50% Of Americans 2 Paychecks Away From Having Big Financial Problemos

Whatever happened to developing an emergency fund to cover rainy day expenses? Apparently many Americans haven’t heard of this practice (or at least aren’t applying it) and now with the economy in the tanker, their financial lives are hanging by a thread. US News reports that half of Americans are two paychecks away from hardship.


They quote this from a recent MetLife study to highlight the problem:”Without a steady paycheck, 50% of Americans say they could not meet their financial obligations for more than a month – and, of that, a disturbing 28% couldn’t support themselves for more than two weeks of unemployment.”

Ouch. Ok, so some of these are probably people that are earning just enough just to get by, with little to save at all. But even accounting for this, there are still significant numbers who simply didn’t plan for the future, didn’t sock away extra money, didn’t think they needed savings. Or conversely, they simply spent all they had without a care for the future. And now that the future has turned very ugly, they are in deep trouble if a job loss comes their way.

Just as frugality and saving money is making a comeback in popularity because of the economy, let the above fact also bring back the wisdom of having an emergency fund — three to six months (and some would say more in this sort of economy) of living expenses to get you through a tough time in case of job loss or substantial unexpected expense.

Half of Americans Are Two Paychecks Away from Hardship [US News]

FREE MONEY FINANCE (Photo: robinryan(www.robi nryan.ca))

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  1. Saboth says:

    I’m actually surprised that it isn’t “0 paychecks”. Most people I know barely have enough money to pay their bills currently.

    • edwardso says:

      @Saboth: Sadly I am one of those people, between rent, student loans, credit card utilities I can only save about $50 per month and most of my friends (1-2 years our of college) can’t even save that

      • JPropaganda says:

        @edwardso: Same. Living in New York is expensive.

        • LSAX says:

          @JPropaganda:

          I’m in my early twenties, I live in Manhattan, made very far under six figures last year, and I have TWO years of living expenses saved up. Most of my friends spend too much money, and there’s really no excuse for it. I wouldn’t care how other people want to live their lives and manage their budgets, but in this welfare society, their irresponsibility hurts the rest of us who manage to hedge for our own darn contingencies.

      • Dillon Barfield says:

        @edwardso: yea … most people I know don’t have all that much they can save if they paid for their own college education and whatnot.

        being a 20-something isn’t very easy in these parts (boston) :

      • Tallanvor says:

        @edwardso: I’ve been there as well. Luckily I’m $300 away from having my credit cards paid off, and I’m now saving around $700/month. –I’m not up to even a 3 month fund yet, but luckily my company has to give me 3 months notice if they’re going to get rid of me, so I’d have time to try and find another job.

  2. TCinIowa says:

    Not to mention the fact that unemployment insurance usually isn’t even close to enough to cover your living expenses, or even many people’s housing expenses.

    • David Brodbeck says:

      @TCinIowa: Also, several states now have such long backlogs that it can take weeks to see your first unemployment check.

    • bohemian says:

      @TCinIowa: Our state unemployment checks even in the top bracket don’t give you enough to buy groceries. Talk about a false sense of security for people.

    • Erwos says:

      @TCinIowa: Unemployment is supposed to be bridge income designed to help stretch your savings. It’s not there to give you a few months of paid vacation courtesy of the state.

      • Anonymous says:

        Who says?

        When unemployment insurance was created as a result of the initiative of the Communist Party who prevailed upon Farmer-Labor Congressman Lundeen of Minnesota to carry the legislation, people were flat broke. They had no “savings”. Workers had never had savings until the organization of a mass labor movement beginning about the same time (another CP project), which drove the wage scale beyond subsistence. If you knew this, raise your hand. Hmmm, not many hands.

        Now those gains have been eroded and are almost gone. We’re back to the ’20s folks. And no CP to organize us. Maybe the Democratic Party will do it.

        LOL!!

      • pecan 3.14159265 says:

        @Erwos: What’s the point of unemployment if there isn’t enough for you to actually cover all of your bills and housing? I don’t need an additional $300 a week to “bridge my savings,” I need as much as I used to make a month because I have a set amount of bills and I need to pay them.

        • progoth says:

          @pecan 3.14159265: Yes, that’s why you keep enough savings to pay for them for x amount of months, with unemployment money helping you to extend the amount of time.

          Not sure why people don’t understand that…

  3. ConroyCotta says:

    I’m also surpriised only 50% don’t have savings to fall back on. I’d have guessed it was more like 60-70%.

    I currently have only a 3 month emergency fund. I’m working on pumping it up, though. Just when I get another couple grand in there, something comes up- like car repairs, etc. Ugh.

    • startertan says:

      @ConroyCotta: Same boat, I’ve got a 4-5 month parachute but it could always be more. A few big ticket items came up recently, car repair, trip to Vegas to propose, etc. I should thank my mom for teaching me to save but she makes me look like a waster compared to her. She could squeeze 50 cents out of a penny.

    • cynical_bastard says:

      @ConroyCotta: Even before this, everytime I’d build up some past my basic emergency money, my car would break…

    • docrice says:

      @ConroyCotta:
      +1. Savings was building up nicely, and then bam, my father in law had a heart attack. Not that it was his fault, but flying across the country for a week to take care of him wasn’t exactly free. Guess that’s what “emergency funds” are for…

  4. junip says:

    Someone I work with just got his pay doubled, and after complaining the week before that he had *zero* dollars to his name (not even enough to take public transit to/from work for the week), once he got his new pay raise paycheck, he suddenly started splurging everywhere.
    I think this is pretty typical of a lot of people – they think in terms of “I’m making X dollars a year so I can afford to spend all this money I don’t actually have yet.” Nevermind that he could lose his job tomorrow and be broke all over again.
    I could probably survive for 6 mos on my savings. Never take anything for granted.

    • Real Cheese Flavor says:

      @junip: Pretty much the same thing happened to me a couple years ago.

      I splurged a little at first and still occasionally splurge on some shiny piece of crap that I really don’t need. But for the most part I still live and spend like I was still making the same amount of money before I took the new job.

      I now have several months of savings and have almost completely paid off all my debt.

    • David Brodbeck says:

      @GuinevereRucker: I started when I got a new job with a higher pay rate. It was nearly painless because I was saving money that I wasn’t used to having anyway. Actually, at first I was paying down credit card debt, but now that’s done and I’m putting that money into savings instead.

    • bohemian says:

      @junip: Another circumstance that stimies some people are that they get a higher status job. Then that higher status job comes with expectations of image at work that you need to pay for. You can’t drive that crap car to client meetings it makes the company look bad. We need to be able to find you 24-7 so now your cell phone is a work need. You need to dress the part of the higher brackets of the company, decent “image” work clothes are not cheap. Of course all of those things your expected to have are verbal demands so they don’t have to provide them as part of your compensation.

      Get on the treadmill and just keep running faster to stay in place.

      • pecan 3.14159265 says:

        @bohemian: But the benefits of a higher status job outweigh any of the requirements. If you’re in an office, you should be dressing professionally to begin with. If you’ve been required to meet with clients before, you probably couldn’t get by dressing like a slob, or else you wouldn’t have been rewarded with a better job.

        I think if companies look at your regular old phone and tell you that you need a Blackberry, the company should pay for the phone and the data plan and if they require more minutes than you currently have, they should pay for the difference in cost, too. If they expect you to be able to answer your e-mail 24/7 without getting up from the bed, they should at least pay for part of it.

      • David Brodbeck says:

        @bohemian: Yeah, good point. I’ve heard horror stories of people who had jobs where they were required to drive a car less than 5 years old, basically locking them into a car payment as a condition of employment.

    • pecan 3.14159265 says:

      @junip: Yep. I know people who just got out of credit card debt, and are jumping head first right back into it because they have this newfound freedom now with that $0.00 balance and they’re abusing it by looking at vacations and televisions.

  5. ThickSkinned says:

    What happened to the idea of an emergency fund? Well, it’s tough to build up an emergency fund when you’re living paycheck to paycheck.

    • winshape says:

      @ThickSkinned: It’s about setting priorities. How many people living paycheck to paycheck still have cable/satellite TV? Cellphones? Eat out more than once a week? Buy new stuff instead of used?

      $6 = A combo at Wendy’s = 1 meal for one person
      or
      $6 = A honking pot of spaghetti = 10+ meals for one person.

      • the_wiggle says:

        @winshape: here’s some of those priorities: rent > gas > food > medicine > oops! no more paycheck.

      • utensil42 says:

        @winshape: And some of us really are struggling without having any of that. When you make $1300 a month and your rent is $570 (not at all high by standards of this area), you have car payments, are still paying off that emergency appendectomy from 3 years ago (even with insurance!), etc., it adds up to not being able to build up a savings.

      • Argy says:

        @winshape: It’s hard to make a honking pot of spaghetti when you’re at school from 9-noon and then at work from 1-10 p.m. That’s my day today, and I still don’t make enough to save money.

    • the_wiggle says:

      @ThickSkinned: or limping from one er to another. damned things tend to snowball at times.

  6. CreativeLinks says:

    What is really scary about the chart on that article. Is that 25% of Baby Boomers fall into this category.

    Not to sound ageist or anything, but If you are over 50, and still living from paycheck to paycheck — what exactly is your retirement plan?

    • theblackdog says:

      @CreativeLinks: Ebaying that barbie doll you had as a kid?

    • techstar25 says:

      @CreativeLinks: The retirement plan is to sell their home, then take the cash from what little equity they had and buy a single-wide trailer in Florida while working as a greeter at Wal-Mart.

    • legwork says:

      @CreativeLinks: …what exactly is your retirement plan?

      Other people’s money?

      Raise a bunch of consumption addicts and you’d better also build a matrix for old age. That, or legalize organ resale on eBay so they can cover next month’s cable bill.

    • speeddaimon says:

      @CreativeLinks: I believe the simple answer is: “us” (those of us still young enough to work once the boomers retire). The younger generation will merely have to set aside %75 of their income so their irresponsible elders have luxury and carefree living until they die. hooray?

    • Anonymous says:

      @CreativeLinks: If you’re my in-laws, begging your kids for money. My MIL quit her job ‘because it sucked’, and my FIL works two jobs. They’re about to get evicted for the third time in the last year, and trying to convince my husband and his two sister to pay their rent, yet again.

  7. MoreFunThanToast says:

    emergencies are not “allowed” when you live paycheck to paycheck. It’s only the 11th and I have $80 in my checking account after bills and student loans.

  8. c_c says:

    It took me a while to get in the habit, but I get paid once in the beginning of the month, and put the max into savings that I can after expenses & bills. It’s in an ING account that takes a while to transfer the money back, so it’s not have instantly available. I don’t even consider it part of my available funds now, which is good. Been doing it for ~ 7 months now and probably have enough already to live for a year in a pinch.

    • Teradoc says:

      @cc82:

      Holy cow, are you like my twin or something? That sounds like my savings set up…. which one of is the evil one though?

  9. nakedscience says:

    The problem is that, you start to save, and then … something happens (you get sick, your kid gets sick, you need new tires, whatever), so then you’re back to 0. So you start to save … then something happens again, and you’re back to zero.

    • GuinevereRucker says:

      @nakedscience: Usually the problem is that people have no discipline or self-control.

      I find it easier to save when you play mind games with yourself. Take your savings off the TOP of your paycheck instead of the scraps that are left over. Sock it in a special account and pretend that it doesn’t exist. Make it hard for yourself to get at it.

      If you aren’t even this disciplined, give your savings money to a trusted friend or relative. Tell them, “Do NOT give me back this money unless the following conditions are met…”

      The average person can live on 80-90% of their paycheck with only a few adjustments, leaving the rest for saving and giving!

    • dohtem says:

      @nakedscience: Tell me about it. Last month, I just cleaned out my savings to buy a new engine for my car. Now I’m back to square one :(

    • Decius says:

      @nakedscience:

      Yes, you might be back to zero. You are not back to -1000 $ or -5000 $ though.

  10. Marshfield says:

    I’m probably somewhere between 2-4 paychecks away. What would almost hurt even more would be job loss that cancels healthcare. I can scrounge up day labor jobs to put food on the table, but medical bills can pile up really fast.

  11. nakedscience says:

    Seriously, ThickSkinned. People just go, “SAVE! You have to SAVE!” acting like it’s easy — but it’s not. Especially if you barely have enough money month-to-month to cover the bills as it is! This is especially true for people with kids, or for those who were doing fine, got sick, then lost their jobs or something.

    Not all of it is because people are irresponsible. Some people just can’t get above water enough to save.

    • the_wiggle says:

      @nakedscience: exactly!

      the just save! just cut stuff! just exercise discipline! just work 2+ jobs! just don’t have kids! mob can hush up & be grateful they can pull off their little ! phrases any minute now.

      life is very seldom that simple for most people.

    • humperdinck says:

      @nakedscience: Seriously. It’s easy to be sanctimonious when you’re looking down the well instead of up from the bottom.

  12. Joshua Willis says:

    Where’s Dave Ramsey when ya need him?

  13. Marshfield says:

    What is this ‘retirement’ you speak of? I’m going to be working until I die.

  14. lpranal says:

    How the hell do people manage to get any kind of increase these days? I was promised a MUCH needed raise a year ago, that has yet to appear. I realize that consumerist isn’t the place for bellyaching about one’s own problems, but I think I can speak for many when I say I’m sick of this situation. I just recently paid off my credit card, and live WELL below my means, it’s just that expenses eat up so much income. If someone would have told me that this is what a college degree gets you, I definitely would have considered alternatives after high school.

    • adamczar says:

      @lpranal: College degrees really don’t mean much anymore, unless they are highly specialized. I was told a college degree would take me anywhere, but after I got one I realized anywhere was only 1 or 2 jobs within that field. Anywhere else, people ask “what are you even doing here?”

      • GuinevereRucker says:

        @adamczar: College is the new high school.

        Seriously, I think most college grads know about as much as high school grads 50 years ago and are in debt up to their necks.

    • calquist says:

      @lpranal: Going to college isn’t the worst thing in the world. People would probably be willing to kill for the opportunity that you had. Normally if your college degree isn’t taking you anywhere you probably choose a bad major, a poor institution or sucked it up big time. In today’s economy if you aren’t getting a job now it is because someone with a better degree than yours has that job or is applying for it.

      • calquist says:

        @calquist: My point got a little lost in there, but most of the jobs worth having that are going to support you and a family with an emergency fund are going to require a college degree.

        • David Brodbeck says:

          @calquist: That’s sort of the problem. Everyone knows most jobs require a college degree. As a result, so many people have gone to college that there’s a glut of degrees, and they’ve become devalued. It’s just the price of entry now; it doesn’t guarantee you a living wage.

        • orlo says:

          @calquist: A BA won’t support a family, unless it’s just you and your cat

          • pecan 3.14159265 says:

            @orlo: A BA/BS isn’t MEANT to support a family. Getting a good job provides the money to support a family – when did education become solely about making money later? In the long run, perhaps a masters would boost income (it really depends on the individual and the field they are in) but surely a great deal of people have done very well with just a BA/BS.

    • Erwos says:

      @lpranal: I guess I’m just lucky – I’ve averaged 15% a year for the past four years. Not in FIRE or anything, just a software engineer who’s good at what he does. If you’ve got the right skills and you’re in the right place (hint: the latter is where people mess up more), there’s still opportunity. Things are just a little harder.

      @pecan 3.14159265: You can say what you want about a BA/BS “not being about the money”, but if those things didn’t have long-run income boosting potential, universities would be ghost towns with the high prices they charge. There is nothing wrong with admitting that higher education is financially rewarding while being intellectually stimulating – unless, of course, you’re a member of the cult of academia who thinks taxpayers should be supporting them _because_ they are academics, not because they contribute to society in some meaningful fashion.

      • pecan 3.14159265 says:

        @Erwos: I didn’t get a degree because I had an inclination that if I didn’t get a degree, I’d be making less money. I went into it for the education. Of course, I was also 19 years old and had no concept of the “real world” of paying for bills and insurance until I got out. I get that an undergrad degree has its financial benefits, but students should never use that as the sole reason for going.

    • shepd says:

      @lpranal:

      A discovery I’ve made:

      The best working environments hire people they know can do the job. They hire based on competence. Having a degree, for many jobs that “require” a degree (for example, my field, computer science), means nothing more than proof you can learn in these environments (In jobs where a degree is legally mandated, like a CPA, it’s a different story, obviously). If you have proven you can learn in other ways (I ran my own store) these places will hire you, and you will love the job.

      Sadly, there’s a limited number of those places. I’m lucky to be in one (although, at times I wonder if it’s more a case of our team being hired based on competence vs. the entire company being that way–either way, it’s still good).

      If you are willing to work anywhere, and don’t mind working a job you hate but is in your field, your degree will help you get into a job working with people who don’t have any clue whatsoever, but rather have a degree in field “X” that pushed them to the top of the pile.

      I learned that if I can’t get a job working in the type of company that hires based on competence rather than education, I’d rather look outside my field. I worked as an electrician’s helper for a few months, and, if it weren’t in a factory (I’m afraid of heights) it would have been a damn good job. If I couldn’t get decent computer science work, I’d consider doing residential electrician work.

      Why did I switch careers? Because this place wasn’t hiring based on education and most IT jobs do. This place was hiring based on competence (or, for the greenies like me, based on earnestness).

      It’s up to you. You can be tied to your career, working anywhere at all (90% of the places being terrible work environments) by getting that degree, or you can work any job at all, trying to target places that are decent environments. In the latter case, getting the degree is optional.

      Now, don’t get the idea I am saying there’s no value in getting a degree–I’m not! The value, however, is in improving your own level of education. You should be getting a degree for yourself, and not for a job (exceptions made for jobs that require it, like being a PE).

      Of course, as I mentioned earlier, most work environments are crap, so if you decide to pave your own path, you will hit rough times. Good luck!

  15. GTB says:

    I [i]had[/i] a pretty good “emergency” savings, but then I got laid off and it did what it was supposed to do. Now i’m about 1 month ahead.

  16. ADismalScience says:

    It’s all self-reported, which casts the validity in doubt. I’d contest that the average American has absolutely no concept of how they’d survive without their current jobs. An opinion poll in a recession is like a Rorschach test given to a clinical depressive – you’ll get dismal answers. Ask this question in 2006 and all those HELOCs would prompt different – and equivalently worthless – answers. Uncertainty and fear is driving this study instead of real analysis.

  17. varro says:

    People weren’t splurging – they were *living richly*.

  18. spoco says:

    I recently (November) took a job where I make $25k more. Every bit of that extra is going into savings + the 10 percent I was saving before.

    Motivation? Throw the numbers in an Excel sheet and see how much you can make even with 4% interest.

    • Oranges w/ Cheese says:

      @spoco: Gah, jealousy.

      • spoco says:

        @Oranges w/ Cheese: I’m only 29 but I have had three unique post-college financial phases.

        Phase 1: Job paid crummy + My first real place + buying everything I wanted = debt, debt and debt.

        Phase 2: Good paying job + a little smarter with money + delaying gratification = living tight but paying off debt, debt and debt.

        Phase 3: Great paying job + a lot smarter with money + being a savings nazi + no debt = doing okay and not worried about myself during these times – friends are losing jobs left and right though. I hate it for them.

        • GuinevereRucker says:

          @spoco: Glad to see you maturing in your financial life!

          I’m 29 as well. Since I was married 8 years ago, we have had no debt except for our mortgage (and we’re paying that off ASAP). We live extravagantly on $42,000 a year. We save 10% and give 10% of our income. To me, this is a great way to live! Not bragging here just saying it’s something to work toward for all you finance noobs :)

    • c_c says:

      @spoco:
      What savings account is paying 4% these days? Mine is down to less than 2%. Bleh.

  19. drrew says:

    I’m probably at 6 weeks.

  20. edwardso says:

    I can’t wait until some smug bastard gets on here and proclaims that they pay off their credit card every month and make x amount of dollars through bonuses or remind everyone of how much they…

    • edwardso says:

      @edwardso: some of my comment got eaten

      how much they would save if they canceled cable, used prepaid cell phones, etc.

      • jake7294 says:

        @edwardso: So true…we already have the “I pay myself first” and “when I get a raise I put the increased income in savings” comments

    • Scott Steiner says:

      I have about a year left.

      I’ve worked with many people who would brag about their rent-a-center TVs, stereos, etc. I wonder how many of them are completely broke right now and completely insolvent.

    • TouchMyMonkey says:

      @edwardso: OK, here’s one of those zero-balance bastards. Now, it took us years to get to this point. I’m 46, and the wife is 52. We carried a balance, off and on, for years. It took more discipline and determination than most people possess, but we did it. Of course, bigger paychecks also helped. A lot. As in, “OK, we’re making more money now, but we’ll still drive that POS Honda Civic until it falls apart because we really need to pay off our credit cards.”

      In other words, it’s harder than most smug bastards make it appear. Would it have been nice to have not charged up the cards in the first place? Sure, but sometimes life makes that impossible.

      I just love it when some Dr. Laura wannabe accuses two-income families like mine of being “addicted to stuff.” You know, like a nicer house in a better neighborhood (that doesn’t require flak vests for your kids), a car that runs every day, health insurance, and on and on. We’ve been there, too, and so have a lot of folks. It sucks.

      It also sucked that we had a President up until recently who thought maxing out our credit cards would be a totally patriotic thing to do. You know, as a symbolic middle-finger extended toward the towel-heads who “hate us for our freedoms.” You know, the ones the previous administration’s “Justice” Department was busy abridging as that pathological liar Ari Fleischer was out there spewing this nonsense on behalf of his idiot boss. But I digress.

      Right now, I think the people who really need to see your middle finger all live in Wilmington, Delaware. If you can cut the umbilical cord attaching yourself to those bastards, by all means. If not, be assured that I feel your pain.

      • jake7294 says:

        @HurtsSoGood: Pretty reasonable and not smug until you went to the liberal crap of blaming Bush for everything. Ugh.

        So, in liberal fashion, keep working because millions on welfare depend on you.

        • chris_d says:

          @jake7294:
          I remember when W told everybody that the patriotic thing to do was buy lots of stuff. That comment is factual.

          W didn’t make anyone buy anything but he sure encouraged it and a lot of Americans took his suggestion and spent beyond their means because the Pres. told them it was the patriotic thing to do. I guess when he said he said he believed in personal responsibility, there were some exceptions that he didn’t mention. Should W not have to take responsibility for what comes out of his mouth?

          Oh and also, I work every day knowing that hundreds on welfare are depending on me:
          [consumerist.com]

          • Erwos says:

            @chris_d: Reminds me of when Buffet and Obama told everyone to go buy American stocks because they were a great value, and the market tanked. Oops. Maybe we should hold them personally accountable with W, too?

            Or, maybe, you should realize that opinions are just that, and only idiots blindly do what others tell them. As far as I’m concerned, the ignorant and the idiots get what they deserve.

          • battra92 says:

            I will have, after my bonus gets to me next week, almost 6 months of full living expenses (not counting any unemployment checks) so I’d say I’m not average.
            /smug comment

            @chris_d: You know the whole “shopping is patriotic” thing was so misconstrued and such. I always interpreted it as “Don’t go into panic hoarding cash mode. Continue commerce as usual.” Some people took it as “I DESERVE and NEED that Plasma TV!!!11one” but some of us held off.

            I did buy a lot of DVDs in college when I could have saved so …

        • TouchMyMonkey says:

          @jake7294: You know, it’s nice to know the safety is still there in case you or I need it. You’re welcome.

        • Techguy1138 says:

          @jake7294:
          “So, in liberal fashion, keep working because millions on welfare depend on you.”

          Yeah, someone has to pay for all of those obligations the government made free health care, terrorist prevention, economic stimulus, and subsidized food.

          I just wish it wasn’t me.

          I just wish those people weren’t Iraqi.

  21. Oranges w/ Cheese says:

    I have enough money socked away to pay my rent for about four months, but that’s not including other expenses or gas.. so probably closer to something like 2-3 and a half.

    Unfortunately the title of this article hit home recently when I was faced with a $2000 medical bill and had to basically liquidate everything in order to deal with it.

  22. winshape says:

    There are a lot of disincentives to saving. If you are working, then you probably have a 401(k) or something similar that can’t be touched until you are 65ish. Any money you have on your paycheck has been taxed. Then if you manage to put any of it into a savings account, you get taxed on the interest it earns. Not to mention that the interest rate at most banks is practically zero.

    Even the previously “good” banks like ING have dropped their rates to around 1.6%. So if you have $10,000, a year later you have about $170 in interest compounded (though it actually ends up closer to $120 after taxes). Really?

  23. adamczar says:

    I’d save, but I had emergency car repairs and other necessities crop up that have gotten me in credit card debt. It makes no sense to save anything when you have thousands in debt and are being charged interest on it. I figure I put everything I would be saving toward the debt and if, God forbid, an emergency happens I’ll just use the credit again.

  24. mythago says:

    Wait, when did Consumerist hire one of the usual “Everything the OP did is wrong” crowd to post?

    News flash, most people don’t have an emergency fund socked away because they CAN’T AFFORD IT. If you’re living paycheck to paycheck, and/or have significant debt (you know, from frittering away money on medical bills), you don’t have a margin for saving that much. “Gee, I could make sure the power isn’t shut off, but what about my rainy-day fund?”

  25. HogwartsAlum says:

    nakedscience said:

    “The problem is that, you start to save, and then … something happens (you get sick, your kid gets sick, you need new tires, whatever), so then you’re back to 0. So you start to save … then something happens again, and you’re back to zero.”

    Welcome to my LIFE!!!!!

  26. FatLynn says:

    I really don’t know what counts as “expenses” in these surveys. Could I pay my mortgage + taxes and still eat? Sure, for about two years.

    I’d have to think long and hard about cutting off my car insurance or downgrading to the minimum liability amount. I wouldn’t buy any new clothing. Cable and internet — gone.

    So I could cover essential expenses much longer than I could cover my current standard of living.

    • spoco says:

      @FatLynn: Exactly. I could make it about 8 months using my current standard of living, but I would do two things to extend it:

      Find gainful employment doing something.
      Lower my standard of living.

      As a side note, I went to four establishments yesterday – a mid-range restaurants (not fast food), Hobby Lobby , JC Penny and Bed Bath and Beyond. ALL were hiring and announcing it very loudly.

  27. slater says:

    As people are saying above, I am not sure why this would surprise anybody.

    Saying things like “Apparently many Americans haven’t heard of this practice” or “there are still significant numbers who simply didn’t plan for the future” doesn’t seem fair.

    There are so many people, myself included, that are smart enough to save. I thought ahead of time and developed an emergency fund and saved for a “rainy day.” I had several months worth of income in both cash and a steadily building 401K. But you know what? It hasn’t been just a rainy day, it’s been a rainy year for most people. I had quite a bit of money saved, but then the company I worked for (that was the biggest company in its field) tanked. That left me without a job- where I was making a pretty good amount of money, allowing me to save quite a bit and start paying any debts I had acquired during my education (namely student loans).

    When a company goes out of business and floods the market with more qualified people in your own profession, it sure makes it hard to find a job making what I was making before… in that situation, you take whatever job you can find.

    Unfortunately, that means I am not making enough to save. And then things come up (the rainy days) where you need to spend that money you had saved. Medical bills, car repair, house repair blah blah blah. So now I am one of those people who you imply “apparently hasn’t heard of this practice” of saving and is no forced to live with only a small reserve.

    Sorry to rant, but it seems unfair to assume people don’t know that they should save money. Not all these people are idiots. To assume that people “simply didn’t plan for the future, didn’t sock away extra money, didn’t think they needed savings” or “simply spent all they had without a care for the future” seems very arrogant.

  28. CRNewsom says:

    Everybody seems to bring up the medical bills issue. While true that many people get stuck with them, most of the people this effects are/were living at or above their means in the first place. If you are carrying credit card debt and haven’t had a major layoff/medical stuff/, you’re doing it wrong.

    /However, if you do have CC debt, by all means, please pay it down before you start trying to seriously save.

  29. N.RobertMoses says:

    If you were to believe the New York Lottery commercials, you would be just one lottery ticket away from not having big financial problemos. They really drive this home with the freaky leprechaun but not a leprechaun little guy with a big head, small body, blue blazer and glasses.

  30. Trencher93 says:

    Don’t your expenses drop dramatically if you’re out of work? Does this scare-number mean continuing your work standard of living after you lose your job?

    • j-o-h-n says:

      @Trencher93: I suppose that depends on your costs of working — If you’re wearing fancy suits, commuting 100 miles a day in your Hummer and having expensive lunches out, yes.

      I wear street clothes, walk/bike to work, and eat fairly frugally. My costs would drop very little.

  31. lalaland13 says:

    Student loans, student loans and student loans. My fault. That, and that I took them out for a four-year degree and went into a low-paying job. I’m not sure which eats at me more-that I took out so many for a state school, or that I went into such a low-paying field.

  32. edwardso says:

    @CRNewson: Yes we get it, credit card debt is bad

  33. meechybee says:

    The interest rates on most bank-sponsored savings accounts is criminal. I hate to blame the system, but there is little or no incentive for banks to promote the good old savings account.

    Think about it. They pay you (I believe the last time I checked it was under 1%) to administer your money, but you pay them (9%+) to borrow money. It’s true that until you physically withdraw your money, the bank is allowed to sweep it in and out of your account to the stock market (which is how interest is generated).

    But even in the boom market, the 9%+ interest you paid them to service your debt is a better cash cow. So, just like in the housing market, servicing debt is more profitable than servicing cash.

    Maybe this liquidity crisis will teach banks that having wads of consumer savings to play with is a much more reliable long-term solution.

    It would be nice to see as many financial products geared towards savings as are geared towards spending.

  34. courtneywoah says:

    I agree with a lot of what people are saying. It is really hard to save these days, especially considering the cost of living. For my family, we are living in the cheapest area possible, and are still pumping about 50% of our earnings into housing, heat, electricity, etc.

    Also, a lot of people I know are living pay check to pay check, even those that have great jobs. It’s really hard to get ahead of college related debt, medical expenses (even with medical insurance), etc. I think the problem stems from the fact that most of us leave college with this huge burden of debt, but are expected to live as adults, so were essentially playing catch-up.

  35. pecan 3.14159265 says:

    I fit in this category only because to me, major financial problem is dipping into my savings, which I vowed not to touch unless absolutely necessary. I just paid a huge credit card bill this month…and I scanned it and realized that the reason it was so big was because I spent a lot of money on bus and metro costs. So instead of buying clothes like I did before getting laid off, the $40 is spent on Metro fare. Better use of money, I guess, since it’s getting me a little work, but it still means I’m spending $800 a month for groceries, transportation (metro, bus, gas) and expenses such as hosting my sister in law for a weekend, or going to a movie.

  36. nakedscience says:

    So, I created a budget. After all my essential bills and food budget, I have about $175 a month left over. This doesn’t include birth control, doctors appointments, when my cat suddenly gets sick, oops suddenly I need new tires, crap my computer died, etc.

    It’s like … you save and BAM!

    I have a car, DSL, and a cell phone and rent. That is it. Yes, I need my cell phone (I’m single, and I travel and spend a lot of time alone), and yes, I need DSL, since it’s my main form of entertainment (I don’t have cable or satellite or anything), and I need my car because the bus commute is 2 hours one way — indeed, I didn’t get my car until last August, when I got a new job and suddenly my commute was 3 times what it was (used to take me 20 minutes by bus, one way).

    So sometimes … it’s just fucking impossible.

    • edwardso says:

      @nakedscience: that’s about what I have leftover too. And it gets on my nerves when people say “you could cut out x” Yeah, I could cancel cable and internet and eat spaghetti every night and the extra 50 dollars a month would barely make a dent in my student loan. I’m not saying I haven’t made mistakes but not everyone who is in debt should have to sit in a dark room watching network tv and eating ramen

    • hollywood2590 says:

      @nakedscience: If those are all of your expenses it makes me curious about three things. What you drive, where you’re located, and what your job is.

  37. Mr_Human says:

    I’ve always been a freelancer — that alone puts the fear of poverty in your blood. You end up saving more than your friends, because you really don’t know when your next job might be coming. In the ’92 recession (barely out of college), I was caught without savings and had had to rely on my parents for about 6 months. I remember being so poor I really had to decide whether the chances of finding a job in the Times was great enough to purchase it. After that recession, I’ve been a big saver. I’m good for about a year now.

  38. pecan 3.14159265 says:

    @ipranal: College is a valuable experience, regardless of what anyone says. calquist is right, it’s more likely that someone picked a major they didn’t end up using, or went to a bad college, or just didn’t have the proper resources. In my field, experience ends up being what gets you in the door after your first or second job, BUT you can’t get into your first job without a college degree. Don’t even think about it. It’s not even a science field, it’s communications. But don’t even think about trying to get a job in journalism without a BA/BS. Almost all of them require an undergraduate degree at the very least.

  39. Steel_Pelican says:

    @winshape:

    So everyone who lives paycheck to paycheck is in that position because they’re not living frugally enough? Bull. Care to publish your monthly income vs. expenses so we can all pick out your necessities vs. luxuries?

    If a paycheck-to-paycheck worker saved 10% of their income every month JUST for their emergency fund (lets ignore retirement, childrens’ college funds, future expenditures, etc.), it would take them 10 months to be 3 paychecks away from “big financial problemos.” Add another 10 months for each paycheck you want to distance yourself from the “problemos.” So even at a 10% savings rate, we’re looking at several years of savings to get to a healthy emergency fund. Want a 6 month emergency fund? That’s 12 paychecks, or 120 months of savings at 10%.

  40. JiminyChristmas says:

    Teacher93, people often say that but I don’t see how it amounts to much. I spend about $2/day for gas to get back and forth to work. Otherwise, I don’t pay for parking, I typically pack my lunch, and I don’t work in an office that requires a snazzy wardrobe. My professional dues are covered through my job. So, not working would “save” me about $40/month.

    I suppose one could reduce expenses if you had a two-earner household and one person didn’t work long-term. The biggie would be not paying for child care. The other might be giving up a second car, if you had two. So, being a single person, as far as I can tell not working would reduce my overhead by about 1%.

  41. TheFuzz53 says:

    I don’t know how people can possibly live like that.

    I just bought my first house over the summer and gone from having an extra $3000k/month to $800/month after bills and social events and I feel like I’m spending way more than I should be.

  42. nakedscience says:

    And, for those of you who say “Cut your lifestyle back DRASTICALLY!” — that is not always healthy. I don’t know about you, but if I go to work and back, eat nothing but ramen, cancel all forms of entertainment, and do nothing but the bare essentials, I get seriously depressed. This is not healthy and not conductive to a productive or motivated life. It really starts to cut into how well I do at work.

    That said, I do pretty well, or at least try to. My major problem is spending way too much on food (as a single gal, I find it difficult to cook for myself, but I’m trying to fix this…). I don’t drink much, and when I do go out, it’s usually to a friends house where I drink and eat and play wii for free. I’m not at the bar every weekend.

    But dammit, sometimes I want to rent a movie, or go see Watchman when it opens, or buy an expensive bottle of whiskey, because I’ve worked hard all fucking week and deserve a break.

  43. Tiber says:

    For me it’s mostly an issue of balancing debt and savings. Sure, I could save in case I lose my job. Or, I could pay more on my student loans and save myself future interest.

    At the moment, my savings is going up a little each month, but I’m still paying significantly more than my minimum payment. I figure I’ll let my savings get high enough that I’ll have a few month’s income worth, then try to increase my payments to the point where my bank account levels off.

  44. Paddlacus says:

    spoco, that’s brilliant. I have never heard that (and my) situation expressed so succinctly.
    I had about 5 years after university in your phase 1. No real prospects, no real job, etc. Bought stuff I couldn’t afford and couldn’t really pay down debt because of it.
    Got a great job about a year ago and now aggressively going after phase 2. Delayed gratification is key. It’s so easy to see all the new money you’re making and “reward” yourself. I’d still be doing that but my wife is way more fiscally responsible than I am and I’m starting to see the benefits.
    Phase 3 should start around October and I’m looking forward to it.

    I’m going to save your comment as a reminder of what I’m working for – thanks!

  45. edwardso says:

    @nakedscience: we were writing basically the same comment at the same time. We must be soul sisters

  46. nakedscience says:

    TheFuzz53, your privilige is showing.

  47. pecan 3.14159265 says:

    @Trencher93: Yes and no. Like j-o-h-n said, if your expense in going to work is a lot, you will save money. But just because you lose your job doesn’t mean your bills go away. I lost my job in February and I’ve got just as many bills as I did when I had a job. Our biggest cost cutting measure was not eating out as often, so we scaled back from once every other week to once every two weeks or three weeks. Sometimes that has to change, like if we’re far away from home and need to eat. I find it impossible to regulate and budget every single facet of life.

    Not working saves me a little money because I wouldn’t be driving to work. But I am doing some work right now for minimum wage until I get a full-time job that pays to the level I used to make, and doing this requires more transportation costs than the cost of transportation to my previous job. BUT I’m also making money, so for the $1,000 I’m getting a month (ugh, minimum wage) I spend about $200 of it on transportation costs. But it’s a hell of a lot better than sitting at home all day being unproductive because companies usually stop posting job listings after they leave the office. At least I’m meeting new people and making a little bit of money.

    But yeah, if you get laid off and take massive cost cutting measures such as canceling cable, that’s one thing…but the biggest problem is that most people are on contracts, and there’s always a huge ETF when it comes to canceling.

  48. Anonymous says:

    my girlfriend and I live together and we are both 22. We have a little more than 22k saved together. We also make 120k a year combined living in seattle so saving isnt too difficult. we can each save about 1300 each a month if we dont buy any extraneous things. She calls me cheap for not wanting to go out to dinner once a week. I cant imagine only have enough money to make it through two paychecks. I would be freaking out.

  49. nakedscience says:

    terrorist fist bump time, edwardso! *bumb*

  50. pecan 3.14159265 says:

    @nakedscience: Amen! Cutting back so drastically can have an impact on your wellbeing psychologically. We aren’t canceling satellite TV because a) we’re on contract and b) we enjoy TV. It keeps us sane because if all we had was us worrying about how we were going to pay the bills in 4 months if I still don’t have a job, we’d go nuts.

    When we have to dip into savings, THEN we’ll discuss drastic reductions (especially cause everything’s on the internet anyway) and maybe eat the ETF.

    And I agree, I’ve worked really hard, and I deserve to be able to sit down on the couch that was given to me by my parents, put my generic orange juice (in the glasses also given to us by my parents) on my coffee table from Craig’s List (though it is a damn fine coffee table), and watch the TV also given to us from my parents. In my world, the most drastic cut in lifestyle I can imagine is that you were smart enough to find quality pieces of furniture for free or very little money! In my entire living room, only three pieces of furniture were purchased brand new, or not given to us. And a lamp. So I don’t want to hear about how I could be living like a hobo.

  51. darthsodomizer says:

    2 paychecks away. Wow that would be the life. I remember when I was two Paychecks away, those were the good old days the days of employment.

  52. nakedscience says:

    @pecan 3.14159265 Exactly! I went out last Friday, even though I couldn’t really afford it, but I NEVER go out, not for “reals reals” anyway, and I wanted a night to spend with some girlfriends, drinking beer downtown, and eating some fish ‘n chips, dammit! It was a blast, and I don’t regret it at all — even if I “should have” saved that money instead.

    Haha, I have cheap furniture too. I have a couch given to me by a friend, a bed (A NICE one!) given to me buy a friend, a dresser, tv stand, and stereo I got used from a friend for $50, and the brand new tv that I have was given to me by my dad for Christmas (sort of, he won it at a charity auction and didn’t need it, so I got it woo-ooh, but it was Christmas time).

    None of it is “quality” (except the TV), but that’s okay because I rent and don’t have room for nice furniture anyway. And I am hugely into Goodwill — that’s where I buy a lot of my books, actually. Every other Saturday, everything is 50% off. Random hardcover books for $1, ftw! I have a lamp from Goodwill too, lol, and some clothing.

    I don’t live richly, people. I am attempting to cut back on food so I can save more, but other than that, all of it is essentials.

    And it doesn’t help that I live in Phoenix, which is HUGELY spread out. I live smack-dab in the middle of the city, and my best friends are 33 miles from me — and still within the Phoenix city limits. I take one street — 7th st — for 33 miles to visit them. LOL. It’s okay; I get 30MPG, and they always feed and booze me, for free, so it’s totally worth it, but still.

    If I want to visit friends in east Mesa…oh boy. Or in Buckeye, which smells like poop.

  53. nakedscience says:

    HOLY WALL OF TEXT SORRY.

    • dohtem says:

      @nakedscience: Haha, dont apologize, I enjoyed reading that.

      On another note, there is something therapeutic about reading these posts about people cutting corners and having to make do in these times. Thanks to you guys that are willing to share your stories. Sigh.. I am not alone…

  54. magstheaxe says:

    A big p[arof the problem is that real incomes haven’t kept up with the rate of inflation.

    • David Brodbeck says:

      @magstheaxe: Yeah, I was reading an article today that mentioned that, when you adjust for inflation, the average income of an American worker peaked in 1973. It’s been all downhill since then, unless you’re in the upper class.

  55. Joseph Heck says:

    Stupid me, living within my means. I save 5 to 10% a month easily. Of course paying off my vehicles and student loans, and not having unwedded kids helps.

    Now lets up the huge inflation coming down the line doesn’t wipe out my savings.

  56. nakedscience says:

    @ hollywood2590 I forgot to mention rent and electricity! So rent, electricity, cell, DSL, and car (plus all that goes with it: mostly payment, gas, and insurance). I am an office manager and eeeh money — it’s not horrible but it’s not great, either (I do have amaaaazing insurance), and my company is not at ALL at risk at laying off, and indeed I should be getting a small raise this year (2%). I am paying way too much for my car, but should be able to refinance soon.

    But I live in Phoenix. My commute to work is 11 miles oneway. I have a 05 Chevy Malibu 4 cyl, so I get 27+mpg — so that’s good, at least.

    Still, Phoenix is hugely spread out. According to: [phoenix.gov] Phoenix is 517 square miles. Which doesn’t include all our sister cities — Mesa, Tempe, Scottsdale, Glendale, etc.

    I miss being able to commute to work every day via bus in 20 minutes flat :(

    But I was working for the State, and they had a bunch of layoffs, hiring freezes, and no one is getting raises.

    I make more money now, my insurance is slightly better, AND I’m getting a raise this year. I made the right decision.

    • p322401 says:

      @nakedscience: This is why im happy to not live in AJ any more and chandler is super awesome. if i worked on the north side of phoenix it would totally be a 6 hour bus ride each way.

    • the_wiggle says:

      @nakedscience: thank god you got out when you did & i wish more folks had had the same drive & good fortune. the state layoffs were very ugly.

      *disclaimer: family with former state employees

  57. cfritchle says:

    I’ve setup the ING account as well. The fact that you aren’t able to get the money instantly is what’s so beneficial. You’ll find yourself actually saving when you don’t think you really can. Even if it’s $20-30 at a time…it’ll really make a difference.

  58. Dethzilla says:

    The idea of an emergency fund is nice… If only life could stop costing money for 3 months so one can actually save.

  59. pecan 3.14159265 says:

    @nakedscience: Note to self: When in Arizona, do not visit Buckeye.

    I actually did just buy a new lunchbag and a new book, but that was because I wanted to have two lunchbags so both of us could take things to work without the risk of them spilling all over our bags or in the car (especially me, cause I take a bus and the subway). And I bought a new book because it wasn’t at the library and wouldn’t be there for several weeks if I were to request it (I consume books like banks consume my money). With a coupon code and free shipping and a member discount I knocked off about $12 from my order. And it felt good. It was $20 I guess I could’ve saved, and maybe we could’ve just taken our lunches in plastic bags for eternity, but I thought we deserved to NOT have spaghetti spilled all over our clothes because someone ahead of us slammed on their brakes. :-P

    I’m glad my friends live really close to me, but we travel to visit family once every month and a half, and it’s 3.5 hours each way. Takes a toll on the gas (takes about half a tank to get there getting 25mpg highway). And there are vet bills every month and a half too. $17 isn’t bad, but it’s necessary. And now the vet is chasing after me to get my pet’s yearly checkup, which is going to cost A LOT.

  60. jake7294 says:

    @ nakedscience: Yes! Buckeye sucks! I live in Tucson so when I visit East Mesa the smell always grosses me out.

  61. kwsventures says:

    The “I gotta have it now generation” is a band of fiscal fools. They buy the latest and greatest gizmos, stick the cost on a credit card at 22%. Many are still paying for that steak dinner they bought 10 years ago and put the cost on a credit card they never payoff. Pure genius.

  62. nakedscience says:

    @pecan 3.14159265 I work on the West side of Phoenix which is only about 30 minutes from Buckeye and also smells like poop (lots of farms here), but not THAT bad. I stopped off to get gas on my way home and OH MY GOD, I almost fell over, it was so strong.

    My family also lives 2.5 hours away, and I try to visit them every few months. I get about 30mpg freeway, at least, and almost all of it is freeway, so it helps, but it’s still a full tank of gas (almost exactly), plus other traveling expenses. But I WILL NOT cut back on that, because I have young nephews I need to visit! It’s hard to ignore, “But Aunntiiiie, can’t you come and watch me race BMX?!”

    And jake7294, Tucson is prettiful!

    • pecan 3.14159265 says:

      @nakedscience: I say if you love your family, and they love you back, visit them as often as you are able because it’s free therapy. The weekend I lost my job, we had planned on visiting family anyway, and we packed up and visited for the weekend and it was just nice to be around comforting people with good food and good conversation, and also to hear from people who have done a great deal more to talk to you about how it was for them when they were your age, and how they got through it. And you realize, maybe, things aren’t as bad as they seemed before. And it gives you a little hope.

  63. nakedscience says:

    ALSO GUIS I have a $50 budget for food the next 7 days AND I THINK I MIGHT ACTUALLY BE ABLE TO STICK TO IT WOO. This also includes drain-o and razors.

  64. Onion_Volcano says:

    Don’t any of you college guys have scholarships or thought about joining the military? How many of you have iphones or ipods and are on here complaining about not having money?

    • David Brodbeck says:

      @Onion_Volcano: Considering that joining the military means you’re pretty much guaranteed to be sent to Iraq to kill people and break things, it’s really more of an ideological decision than a financial one, these days.

      • orlo says:

        @David Brodbeck: With active wars that are meaningless, you have to be maniacally suicidal to enlist. Dying is one thing, but how about coming back with half a brain or no arms? If you hold your life cheaply, contact me and I’ll consider you for my narco/assassination/kidnapping/human trafficking operation. All of my operatives are guaranteed a headshot retirement.

      • pecan 3.14159265 says:

        @David Brodbeck: I break things all the time, does this mean I can get paid to be naturally klutzy in Iraq?

        But no, I wouldn’t join the military. They wouldn’t take me. My eyesight is terrible and I’m probably on the tiny end of their requirements when it comes to accepting females. So I’m going to live vicariously through the characters on Battlestar Galactica.

        • David Brodbeck says:

          @pecan 3.14159265: I break things all the time, does this mean I can get paid to be naturally klutzy in Iraq?

          I remember reading a sci-fi story about a soldier who was preternaturally accident-prone. He wasn’t affected, but everyone around him would mysteriously have horribly bad luck. Eventually he was told to slip through enemy lines and simply live in their capitol city for a while.

  65. nakedscience says:

    Joining the military?! If someone wants to joint he military, fine, that’s their choice, but it shouldn’t be a freakin’ requirement to get a decent education at a decent price.

    I have an mp3 player, Onion_Volcano. Of course, I bought it when I was taking public transportation, so it was a necessity (it’s also not an iPod).

    I have a BlackJack II! $50, referbished.

  66. Kevin says:

    It’s wicked hard to save cash when you have: car loans, student loans, cable, internet, home phone, cell phone, cell phone internet, text messaging plan, utilities, clothes bills, kids, pets, medical, dental, and vision bills. Everyone’s got their hand out and everyone keeps sticking in your face saying MORE, MORE, MORE!

    • nsv says:

      Some of us have been living off the emergency fund for months, thanks.

      @Kevin, what can you do without? You absolutely need both internet and cell phone internet? What would happen if you got rid of cable? Do you need both home phone and cell phone?

  67. Sucko-T says:

    Today our owner was talking about how Americans don’t work hard anymore, at first I agreed with him but then thought, why should people work hard?

    So they can get a raise that just barely keeps up with inflation? So they can work somewhere 20 years and get laid off at the first sign of the company not having a good quarter? So they can make money for a CEO who earns more in an hour than they will in their whole career. Go ahead call me lazy but I don’t really see the point of working hard anymore unless it’s working for yourself or to help others.

    • Techguy1138 says:

      @Sucko-T:
      Your boss doesn’t know what he’s talking about.
      Americans are among the hardest working people in the world.

      Truly deal with workers internationally. Hard work in cultural to North Americans(Canadians and Mexicans included)

      In parts of the the world when it’s break time they take a break. Even if this is right in the middle of a teleconference with people on the other side of the globe.

      In other places they will go home when the 8 hours are up. Doesn’t matter much how important it is.

      Many Americans wind up working with the same benefits are factory workers in 3rd (2nd) world countries. Many American workers wouldn’t have the vacation time to cover the Chinese New Year.

      Outsourcing has pretty much disproved the myth of the lazy American worker. Usually it’s a failure of management.

  68. Anonymous says:

    I’m sure you have all heard this before but please read the book The Richest Man in Babylon. Your creditors can wait. The first creditor you pay is yourself. It’s called spending less than what you earn and saving money every month. You can live on the other 90%. Yes, it might be painful and a handful of people really just can’t but 99% of us can live on less than what we spend. If you don’t spend less you will always be poor.

  69. Shrew2u says:

    Anybody who has looked as his/her bottom line, and determined that building an emergency fund is not feasible, can still sit down and start planning for a worst-case financial scenario.

    And it starts with questions like, “What expenses take top priority if I lose my job tomorrow?”, “How much could I expect to receive in unemployment benefits if I suddenly get laid off?” and “Given a drastic decline in income, what free or low-cost services/benefits could I be eligible for?”

    Having an expense priority plan and knowing what resources are available, even if a person doesn’t have any money specifically saved, can at least give a person his/her bearings when the ka-ka hits the fan.

    I can’t remember where I read it, but there was an article on the psychological effects of a job loss and how some/many people operate on “financial auto-pilot” for a period of time. They basically live as though they didn’t just suffer an economic blow, even though they may be actively engaged in job hunting and know in the intellectual sense that “no job = less/no money coming in”. By the time the autopilot is turned off, they have usually dug themselves in a far deeper financial hole than they would have been in had they changed financial gears quickly.

  70. runswithscissors says:

    I feel sorry for those foolish people and for all of you who lack the intellect and personal discipline to save up a large “rainy day fund”. I personally have saved up 24 months of expense payments in my rainy day fund, which about a year ago I safely invested in venerable and reliable Lehman Bros stock where it earns me a hefty return.

    Come to think of it, I haven’t looked at my statements on the old 24 month rainy day fund since last summer. I wonder if it has grown to cover 36 or even 48 months by now? Oooooo I am dizzy with excitement! Let me go find one of my unopened statements since last summer and bask in its glory.

    • pecan 3.14159265 says:

      @runswithscissors: Just because you make money does not mean you can automatically put 10% of it aside for a rainy day fund. Some people are going paycheck to paycheck as it is, and are living with the bare essentials. They have the discipline, but not the means. Do you suggest they give up their rent and crawl into a paper box instead? Why not just cancel everything and die?

      It’s really nice that you’ve saved a lot of money. Good for you for having the means to do it. But you are not everyone else, and mocking them and being mean and calling them foolish, and saying they lack intellect is proving that the largest amounts of money in the world won’t always make someone

      Some people just haven’t found the means to save any extra money. People need to eat, and they need to eat healthily in order to avoid medical problems and malnutrition. Many people have poor paying jobs, and can’t do anything about it until they get a new one. And unless you have the solution to that, refrain from telling people they are fools or unintelligent. You obviously have no idea how they live, and are blind to the problems of those who work too hard for very little.

    • chocolate1234 says:

      @runswithscissors:
      Love it!

  71. Anonymous says:

    What you’re all failing to ask is the big question on all our minds: are the Fortune 500 execs able to make bank with their golden parachutes, or do companies need to add more zeroes to the checks these poor wretches are getting?

  72. odinzero17 says:

    Not saving money is a personal issue. Because, if you HAD to, most people could probably cut out a lot of crap in their lives. People just aren’t willing to make those sacrifices because it affects their quality of life. I mean everyone on this board who’s broke and can’t save is sharing a one bedroom apartment with someone, right? Or even if you have a family of four, you’re all cramming into a 2 bedroom? Car loans? How much was the price of the car you took the loan out for? Hmmm…. that sounds like a lot more money than the price of a 95 Honda Civic should cost (which is what you should drive out of college considering debt load and low income for the first years). TV… our cable company offers 14 channels for $12 a month, but how many people who are “broke” have a contract where they pay over $100 month for TV? iPOD’s are also never a necessity, even if you commute a hundred miles a day, if you’re that bored on the bus there’s a place called the library and they have all kinds of stuff you can borrow for free. The biggest problem is that everyone’s wants have turned into necessities and no one can tell the difference between the two anymore.

    • pecan 3.14159265 says:

      @odinzero17: You’re saying a family of four should fit themselves into a two bedroom home? What if you have two children over the age of 10? And they’re different genders? There’s a point in which it becomes difficult to justify having two children of different genders in the same room past the age of 10.

      Okay, I’ll give you car loans. But the problem there is that you can’t just give up a car loan or tell the company you won’t pay it because you don’t have money. What’s done is done, and the goal should be paying it off, not figuring out how to avoid paying. You can’t just tell people they can cut a car payment, it’s already agreed upon.

      I’ll also give you TV and this is an area in which you can eat the ETF and save money in the long run, depending on how much time is left in your contract. This is also something many people have already done.

      iPods are another purchase, which, if already made, won’t do a thing. Also, the iPod shuffle is as cheap as $40 depending on where you look or what deals you have, so it’s not such a huge expense as say, an iPod Touch.

      • David Brodbeck says:

        @pecan 3.14159265: But the problem there is that you can’t just give up a car loan or tell the company you won’t pay it because you don’t have money.

        Actually, you can give up a car loan. You do it by selling the car. In some cases selling a car you can’t afford the payments on and replacing it with a cheap beater makes good financial sense.

        • pecan 3.14159265 says:

          @David Brodbeck: I guess that would depend on how new the car was…if it’s relatively new, you could sell the car for relative to what you paid for it and use that to pay off the loan…but then you probably wouldn’t get much to contribute to another vehicle. This is less of an issue if you can get more for the vehicle and owe significantly less to the point where you can afford even a beater.

    • chocolate1234 says:

      @odinzero17:
      Agreed. There is almost always something someone can give up.

      I’m only a couple years out of college, and I’m still not making a lot of money, but I’ve been careful about spending within my means and saving as much as I could, which was practically nothing some months. I had a lot of friends who earned roughly the same as I did post-graduation, and refused to live within their means, financing vacations on credit cards, buying new cameras, iphones (because they really needed it!!), etc. None of them have lost their jobs yet, but I wonder how they’ll survive if they do. Sometimes not saving isn’t a choice, and I’ve been there so I totally agree with that. But I also think a lot of people aren’t willing to put aside money to save when they could be spending that on something fun or flashy. Plus, when people get really far behind, I think it’s hard for them to figure out how to even begin to pull themselves back out.

  73. mykie says:

    Is this the thread where I come to tell everyone that I pay my credit card off every month and have a gadzillion dollars in savings because I’ve put 10 dollars a week in it since my first paper route?

    • David Brodbeck says:

      @mykie: Wow, you made $10/week on your paper route? I made less than that. It was way less than minimum wage. Paper routes are a scam.

  74. runswithscissors says:

    @ pecan 3.14159265

    My jokes falling flat makes me a sad panda. :(

    • pecan 3.14159265 says:

      @runswithscissors: If that was a joke, don’t be a sad panda.

      Every time someone says panda, I think about the “how’s your panda burger?” line from Harvey Birdman.

  75. bananaboat says:

    The maximum unemployment in my state equates to just over $20k per year. I know lots of people living paycheck to paycheck on $80k+.

  76. captadam says:

    I’m paid once a month, so two paychecks equals one-sixth of my salary. And my salary isn’t that high. So, yeah, I guess I would be hurting pretty severely if I had to miss the next two paychecks.

    I have some cash saved up–enough to equal about two paychecks’ worth of take-home pay. But, then again, my mortgage payment comes directly out of my paycheck, and I don’t have two months’ of pay INCLUDING the mortgage payment saved up. Hope I don’t lose my job …

  77. MikeVx says:

    I’ve been learning better money management from a series of web sites. I can’t remember the details now, but one day I was on fark.com and there was an article linked to getrichslowly.org. From there and sites I found from there I’ve managed to improve things to where I actually have savings now. About 6 paychecks in a pinch.

    My budget actually includes a line for money sent to savings each month. I wish the expensive surprises would stop, though.

    I keep the eating out down, basically when I’m meeting friends for something or when the day has gone crazy and it’s fast food or no food. I find a Netflix subscription to be considerably cheaper than cable. My Internet is low-cost middling-speed, but serviceable.

    Even before learning good money management, I did some things right. I take care of my gadgetry. I have a TV and DVD player that are each around 10 years old, and they still work. My pocket organizer is coming up on 9 years old, a nearly unheard-of lifespan for such a device. At any geek gather I win the oldest-laptop competition. (It was a gift, ant it still works perfectly 7 years later.) My microwave oven is older than some of the Consumerist staff. I could go on, but one often-missed point is the money you save by taking care of your household hardware. My regular household appliances: washer, dryer, stove, and refrigerator, are all over 20 years old.

    I’m not sure how much I’m saving by not having to replace this stuff regularly, but I suspect it would be an impressive number.

  78. TalKeaton: Every Puzzle Has an Answer! says:

    I had an emergency fund once. It got used for emergencies. There have been several lately. Now I’m out of money.

    Short, but very true, story.

  79. Oranges w/ Cheese says:

    @lpranal: SERIOUSLY! I have a degree too and I’m barely making by!

  80. Anonymous says:

    Experience is the best teacher. Many years ago, I was laid off from my job. With mouths to feed, and a $300 car payment. I swore that, if I survived, I would never get into that mess again. I scrimped, saved, cut expenses, and lived within a strict budget. Buying only what I needed, not what I wanted. For the last 20 years, I saved at least 15% of my income and gave another 5% to charity, and I never made a lot of money, but I always spent less than I made. I kept my cars for 9-10 years, then bought a new one with the cash I had saved. If you survive this economic downturn, you will learn a valuable lesson; it will be the same lesson that was learned by the people who lived during the depression. You will find out that your I-Pod, HBO, fancy restaurant meals, new car, expensive clothes, I-Phone, and SUV aren’t needed, just wanted. Good luck!

  81. Anonymous says:

    If you survive this economic crisis, you will learn the most valuable economic lesson of your life. It is the same lesson that people who survived the Great Depression learned. Spend less than you make, and save the rest. If you don’t know the difference between what you NEED and what you WANT; you soon will. Good luck, from someone who has been living on a strict budget; saving 15% of income, and giving 5% to charity, all for the past 20 years.

  82. Sabbadeus says:

    I’m currently out in the middle of nowheres in the midwest, and in the process of moving out here I racked up a bit more debt then I wanted and thereafter learned rather quickly that it is next to impossible to find a job in my line of work (Electrician/Fire Alarm Tech) in this town, much less most of this state. That immediately hit me with having to cut back on my spending drastically and try and find whatever job I could. So I work a glorified data entry job through a third-party company that does backend work for comcast.

    Already they’ve started VTO(Voluntary Time Off)ing people so they’re working en estimated 20 hours a week instead of their scheduled fourty. Thankfully, my department hasn’t suffered yet, but if I was to lose this job, or have my hours cut, I would survive for one paycheck since we get paid every other week.

    The only thing thats saving me this year is my tax returns from my job back on the east coast when I was making decent enough money to live off of in semi-comfort for my lifestyle.

    Out here, I live paycheck-to-paycheck with wages that are 1/3 of what I used to make(so basically 8.25/hour) and between rent, car/renters insurance, foodstuffs and entertainment(finally quitting my MMO’s, better things to do with my time now), it leaves very little to save.

  83. Madaria says:

    I am sorry I do not buy that whole vicious cycle of getting a higher status job being any more expensive than another.

    A company phone should be provided if you really needed to be reached 24/7.

    Lease return vehicles or “certified” vehicles are the biggest deal in the automarket. Some other sucker has taken the bulk of the depreciation. Even better is to buy a “vintage” foreign car; buy it for cash, show you have character, save on insurance and taxes, and some can be maintained for the price of modern import.

    As far as clothing, anyone paying full retail for “designer” clothing should have their wallets drained. There are soo many avenues for designer or designer inspired clothing.

  84. EdenBabararacucudada says:

    I /was/ the kind of guy who saved at least 50% of his paycheck every month. But in the past year:
    – My necessary expenses (rent, etc) have more than doubled
    – My income has nearly halved.

    Add to that a couple of unexpected expenses, as well as the fact that it took a few months to really adjust to the change in income vs expenses, and my $20,000 in savings (I’m 24, and earned every penny), has been reduced to a little less than one-month’s paycheck. And only rising by about $50/mo.

    I expect that I am relatively marketable (I do keep getting responses to a resume on Monster that I left about two years ago), and am certainly willing to endure a long commute or similar if that’s what it takes to support my family, but yeah, I’m worried about what I would do if I suddenly lost my job.

  85. IT-Chick says:

    This is why I opt to have more deductions out of my paychecks. I know a lot of people don’t agree with it, but being able to deposit a $4000-$5000 check into savings removes so much stress.
    We struggle to save, but it’s totally because we spend too much… errr I mean, we stimulate the economy… and I’ll totally admit it. We pay our bills, we have 401k, we have college savings for our 4 year old, just don’t have the cushion in the savings all the time.

  86. Jevia says:

    It is hard to save money when one has to pay for more things than ever before. Most american workers have to pay for their own healthcare and that of their family, fund their own retirement plan, pay for their student loans, fund their kids college plan, pay for TV service and pay significantly more for telephone service.

    That’s on top of other “normal” expenses many of which have increased proportionately far more than one’s paycheck, including car/life/home insurance, car expenses (loans, repairs), gasoline, food, mortgage, clothing, utilities, and some entertainment.

    I did have a nice savings account, but used most of that money to pay for a house downpayment/closing costs, expenses while I was then out of work for 4 months (laid off 8 months after buying house), replacement of airconditioning/furnace 13 months after buying the home.

    Fortunately, found a new job relatively quickly (although at a paycut) and slowly building up the savings account again. After paying my monthly bills, I have very little left over. I put half of that into a savings account and half towards paying off a credit card. I’ll be in much better shape in about another 12-18 months to put more money in the savings. As it is now, my family would probably be ok for about 3 months, which I guess is at least better than most.

  87. Anonymous says:

    Well, during the ’01-’03 IT downturn, I wasn’t ready for an extended layoff period. And for those in tech, those were awful times with telecoms laying off 50%+ of their staffs. What I’d learned, from this period, was to plan ahead for relocation expenses, in addition to normal bills, since moving to find a job, was an expectation. Luckily, I was among those who’d stayed gainfully employed for the downturn. Since then, I’d grown an emergency fund to cover 2-3 years worth of expenses, outside of my investments. And this time around, I’m not worried about having to move to keep my former level of employment.

  88. Tim Russell says:

    Remember when gas hit $4+ a gallon and there was all this debate about oil drilling. Many said “it’ll take 10 years” as if it shouldn’t be done. The retort from the other side was then best to start now. So what if it’ll take 10 months start today. The point is to get in the savings habit. Even a small emergency fund might help you not have to put that car repair on a CC and so you knock a bit more of the balance down.

  89. MrFrankenstein says:

    Americans live beyond their means – and have done for a long time, indulging (and being indulged) in the delusion of being entitled to anything they want.

    Now comes the learning curve, where Americans get to live like the majority of people in the rest of the world.

    It’s not that bad. You just have to learn ‘how’ – its primary difficulty is because you’re not used to the idea that life isn’t about the prompt fulfillment of all your instant, spur-of-the-moment desires.

    And that ‘hand to mouth’ living, saving, and self-discipline are the norm, or else you starve to death. Its simple. Easy lesson to learn.

    A place to stay, somewhere to wash, and a job.
    Anything beyond that, is ‘luxury.’

    Many folks are going to be increasingly struggling (especially as the USA is technically bankrupt and living on China’s largesse) but your kids will grow up used to it. They’ll be leaner, more in control of their lives, and smarter for it.

    In the mean time, think of it as ‘educational’ :)

  90. caranguejo says:

    I’m just laughing at all the people coming on here and trying to tell others how to live their lives.

  91. littlemisslondon says:

    Yeah, um, we had a decent emergency fund (about 5 months’ wages). Then our furnace broke in December, in Canada, and we had to blow half of it on a new one.

    We’re young and just starting out so we haven’t had enough time to really build up six-figure investments or anything. And we’d still be fine for a couple of months without money coming in, longer if we didn’t mind going into debt. But it takes time to build up savings, you know? If you’ve only been working for a couple of years, you’re limited in your ability to save up giant sums. And we pay off our credit card bill every month and have zero non-mortgage debt.

  92. Stupendous says:

    Savings? How un-American! Debt for life!

    I’ve met 2 friends with money problems since I finished college. Both dug themselves into that hole and continued to do nothing about it. I ended it with the first one because he had a tendency to mooch off me and he took 6 months to pay back the money he shorted me on rent + utils. And I’m getting ready to end it with the 2nd one because he has a tendency to mooch as well yet he is telling me and his wife still have to pay off their high end bed mattress, plasma television, and 1 month ago they just spent $600+ on 2 Blackberry Storm’s. WTF.

    I myself am a bad American. I live way below my means and have 0 debt. If things got real bad I could live over 6 years without a job by living off my 6 month emergency fund + house downpayment.

  93. reidnez says:

    Actually, someone that lives paycheck-to-paycheck is in pretty *good* shape among working folks that I know. It is more common to be living paycheck-to-paycheck *and* have crushing debt at the same time. When you’re in that situation, it is actually foolish to save money because you will simply get hammered by the interest rates on all your debts.

    It’s too common a tendency to assume that the working poor “just don’t know about money,” when the truth is that wages are so low and expenses are so high, they simply get trapped and beaten down. You might see a waitress and kids living in a lousy motel and paying the equivalent of more than $1000 a month for rent, when a decent apartment could be had for hundreds less (depending on the area). Yes, that’s crazy. She knows it’s crazy. But how is she going to save up deposit, first and last month’s rent, and money to rent a U-haul when every red cent she brings home is already spoken for? What if her credit is ruined because a kid got sick, or she missed a few car payments because groceries were more important?

    Yes, a lot of people mismanage their money–but this is totally independent of wealth. There are plenty of people with six- and seven-figure salaries who live wildly beyond their means, too, because they believe such a “lifestyle” is integral to their profession or image.

  94. darkryd says:

    Yeah – tell me how good that spaghetti tastes on day number 5….

  95. Anonymous says:

    Some of you who comment here simply don’t get that many, many responsible, fiscally careful and hardworking people DO NOT MAKE ENOUGH MONEY to create an emergency fund.

    People making minimum wage can barely get by each week. Save for emergency fund? Get real. They’re lucky if they can pay rent and all their other expenses. The term “working poor” refers to real people.

    Show a bit more compassion. The world is NOT filled with people who make lots of money, spend it frivolously and don’t save. The world is bigger than your immediate social circle.

    It’s filled with people who have neither the skills, nor the education to get good-paying jobs. But even some folks who have the education and skills can’t find jobs that pay them for them…and thus, they don’t have EXTRA money to create these funds.

    And the study is probably wrong. For most people, it’s one paycheck away from disaster. Especially in this economic climate.

    And by the way, just because your financial house may be in order, you don’t get to judge and criticize others.

    There but for the grace of god. As someone said, enough of this smug, righteous attitude toward those who are not in as good a situation as you. Compare apples to apples. Not apples to oranges.

    Let’s see how much of an emergency fund you’d have if you made $8 an hour.

    • Argy says:

      @PieroPsyche: $8 an hour would be nice!! I make $7.25 (until I get laid off in April), and that’s with three years of college in the same field under my belt.

  96. Anonymous says:

    An emergency fund isn’t only money in the bank, it has to be cash on hand, as well as non-perishable foodstuffs, TP, soap, shampoo, deoderant, laundry detergent, etc. I keep large amounts on hand, and along with my deepfreeze, could live in my house for months if I had to. I even have powdered milk. If your bank crashes, and your money is tied up electronically, and you can’t use your debit card or write a check, you’re pretty much screwed.

  97. DeeKey says:

    If you have a mortgage and you cannot put money into savings, you can not afford to own a house. If I did not own my house out-right I would be renting, it is much cheaper because of property taxes and home maintenance. It still takes nearly 30k a year to pay bills and eat even with the mortgage out of the way.

  98. Anonymous says:

    What’s a steady paycheck. If you are in a commission based line of work and have no business, you are among the walking dead. Pray you stay healthy, eat out your freezer, no more $4 Starbucks lattes, and pray, pray, pray!

  99. curtisawa says:

    I would have guessed this number was much higher even during boom times from a few years ago. Americans have not saved anything in a long while. That is part of the problem.

  100. Anonymous says:

    @Argy – you said:

    >>It’s hard to make a honking pot of spaghetti when you’re at school from 9-noon and then at work from 1-10 p.m. That’s my day today, and I still don’t make enough to save money.

    Making a pot of spaghetti takes less than 15 minutes, and that’s if you actually use meat (which has to be browned if it starts out raw) and heat the sauce on top of the stove rather than the microwave. Skip the meat (or use sauce that already has meat) and heat sauce in microwave and you’re talking about cooking time for the pasta – negligible, and doesn’t require you to stand over it (watched pot never boils y’know). 30 seconds to dump the microwaved sauce onto the pasta, voila, you’re done.

    If you want to buy the stuff in person at a store, add a few minutes for physical shopping – yes, it really only takes a few minutes if you’re not buying a basket full of stuff and IF you have a list and STICK TO IT – though there’s no reason you couldn’t buy this stuff online, since it’s all nonperishable excepting fresh meat – which is really a luxury anyway for someone on a VERY tight budget. Many places on line where you can buy these kinds of ingredients cheaply and not pay a fortune for shipping.

    Also, spaghetti can be frozen (many ways to freeze in smaller portions for per-meal use… use your Google, children…) which means it’s even LESS time intensive; make a huge amount once and never have to spend that time again for x-number of meals, except the time it takes to throw it in the microwave.

    Nice try, but there’s nothing time intensive about making a pot of spaghetti. Or at least no more time intensive than, say, reading and leaving a comment at a website – but you somehow found time to do that.

  101. Anonymous says:

    Several of you describe how they save and budget, but then car repairs & the like will wipe out all your savings. This tells me that your budget is not realistic. Anyone who does the math will see that a car costs $5k a year (roughly; all-in). Well, that $5k is the figure to include in your budget! If you’ve bought a cheap used car and have been spending $100/month (i.e. $1k/year), know that this is not going to last forever. A budget is worthless if it isn’t realistic!