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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

#41

Post by arn »

elbelcho wrote: post #36
fr0sty wrote: post #27

Earlier quoted context omitted.

Unless you are carrying low/no interest debt you should really pay it off rather than put money into savings. As long as your bank is not evil and keeps dropping your credit limit as your balance decreases you can always borrow again against that line of credit if needed.

I disagree. Saving money for an emergency should be a priority over paying off a credit card debt. In an emergency, you cannot count on the credit card bank keeping your account open. You cannot count on them maintaining your current credit line. ALL banks are "evil" in the sense that they operate with their best interests at heart, and no matter how horrible of a position it may put you in, the CC bank has no obliga…

The only thing people should be aware of in this situation is that $2000 under your bed actually cost you $4000 or whatever since you are holding a balance on your credit card with high interest.

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

#42

Post by ChuckMcM »

elbelcho wrote: post #36
fr0sty wrote: post #27

Earlier quoted context omitted.

Unless you are carrying low/no interest debt you should really pay it off rather than put money into savings. As long as your bank is not evil and keeps dropping your credit limit as your balance decreases you can always borrow again against that line of credit if needed.

I disagree. Saving money for an emergency should be a priority over paying off a credit card debt. In an emergency, you cannot count on the credit card bank keeping your account open. You cannot count on them maintaining your current credit line. ALL banks are "evil" in the sense that they operate with their best interests at heart, and no matter how horrible of a position it may put you in, the CC bank has no obliga…

"If you're in a real emergency, what would your rather rely on?"

I think the point was that if you have credit card debt then you are in a emergency situation already. So using money to pay off that debt means you can get 'out' of the emergency. Paying off the debt and then putting $2,000 into a liquid account allows you to declare the emergency over.

The trick that folks often don't quite realize is that when you carry debt, some of your 'income' (whether its a paycheck or money back from recycling aluminum cans) goes to servicing that debt and not to your benefit. If you are living at the edge of your means, any money not going to supporting you directly is wasted.

That's the reasoning that says "priority #1" should be "get out of debt." #2 is build a "cushion" so that when unanticipated expenses hit you don't take a long term hit to the income stream, #3 is invest in longer term income growth (could be night classes, could be a washing machine to save on laundromat bills, could be stocks and bonds).

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

#43

Post by anonymouser »

I have a question for HN hackers. I make over 6 figure a year. My wife doesn't work. She keeps telling me that we are not middle class, and that I should earn more if I want to afford us a middle class lifestyle, because everything is very expensive now. She also thinks that I'm a bit of an underachiever, professionally, for earning only 120K a year. Am I an underachiever or is she out of touch with Midwestern America? I keep telling her that the average family can only dream of the money I bring home every month with my two jobs.

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

#44

Post by jswinghammer »

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?

No very few countries do.

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

#45

Post by noodle »

pavel_lishin wrote: post #23
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…

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 interest debt (mortgages, student loans, etc).

creating a smaller emergency fund to start sets the best precedent because it creates a safety buffer. what happens if you throw tons of cash at paying down your CC bill every month and save nothing, but then you lose your job and have 0 income? you're going to end up missing payments, get penalized, and your debt will snowball again quickly. you need to have something to fall back on when bad things happen, just in case.

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

#46

Post by FraaJad »

anonymouser wrote: post #43

I have a question for HN hackers. I make over 6 figure a year. My wife doesn't work. She keeps telling me that we are not middle class, and that I should earn more if I want to afford us a middle class lifestyle, because everything is very expensive now. She also thinks that I'm a bit of an underachiever, professionally, for earning only 120K a year. Am I an underachiever or is she out of touch with Midwestern Americ…

encourage her to go and get the best job available for her qualification. She will come to a more grounded opinion.

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

#47

Post by hugh3 »

artmageddon wrote: post #10
nkassis wrote: post #5

2,000 bucks is a lot, I know the rule of thumbs is like 3 months net salary to keep for bad days but that's just hard for people like most on HN that are young, trying to either bootstrap a business or have a ton of student debt. Not sure what I would do but I think I could sell enough non-essentials to make up the money if it was a really bad situation.

>I know the rule of thumbs is like 3 months net salary to keep for bad days I was under the impression that the rule was around 6 months.. then again, I'm talking about monthly expenses,as opposed to salary(which hopefully a person isn't spending 3 month's worth of salary in 3 months under normal circumstances). It probably goes up somewhat proportionally with age, if you factor in a home / dependents. I'm in the pro…

My rule of thumb is "as much as you reasonably can". Always be throwing money into your savings. First you're saving for emergencies. Then, you're saving a deposit for a house. And finally, you're saving for retirement. There's never a point at which you should say "Phew, I've got six months' living expenses now, I can stop saving!"

The only point at which it's okay to stop saving is when you say "Phew, I've got more than enough money to last me for the rest of my life regardless of random emergencies, I think I'll retire!"

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

#48

Post by nhangen »

anonymouser wrote: post #43

I have a question for HN hackers. I make over 6 figure a year. My wife doesn't work. She keeps telling me that we are not middle class, and that I should earn more if I want to afford us a middle class lifestyle, because everything is very expensive now. She also thinks that I'm a bit of an underachiever, professionally, for earning only 120K a year. Am I an underachiever or is she out of touch with Midwestern Americ…

Depends on where you live, but 100k+ is well-to-do where I come from. Most people I know aren't making half of that, and they are working 60 hour weeks. She's out of touch.

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

#49

Post by wazoox »

anonymouser wrote: post #43

I have a question for HN hackers. I make over 6 figure a year. My wife doesn't work. She keeps telling me that we are not middle class, and that I should earn more if I want to afford us a middle class lifestyle, because everything is very expensive now. She also thinks that I'm a bit of an underachiever, professionally, for earning only 120K a year. Am I an underachiever or is she out of touch with Midwestern Americ…

Most people, even those in the top 1%, think themselves as middle-class. You're probably still middle-class, but definitely quite close to the upper bound.

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

#50

Post by hugh3 »

ebiester wrote: post #24
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…

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.

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