enough for medical problems.
This is my single greatest fear in retirement...I tell people all that time that you're only one heart attack, stroke, or cancer diagnosis from hundreds of thousands in debt, even if insurance pays 80%...what's 20% of one million? That's what you're on the hook for to the hospital.
 

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If you want to know from experts with experience on how to save money, try a forum on early retirement that's popular. They work on these issues and share tips and success stories as a routine, it's not some big secret. Living below your means is the #1 strategy. Two incomes, a strong saving/investment plan, the next two. Of importance is to note that living below your means is largely in your control, whereas your income is but is still subject a lot to things outside your direct control, and so is investment payoff (they use 3% withdrawal, 4% if you're feeling confident).

I've been thinking this myself. It looks like the best (only) way to accumulate capital is to simply be homeless.
Living with parents or renting, living with roomates, all good choices for someone who wants to live below their means and save. If you mean living entirely on the street, that's not advisable because the risks likely would cost you more for a variety of reasons (health, security, reputation). There was that middle class lady in the news who left her family to live homeless for a while, she chose it over all those nice amenities and middle class lifestyle, don't act as though you're being serious.
 

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This is my single greatest fear in retirement...I tell people all that time that you're only one heart attack, stroke, or cancer diagnosis from hundreds of thousands in debt, even if insurance pays 80%...what's 20% of one million? That's what you're on the hook for to the hospital.
Usually 20% of $1M, if $1M doesn't exceed your plan, is about $10,000. There is a max out of pocket on most plans and it caps it.
 

mak2

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Yes, there is a max. but here is what happens. The hospital bills the insurance company. The insurance company says nope, sorry we are not paying this...so the medical providor billed me. I said, wow, sorry but I am way beyond my ($46,000) max. The hospital or medical providor says cool. Then sells the bill to a colletion agency. the agency bills me, I tell them sorry but I dont owe that, the collection agency sues me. I could not figure out why they were hounding me so much. One of my old students husband works for the billing dept of hospital (not the one involved) and knew how they decided who to write off and who not to. We made way to much to get any sort of break, and my theroy was as long as we kept paying, they kept sending bills. We are getting real close to caught up and a new bill has not surfaced for a year or so... maybe this year we will get it all paid off. If we made average wage we would never have been able to pay it all off.
Usually 20% of $1M, if $1M doesn't exceed your plan, is about $10,000. There is a max out of pocket on most plans and it caps it.
 
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