Do Your Emergency Savings Come With a Credit Card Logo?
George Boelcke CCP
March 14, 2007
Every couple of months, one report or another confirms what the majority of people already know: If most families missed one two pay checks, they’d be in serious financial trouble.
The most recent study comes from the Center for American Progress and reports on a survey of middle-class families, which they define as having total household income between $18,000 and $88,000. The figures are pretty alarming – and getting worse:
Only 29% of families could sustain a three month income loss (down from 40% in 2001)
Just 18% have three months of savings on hand (down from 29% in 2001)
In fact, according to the Federal Reserve, our savings rate is now at minus 1.2 percent. That means, on average, we’re taking money out of our savings, instead of growing them. Remember that we’re not talking about assets here – just the money coming in versus what’s going out.
Since we’ve become a nation of spenders and not savers – it’s true. A month or two with no income, and that house of cards collapses, since on average we spend way more than we earn. That house of cards term isn’t just an expression – but reality. One in seven families now has 10 or more credit cards. That isn’t by choice – but simply because a maxed out card doesn’t do any good when these families need continued access to credit. So the short-term answer for someone with very few options often presents itself in those 6.1 billion credit card solicitations mailed each year.
Millions of families simply couldn’t live without their credit cards, lines of credit, convenience checks (that are anything but convenient) or other types of cash advances. The reality for more and more families is that actual emergency savings just aren’t possible, but as long as there’s some available “room” on their credit card, at least there’s a hope of making it through any unforeseen minor financial problem - maybe.
What people without financial stress just don’t understand, is that the focus is on making it through today and making it to the next payday. THAT is a win, and for those families, it’s the current definition of long-term planning. It’s hoping there’ll be enough cash to make a minimum payment and maybe getting the odd night of decent sleep, forgetting for a few hours the huge financial stress that others couldn’t imagine. Then tomorrow just putting a smile back on and pretending everything’s under control, to make sure others don’t see what’s really going on.
If some of that describes you, can you take four small steps?
Cut down or eliminate using credit card cash advances – it’s one of the most expensive forms of credit and will always make things worse and not better.
Slowly start saving a little something for emergencies. It’ll be a huge stress reliever to know you’ve got a small cushion.
Between now and the summer, pay off one or two of your smallest debts. It’ll free up a little cash each month that you can use for savings, or roll those saved payments into your other bills.
Ask for help and get informed. It’s not a sign of weakness, but quite the opposite. Even if you just read through the debt chapter in the: It’s Your Money book, you’ll find a simple blueprint of how to take just $100 extra and pay off $25,000 or more in debts, in under four years.
Those four small steps create hope, confidence and freedom – the start of real financial freedom. It’s worth it – you’re worth it!
The most recent study comes from the Center for American Progress and reports on a survey of middle-class families, which they define as having total household income between $18,000 and $88,000. The figures are pretty alarming – and getting worse:
Only 29% of families could sustain a three month income loss (down from 40% in 2001)
Just 18% have three months of savings on hand (down from 29% in 2001)
In fact, according to the Federal Reserve, our savings rate is now at minus 1.2 percent. That means, on average, we’re taking money out of our savings, instead of growing them. Remember that we’re not talking about assets here – just the money coming in versus what’s going out.
Since we’ve become a nation of spenders and not savers – it’s true. A month or two with no income, and that house of cards collapses, since on average we spend way more than we earn. That house of cards term isn’t just an expression – but reality. One in seven families now has 10 or more credit cards. That isn’t by choice – but simply because a maxed out card doesn’t do any good when these families need continued access to credit. So the short-term answer for someone with very few options often presents itself in those 6.1 billion credit card solicitations mailed each year.
Millions of families simply couldn’t live without their credit cards, lines of credit, convenience checks (that are anything but convenient) or other types of cash advances. The reality for more and more families is that actual emergency savings just aren’t possible, but as long as there’s some available “room” on their credit card, at least there’s a hope of making it through any unforeseen minor financial problem - maybe.
What people without financial stress just don’t understand, is that the focus is on making it through today and making it to the next payday. THAT is a win, and for those families, it’s the current definition of long-term planning. It’s hoping there’ll be enough cash to make a minimum payment and maybe getting the odd night of decent sleep, forgetting for a few hours the huge financial stress that others couldn’t imagine. Then tomorrow just putting a smile back on and pretending everything’s under control, to make sure others don’t see what’s really going on.
If some of that describes you, can you take four small steps?
Cut down or eliminate using credit card cash advances – it’s one of the most expensive forms of credit and will always make things worse and not better.
Slowly start saving a little something for emergencies. It’ll be a huge stress reliever to know you’ve got a small cushion.
Between now and the summer, pay off one or two of your smallest debts. It’ll free up a little cash each month that you can use for savings, or roll those saved payments into your other bills.
Ask for help and get informed. It’s not a sign of weakness, but quite the opposite. Even if you just read through the debt chapter in the: It’s Your Money book, you’ll find a simple blueprint of how to take just $100 extra and pay off $25,000 or more in debts, in under four years.
Those four small steps create hope, confidence and freedom – the start of real financial freedom. It’s worth it – you’re worth it!
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