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Many don't have $2,000 for a rainy day

money.cnn.com

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Re: Many don't have $2,000 for a rainy day

#101

Post by dailyrorschach »

noodle wrote: post #80
dailyrorschach wrote: post #68

Earlier quoted context omitted.

This is exactly how I've been doing it. Auto-transfer set up on the bank account, and taking cash out for spending money instead of just letting myself use a credit or debit card.

credit cards are useful tools. i use mine and just pay it down monthly. if you have any plans on obtaining a loan/mortgage at any point in time, the easiest way to establish yourself with good credit is through actually using a credit card.

I don't mean that I don't use it all. I just don't use it for every single thing, every day. I was doing that, and was paying it off timely. But I found my spending was higher then I'd care for.

Re: Many don't have $2,000 for a rainy day

#102

Post by nazgulnarsil »

participating in a zero sum or negative sum game makes you, on average, poorer. we all need to play the status game, we have to keep up appearances in order to function smoothly with others in both the personal and business worlds. but explicitly reason about which activities are actually delivering the utility.

one of the ways that other people's thinking strikes me as insane (and not in a hyperbole sense, but literally insane) is not considering the alternative uses of any given chunk of money when making buying decisions. I watch time and again the people around me purchase something they want less for more money, simply because their thinking is compartmentalized i.e. the two items don't get thought of at the same time.

Re: Many don't have $2,000 for a rainy day

#103

Post by arethuza »

pkamb wrote: post #25
arethuza wrote: post #17

One of the reasons the UK government bailed out the major banks here in the last financial crisis is that they feared what would happen if the retail banking system stopped working - if our chip-n-pin cards and ATMs suddenly stopped working. I did wonder if it might be sensible to keep a chunk of cash somewhere safe for unpredictable times - having plenty of cash on tap won't help much if it is tied up in a bank that…

Does the UK not have something like FDIC Insurance?

I meant physical cash, not a number in a computer system somewhere. I don't use cash that often - which made me wonder about having a roll of cash stashed somewhere.

Re: Many don't have $2,000 for a rainy day

#104

Post by nazgulnarsil »

kwis wrote: post #34
arn wrote: post #7

I'd be curious what the survey would have shown if it were given in 2007. I bet at least some of the people who can't come up with $2000 today is because they've already eaten into their emergency funds due to lost jobs, economy, etc...

I've seen similar studies about emergency funds for many years. They all say roughly the same thing: most people don't save money. To the point that not only do they not have $2,000, they can't borrow $2,000 to handle an emergency.

define "most". saving is a cultural norm in china. I've heard figures of as much as 50% of many family's income being saved.

Re: Many don't have $2,000 for a rainy day

#105

Post by reemrevnivek »

hugh3 wrote: post #50
ebiester wrote: post #24

Earlier quoted context omitted.

You're looking at it from a middle class perspective. Unfortunately, most of these people are also deep in debt and have already made such cuts. This is the byproduct of double digit unemployment as much as anything. As much as we talk about consumption, most of it is at the middle class level. Now, I've seen poor people make very bad decisions, but many are on purchases you and I would make without a second thought.…

Unfortunately, most of these people are also deep in debt and have already made such cuts. Sometimes I wonder about this. How many poor folks are wasting their limited budget on frivolous crap? One reality show I really would like to see would be about a sensible financial advice type who parachutes into the lives of low-income, deeply-in-debt people and shows them how to budget properly.

Dave Ramsey's Financial Peace program (not reality TV, a and "Total Money Makeover" (a book, even though it sounds like a reality TV show) does delve into how to take a deeply-in-debt situation and start budgeting properly.

Step 1: Create an emergency fund with $1000 (as a rough starting point, your financial situation may be different) to handle the unexpected and avoid making more debt. Adjust the $1000 number based on your income level and possible expenses. A homeowning breadwinner with a wife and kids would need a good deal more. See: http://www.daveramsey.com/new/baby-step-1/

Re: Many don't have $2,000 for a rainy day

#106

Post by veyron »

PagingCraig wrote: post #94
billybob wrote: post #6

If you don't have enough money to handle an emergency, you have an emergency. Go ahead and panic. Trade your car for a cheaper one, move into a cheaper apartment, stop eating out, sell your TV, and get an emergency fund . If you're already living on toasted rats in a cardboard box, that's different, but if you've got unnecessary expenditures, you should really cut those out and get an emergency fund. To do otherwise…

On top of an Emergency fund, I find taking money out for KNOWN expenses makes sense. Like putting aside money for car repair, basic home repairs, etc separate from emergency stuff.

Should be the other way around. Money taken out for known expenses should be on par with money for bills.

Re: Many don't have $2,000 for a rainy day

#107

Post by skidooer »

hugh3 wrote: post #50
ebiester wrote: post #24

Earlier quoted context omitted.

You're looking at it from a middle class perspective. Unfortunately, most of these people are also deep in debt and have already made such cuts. This is the byproduct of double digit unemployment as much as anything. As much as we talk about consumption, most of it is at the middle class level. Now, I've seen poor people make very bad decisions, but many are on purchases you and I would make without a second thought.…

Unfortunately, most of these people are also deep in debt and have already made such cuts. Sometimes I wonder about this. How many poor folks are wasting their limited budget on frivolous crap? One reality show I really would like to see would be about a sensible financial advice type who parachutes into the lives of low-income, deeply-in-debt people and shows them how to budget properly.

There's a show in Canada named Til Debt Do Us Part that has a similar premise, except they usually visit higher class households (usually $100K/year+ earners) who still have managed to rack up tens to hundreds of thousands of dollars worth of consumer debt.

Re: Many don't have $2,000 for a rainy day

#108

Post by alexgartrell »

dmm wrote: post #74
GeneralWaste wrote: post #54

Earlier quoted context omitted.

As a UK resident, I find that distressing. The idea that needing medical treatment might impoverish me or poverty leaves me unable to obtain the treatment I need seems exceedingly cruel.

He's not going to pay $24k. Either he has insurance to cover most of it or he'll just not pay it. Bill collectors can't harass you for medical debts. Hospitals have to treat you regardless of your ability to pay. The whole situation is far from optimal though.

I'll add to that that creditors tend to ignore medical debts (according to a credit analyst I know), and that hospitals tend to cut deals for the under-insured.

Re: Many don't have $2,000 for a rainy day

#109

Post by phillmv »

noodle wrote: post #45
pavel_lishin wrote: post #23

Earlier quoted context omitted.

Does having a credit card count? What if someone has a $5k debt on a credit card, and only $1k in savings? Should they prioritize getting more cash into a low-interest savings account, while racking up interest on the CC?

this is how i typically recommend people to prioritize their money: (1) pay your bills (2) get a small emergency fund together (enough to pay for a small emergency, car breakdown, 1 month's living expenses, etc) (3) pay down high interest debt (credit cards, etc) (4) get a large emergency fund together (enough to support you for a few months if you lose your job, major emergency, etc) (5) invest and pay down low inte…

That is bad advice. Always always get out of debt first.

CC debt is highly liquid. If you're fucked, you can max it out within 24hrs. Ergo, it doesn't make sense to have a pool of savings around and service the debt interest payments when you could clear out the debt and put that interest payment to good use elsewhere.

Re: Many don't have $2,000 for a rainy day

#110

Post by darklajid »

jsdalton wrote: post #64

What interested me was the cross-cultural comparison, which is only alluded to in the CNN article but explained a bit more in depth here: http://blogs.wsj.com/economics/2011/05/23/nearly-half-of-ame... > Meanwhile, Lusardi, Schneider and Tufano also looked at how different countries compare. They consulted with local partners to set the number used in local currency at a comparable level. “Perceived capacity to cope…

Disclaimer: Been in the UK rarely, never to the US. I don't claim to know a lot about these places.

My impression is that it's just far less dangerous (and so a lot more compelling?) to go without an emergency budget here in Germany, so I wonder if this comparison misses to include the risks involved?

Sure, if you have family and a good deal of property/a mortgage to pay, you've got a lot of incentives to stay in business. But if you're renting? Already living in the lower middle class? No kids?

Worst case scenario: You lose your job (2-4 weeks notice) and are bankrupt at the end of the month. You can apply for help from the state (unless you find something else). You'll get a (60%? No idea, but something like that) percentage of your last salary for a while, afterwards you end up on a different and quite a lot lower benefit level, but you'll most certainly keep a TV, keep a (reasonable) flat, get good healthcare. If you do have kids you get (a bit) more money, education is mostly free for them.

I don't want to claim that it's all roses, but this is the worst that you actually need to worry about in my very humble opinion. What would happen in the UK or US if you run out of cash completely?

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