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It is a myth that a large share of people can’t cover a $400 emergency expense

bloomberg.com

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Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#11

Post by leereeves »

wilg wrote: post #10

I somehow read this article the first time without realizing it's totally wrong. Here's the direct quote from the original government report [1]: > If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to…

This seems to hang on the definition of "come up with $400".

To me that includes being able to sell or borrow something, but clearly the interpretation varies.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#12

Post by SerLava »

This is splitting hairs.

40% of Americans can't come up with $400 but luckily a majority of those know a financial institution that can come up with $400 for them.

Anyone who does not have an emergency $400 is not going to have a great time with an unexpected $400 debt on top of whatever else their debt obligations and expenses are.

Is it so hard to believe that we want to live in a country where pretty much everyone has four hundred measly god damned dollars.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#13

Post by thaumaturgy »

wilg wrote: post #10

I somehow read this article the first time without realizing it's totally wrong. Here's the direct quote from the original government report [1]: > If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to…

Credit cards that offer rewards muddies up the waters here a lot. In that case, it's smarter to put the $400 on the card (and pay it off before paying interest) for the 1.5% discount or the air miles or whatever.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#14

Post by shereadsthenews »

lukevdp wrote: post #3
anigbrowl wrote: post #2

I am troubled that 12% say they couldn’t cover the $400 expense, and that 14% claim it would stop them from paying some of their other bills. But even if respondents are accurately reporting on their finances, these numbers suggest their situation is relatively uncommon. That's between 1/7th and 1/8th of adults responding to a survey, some of whom presumably have kids to look after. This guy seems so in love with dem…

He isn’t dismissing those people or their hardships, he is saying that the actual number of 40% that many politicians use is disingenuous.

He does dismiss it right there in the same sentence, saying "I’m dubious about [12%] as well." It's obvious that this guy who equates $400 with a new tire is out of touch and I guess he drives a Porsche. Poor Americans drive on the same tires until they explode and then they get another $20 tire. Also rich to equate it with a dishwasher repair bill; only 2/3rds of Americans can look forward to one of those because the other 1/3rd don't even have a dishwasher.

The specialist on American poverty at the AEI is not the kind of person to whom you should turn for factual statements about poverty in America. AEI is an organization founded upon and dedicated to deception.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#16

Post by perennate »

thaumaturgy wrote: post #13
wilg wrote: post #10

I somehow read this article the first time without realizing it's totally wrong. Here's the direct quote from the original government report [1]: > If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to…

Credit cards that offer rewards muddies up the waters here a lot. In that case, it's smarter to put the $400 on the card (and pay it off before paying interest) for the 1.5% discount or the air miles or whatever.

I don't believe it muddies things at all. A sub-quote from wilg's quote:

> 61 percent of adults say they would cover it with cash, savings, _or a credit card paid off at the next statement_

If some of the other 39% pay with a credit card, they are saying they would carry a balance and pay interest.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#18

Post by olliej »

thaumaturgy wrote: post #13
wilg wrote: post #10

I somehow read this article the first time without realizing it's totally wrong. Here's the direct quote from the original government report [1]: > If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to…

Credit cards that offer rewards muddies up the waters here a lot. In that case, it's smarter to put the $400 on the card (and pay it off before paying interest) for the 1.5% discount or the air miles or whatever.

If you’re on the bottom rung I’m guessing your interest rate is >20%, (the max is apparently 29.9%). Divide by 12 and one month of interest rate is as much, if not more, than 1.5% cash back.

Using debt to save money depends on starting with a reasonable amount of money.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#19

Post by ac29 »

olliej wrote: post #18
thaumaturgy wrote: post #13

Earlier quoted context omitted.

Credit cards that offer rewards muddies up the waters here a lot. In that case, it's smarter to put the $400 on the card (and pay it off before paying interest) for the 1.5% discount or the air miles or whatever.

If you’re on the bottom rung I’m guessing your interest rate is >20%, (the max is apparently 29.9%). Divide by 12 and one month of interest rate is as much, if not more, than 1.5% cash back. Using debt to save money depends on starting with a reasonable amount of money.

> put the $400 on the card (and pay it off before paying interest)

Depending where you are in the credit cycle, it could be ~30-50 days before incurring any interest.

Re: It is a myth that a large share of people can’t cover a $400 emergency expense

#20

Post by WalterBright »

wilg wrote: post #10

I somehow read this article the first time without realizing it's totally wrong. Here's the direct quote from the original government report [1]: > If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to…

Many people have no cash, despite not being poor at all. All their money is tied up in assets, and they borrow for living expenses.

A typical example is someone with a mortgage. His mortgage debt is probably quite a bit higher than his "cash", and so any cash he spends is effectively borrowed from the mortgage company.

This means the answer to the survey question depends on one's frame of reference with regard to how finance works, and so I wouldn't take the results very seriously.

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