8 ms·

Almost 40% of Americans Would Struggle to Cover a $400 Emergency

112 points by Geeek 7y ago

war1025 7y ago
I always wonder what proportion of that group is due to insufficient income, and what proportion is due to terrible financial literacy.
- whalesalad 7y ago
  Yeah there were times that even when I was making a ton of cash at a startup, living in SF, a $400 emergency could kick my ass too because I was such a financial idiot.
- mAEStro-paNDa 7y ago
  I'd suggest that these groups are less distinguishable, or that there is more overlap of these groups, than you may think.
  - josephorjoe 7y ago
    Indeed. Most of my family falls into both categories. One the one hand it is infuriating to see them pay more for everything they buy because they are paying interest on everything they buy partly because they buy stuff they don't need or buy it sooner than they need to. On the other hand there are incredible cultural pressures in america to spend spend spend and get newer/better stuff than you need (cars, houses, phones) and almost no cultural pressure to be prudent and responsible. Probably doesn't help that there is a whole 'industry' whose only function is to capture 5-35% of the income of the poor and distribute it to the rich.
    - war1025 7y ago
      What industry are you referring to?
      - josephorjoe 7y ago
        Credit card, payday loans, etc. To a lesser degree car loans. It often does make sense for many people to take out a loan to buy a car, but car loans tend to be described to people in terms of 'monthly payment' rather than total cost, which makes it easier for people to make bad decisions (e.g., buying that new $30,000 SUV w a 5 year loan instead of the used $15,000 sedan w a 2 year loan).
- mrandish 7y ago
  Yeah, even when I was younger and only had irregular, low paid work, I never had less than a few thousand dollars in cash available in case of emergency. Sure, I had to defer things I wanted to have that but it there was more than once that it kept my life from going off the rails when an emergency did arise.
  - slashcom 7y ago
    Indeed it may somewhat be a result of financial illiteracy, but today's young people are significantly better educated than previous generations (https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States#/media/File:Educational_Attainment_in_the_United_States_2009.png https://en.wikipedia.org/wiki/Educational_attainment_in_the_...). With the cost of education, healthcare, and housing all rising significantly faster than inflation, it's possibly just harder for many to save up that emergency fund. Indeed, it's particularly difficult to justify having an emergency fund if you're also facing five figure 8% interest student loans.
    - tspike 7y ago
      The education system does do a poor job of educating people on financial matters, however.
    - malvosenior 7y ago
      There was just a post on HN the other day about how the top priority for Millenials and Gen Z is travel, so I would say that the younger generations are not significantly better at financial literacy and in fact may have expectations even more out of line with their financial reality than other generations. https://news.ycombinator.com/item?id=19963476 https://news.ycombinator.com/item?id=19963476
    - war1025 7y ago
      A difference I've noticed between myself and many of my friends is that I view savings as "Money you don't touch", whereas they view it as "Money you haven't spent yet" That difference in perception leads to me having a constantly growing bank balance, while they have developed a habit of saving then splurging, repeatedly. Which isn't really building wealth, but more buffering for large pre-planned expenses.
- the_gastropod 7y ago
  I don't think these things are necessarily mutually exclusive. A fair bit of financial literacy should enable someone to save at least some income even at minimum wage (barring catastrophes and good old fashioned bad luck). The lifestyle you'd need to save on a minimum wage is pretty unsavory, though, and not many would enjoy living that way forever.
  - imsofuture 7y ago
    And of course, billions of dollars are being spent to convince you that you shouldn't actually live that thrifty lifestyle, even if you are able to.
    - brighter2morrow 7y ago
      This is the bigger thing. "Go to the movies, buy Netflix, buy Amazon Prime" etc etc etc. There's so much more things the financially illiterate feel compelled to buy these days.
  - zanny 7y ago
    I feel like this might be coming from a position far above minimum wage, because in practice the poor aren't that stupid. You get trapped in cycles of incredible housing expenses keeping you in constant short term debt and the lack of income leading you to constantly seek new revenue sources, but being in that condition is inherently expensive and money in is always trying to fill up a bucket with a hole in it.
    - bluGill 7y ago
      Back in my college days I was able to live on minimum wage, including paying tuition. I knew several other people doing the same thing and even supporting a family on their income. Their housing expenses where a lot lower than you would believe possible: they lived in a tiny apartment in the bad part of time: they had a warm place (hot in summer: no AC), a dry roof, a kitchen and bathroom. We all had a cheap car, with enough money set aside to fix it as required. Of course we were the minority. Most people live exactly at their means (including whatever they can borrow). I understand, I like more space as well: I like my toys as much as everybody. I just believed my future was better if I didn't get myself into debt now.
- imsofuture 7y ago
  Both being hallmarks of capitalism, does it really matter?
  - war1025 7y ago
    It matters because giving someone who can't manage money more money doesn't improve anything. Further, being semi-financially literate is probably a prerequisite for clawing your way out of poverty.
  - mfatica 7y ago
    Financial illiteracy is a hallmark of capitalism?
    - imsofuture 7y ago
      Extracting as much money as possible from the financially illiterate absolutely is.
      - SkyBelow 7y ago
        Extracting resources from those who don't protect those resources is core behavior in most evolved animals. That we do it with money instead of other resources due to capitalism does not change that the root problem is on a deeper level than even human nature.
  - RhodesianHunter 7y ago
    Yep, only capitalism has poor people and people with poor financial literacy. rolls eyes
    - imsofuture 7y ago
      I didn't even sort of say that.
- peterwwillis 7y ago
  It seems more like a cumulative effect than one cause. Rising costs [of housing, health care, education, etc], stagnant wages, loss of retirement support, increased dependence on credit, recessions, and a continued disposable consumerism, all have an effect not just on personal wealth, but what one's wealth can do. And I don't think people were significantly more financially literate 20 years ago.
- deleted 7y ago
  [deleted]
- michaelchisari 7y ago
  When you know someone who is $400 away from absolute ruin, it's reasonable to ask them whether this is due to personal failings or external forces. When 40% of your population is dealing with it, you have an economic problem that needs to be addressed on a policy level.
  - war1025 7y ago
    40% of the population isn't $400 from ruin. They just can't easily absorb unexpected expenses. Given the frequency of unexpected expenses, the majority of the population obviously figures out how to get by. If 40% of the population was that close to "absulute ruin" there would be rioting in the streets.
    - Kye 7y ago
      They mostly do it with emergency funds from friends and family who are not necessarily any better off, selling things off, and putting off essential maintenance. Sometimes they can get by this way for a long time, but it's not sustainable.
      - michaelchisari 7y ago
        Or if all else fails, putting it on a high interest credit card.
  - badpun 7y ago
    Why? This was always the case in world's history, and we survived. If it was possible to address it with policy at a relatively low cost, then I'd be up for it, but something tells me that there is no policy that can make 100% (or even 90%) of people make rational life choices. Which means that the only option left is cleaning the messes caused by irrationality, and that's very expensive.
- minikites 7y ago
  This is as disingenuous as the Fox News graphic citing a study that 99.6% of "poor" households own a refrigerator. Growing up poor impacts a lot of your future decision making priorities; poor financial literacy is often a symptom, not a cause. The personal finance "industry" (racket) preys on the anxious and blames the victim: https://slate.com/business/2016/05/the-latte-is-a-lie-and-buying-coffee-has-nothing-to-do-with-debt-an-excerpt-from-helaine-olens-pound-foolish.html https://slate.com/business/2016/05/the-latte-is-a-lie-and-bu...
  - war1025 7y ago
    My comment is disingenuous? How?
    - minikites 7y ago
      In the way I described, you're reversing cause and effect in many cases and putting the blame on people for being in a situation mostly out of their control. Poor people aren't poor because they spend all their money on avocado toast and fidget spinners, they're poor because wages have stagnated and the costs of housing, education, and healthcare have skyrocketed. The "welfare queen" stereotype of a poor person recklessly spending money doesn't reflect the evidence. https://en.wikipedia.org/wiki/Welfare_queen#Gender_and_racial_stereotypes https://en.wikipedia.org/wiki/Welfare_queen#Gender_and_racia... It costs a lot of money to be poor in the USA: “The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.” ― Terry Pratchett, Men at Arms: The Play
- westurner 7y ago
  > I always wonder what proportion of that group is due to insufficient income According to the Social Security Administration [1]: 2017 Average net compensation: 48,251.57 2017 Median net compensation: 31,561.49 The FPL (Federal Poverty Level) income numbers for Medicaid and the Children's Health Insurance Program (CHIP) eligibility [2]: >> $12,140 for individuals, $16,460 for a family of 2, $20,780 for a family of 3, $25,100 for a family of 4, $29,420 for a family of 5, $33,740 for a family of 6, $38,060 for a family of 7, $42,380 for a family of 8 Wages are not keeping up with corporate profits. That can't all be due to automation. The minimum wage is only one factor linked to price inflation. We can raise wages and still keep inflation down to an ideal range. Maybe it's that we don't understand what it's like to live on $12K or $32K a year (without healthcare due to lack of Medicaid expansion; due to our collective failure to instill charity as a virtue and getting people back on their feet as a good investment). How could we learn (or remember!) about what it's like to be in this position (without zero-interest bank loans to bail us out)? > and what proportion is due to terrible financial literacy. The r/personalfinance wiki is one good resource for personal finance. From [3]: >> Personal Finance (budgets, interest, growth, inflation, retirement) Personal Finance https://en.wikipedia.org/wiki/Personal_finance https://en.wikipedia.org/wiki/Personal_finance Khan Academy > College, careers, and more > Personal finance https://www.khanacademy.org/college-careers-more/personal-finance https://www.khanacademy.org/college-careers-more/personal-fi... "CS 007: Personal Finance For Engineers" https://cs007.blog https://cs007.blog https://reddit.com/r/personalfinance/wiki https://reddit.com/r/personalfinance/wiki ... How can we make personal finance a required middle and high school curriculum component? [4] "What are some ways that you can save money in order to meet or exceed inflation?" Dave Ramsey's 7 Baby Steps to financial freedom [5] seem like good advice? Is the debt snowball method ideal for minimizing interest payments? [1] https://www.ssa.gov/OACT/COLA/central.html https://www.ssa.gov/OACT/COLA/central.html [2] https://www.healthcare.gov/glossary/federal-poverty-level-fpl/ https://www.healthcare.gov/glossary/federal-poverty-level-fp... [3] "Ask HN: How can you save money while living on poverty level?" https://news.ycombinator.com/item?id=18894582 https://news.ycombinator.com/item?id=18894582 [4] "Consumer science (a.k.a. home economics) as a college major" https://news.ycombinator.com/item?id=17894632 https://news.ycombinator.com/item?id=17894632 [5] https://www.daveramsey.com/dave-ramsey-7-baby-steps https://www.daveramsey.com/dave-ramsey-7-baby-steps
duxup 7y ago
It is scary stuff as I don't think I can make a visit to a doctor for a non checkup type situation (injury) without the bill being more than $400.* And I have "good" insurance. *Granted that largely depends on how much I've paid YTD, so it could be more than $400, or less, but hell who knows as the plan changes every year. To be clear I can foot the bill just fine, but it demonstrates how on the edge and out of control you are when $400 breaks the bank.
- dragonwriter 7y ago
  > It is scary stuff as I don't think I can make a visit to a doctor for a non checkup type situation (injury) without the bill being more than $400.* > And I have "good" insurance. Well, not really, because even a crappy HMO gives you better guarantees than that. You have a “good” insurance plan probably in the sense that providing the illusion of choice while heavily exposing you to cost for “covered” services is widely sold as “better” than a slight reduction in mostly illusory choice with far performance on the risk protection function that is the whole reason to buy insurance.
  - duxup 7y ago
    Plans are way more complex to say what a $400 bill is in relation to the quality of the plan. Example: 1. My plan could cover squat of the first $400 for the year... but cover EVERYTHING after $400 of out of pocket costs for the year. If you've got a family, that's a hell of a plan. 2. My plan could cover squat of the first $10k ... that would suck. A single $400 bill doesn't tell you much as far as what a good plan in the US is or isn't.... and we haven't even gotten into what the premiums are per month. Of course this also goes to show how much of a pain health insurance in the US is ...
- glaurung_ 7y ago
  Not to mention that if you're in that <$40,000 income bracket, you're almost guaranteed driving a car that has a very high probability of needing a $400 (or worse) repair quite regularly. You also likely live somewhere where you need that car functioning to get to work.
prepend 7y ago
“Among the remaining 4 in 10 adults who would have more difficulty covering such an expense, the most common approaches include carrying a balance on credit cards and borrowing from friends or family” Having to carry a credit card balance isn’t much of a struggle. This article needs to do more work to make a better headline so it’s not actually “40% of Americans would be inconvenienced...”
- bennylope 7y ago
  Carrying a balance isn't the struggle, it's paying off the accumulation that is.
- cbanek 7y ago
  Well if you don't have the money to pay it off right away, and it's on your credit card, then how are you supposed to find even more money to pay that off? What if another surprise bill came at that time? You'd be going down the debt spiral.
  - prepend 7y ago
    That’s why it’s inconvenient. I mean the average cc rate is 20% so every month you can’t pay off the $400 means you’re paying $70 in interest. It sucks but I don’t know how much of a struggle that is.
- Causality1 7y ago
  Many people haven't been taught the difference between spending money you don't have and spending money you won't have. The former is dangerous, the latter is nigh-suicidal.
- Raphmedia 7y ago
  > Having to carry a credit card balance isn’t much of a struggle. Let's say you put $400 on a CC that has 18% interest rate. By paying only the minimum payment each month you end up paying a total of $598 after 4 years and 11 months. This means that for the next 4 years, a credit card is no longer a safe escape for you. A better example would be an emergency Root Canal at $1,600. This would take you 12 years and 7 months to pay off.
akshayB 7y ago
I am bit surprised by the fact that with unemployment rate that is all time low, people should eventually see that savings amount go up overall. This is almost saving like $8 per week which is close to hourly minimum wage. Personally I think either people spend way too much money or they don't follow strict discipline of saving small (%) of their income.
- mAEStro-paNDa 7y ago
  Perhaps instead the employment rate doesn't tell the whole story?
  - cirgue 7y ago
    The people working in the sharing economy because they don't have other options for income get counted in employment statistics. The PhD working at starbucks gets counted in the employment statistics. People who are not actively seeking employment don't. The unemployment rate might be low, but the labor participation rate has been hovering around 63% since 2016. It was above 66% for most of the 90s through the early 2000s, until the financial crisis. Employment statistics are, at best, useful for comparing last year to this year, or last quarter to this quarter. They say little about the overall structure of the economy.
- metalliqaz 7y ago
  Low unemployment rate only improves savings if incomes rise as a result of the increased demand for labor. Though wages have ticked up a little bit, we haven't seen the expected rise in incomes that would be expected for our historically low unemployment rate. I'm not sure anyone knows exactly why, but I've been led to understand that the rosy picture painted by the unemployment rate is undercut by the copious amounts of underemployed americans, as well as leftovers from the great recessions that never re-entered the workforce. There is also the current trends of automating the workforce, and the gig economy, both of which suppress the value of labor.
samcampbell 7y ago
While a surprising statistic, this number has actually improved in the last five years. "This is an improvement from half of adults in 2013 being ill-prepared for such an expense [$400]" - Report on the Economic Well-Being of U.S. Households in 2017 [0] [0]https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf https://www.federalreserve.gov/publications/files/2017-repor...
- kibwen 7y ago
  This feels a bit like damning with faint praise; the most likely cause of an emergency debt is a trip to the hospital, and the average deductible of a US employee on private health insurance is $1500 (closer to $3000 for family coverage). (We don't need to bother considering people who don't have jobs and thus don't have insurance; the failure mode for them, as before, is "resign yourself to lifelong financial ruin and dodging debt collectors".) So the question then is: what percentage of households can cover a $1500 emergency bill, rather than a mere $400 bill? And, at the rate of growth since 2013, how many decades will it take for that number to creep up to 50% (and don't forget to adjust for inflation).
- gshubert17 7y ago
  Here's the actual Federal Reserve Board news release from which Bloomberg made their report: https://www.federalreserve.gov/newsevents/pressreleases/other20190523b.htm https://www.federalreserve.gov/newsevents/pressreleases/othe...
jorblumesea 7y ago
I wonder how much the American economy is propped up by rampant debt spending and financial illiteracy. If everyone in the US saved 20% of their income, and didn't over leverage for that new truck, would we see a noticeable economic impact?
- bdcravens 7y ago
  Or more relevant to HN, a new phone or tablet. And paying $15 surcharges to get lunch delivered. And multiple entertainment services at $10-20/month.
- perfunctory 7y ago
  People not saving for pension is a ticking economic bomb. The economy might be prompt now but I am afraid to think about what happens when the current working generation retires.
  - bluGill 7y ago
    You will so the current generation at WalMart in a few years pushing carts and other such tasks when they are forced to realize their retirement savings doesn't cover their needs. Actually it isn't that bad, a fair number of people don't plan to retire while they can work. A job provides a social experience and meaning in life. If you retire you need to replace that (if you don't you will die quickly - this is known medically), if the job isn't that bad why not keep working? For such people retirement means a nursing home, and if they don't have any money the government will cover that. It isn't for me, I have my own projects I want to do, but maybe it is for you: so long as it is a real decision I don't have a problem with it.
gojomo 7y ago
Headline strongly debunked here: https://twitter.com/p_millerd/status/1118071142311288838 https://twitter.com/p_millerd/status/1118071142311288838 Highlights: "After some digging I found the 2016 appendix (again, 2017 not to be found). Only 12% of people couldn't actually pay the expense" "Another survey question not highlighted actually gives some direct clarity on this question. It turns out only about 15% of people would not be able to cover a $400 expense [without impacting their ability to pay other bills]." Note that "12% couldn't actually pay" is about equal to the 2017 official poverty rate of 12.3%. I don't find it surprising that people counted as "in poverty" would have problems covering a $400 immediate cash expense.
- wonder_er 7y ago
  hah! I saw this article, came here to post the same twitter thread. Good eye, /u/gojomo.
  - deleted 7y ago
    [deleted]
- mrguyorama 7y ago
  I don't see how "I would have to accrue unexpected and emergency debt to manage this expense" is any different from "I can't afford this expense"
  - metalliqaz 7y ago
    the difference is that the former requires credit. Some people are so poor they don't even have that. I'd say that both count as "struggle", though
  - SilasX 7y ago
    "Afford" is a four-letter word. You can break it into: 1) I have the cash ready to spend right now or in liquid assets. 2) I can get the cash, but from an account/asset I'd rather not withdraw from (IRA, jewelry). 3) I can go into debt to pay it, and it wouldn't make a big difference over the next year. 4) I can go into debt to pay it, but my financial situation would be close to bankruptcy over the next year. 5) I can't access that kind of money by any means. A good survey should iron out this spectrum of "affording" the expense to make the result robust and easy to interpret.
pavel_lishin 7y ago
Throwing my own anecdote into the barrel: Somehow, our HR provider company fucked up, and signed me up for the shittier of the two healthcare plans my employer provides, despite me signing up for the better version. All the paperwork shows that we had the good plan last year, but Aetna says we were on the shitty plan, with no out-of-pocket limit. To that end, our doctor's office is now billing us for $20k for a procedure my wife had to undergo. We're lucky; we have $20k in savings. We can cover this without the bill going to collections and dinging our credit, while we deal with the god-awful chain of HR->provider->insurer, until we get paid back. I wonder how many of my coworkers couldn't.
- john-radio 7y ago
  Don't pay it! You negotiate with healthcare providers! Don't tell them you have the money.
  - xmprt 7y ago
    This is the right approach. A healthcare provider would prefer $10k (<- arbitrary number) now over the potential to get $20k while also having to deal with debt collectors.
    - pavel_lishin 7y ago
      What happens if I negotiate down, and three months later Aetna finally unfucks my asshole and agrees to pay the $20k? I guess this is a question for a lawyer, and not a stranger on the internet.
- btilly 7y ago
  For this sum, if you have paperwork showing what you should have been covered to, you have grounds for a lawsuit.
- neilv 7y ago
  Unless you don't mind losing the $20K, talk to a lawyer ASAP, and before you pay. Also, HR/benefits mistakes happen, and that kind of arrangement with an outsourced company can lead to both individuals and organizations trying to cover their butts when a mistake happens, to a ridiculous degree. (I had paperwork showing I'd paid for and gotten insurance, but the actual insurance company said I didn't have coverage. Fortunately, I didn't get sick or injured, and found out on a routine health appointment. Had I found out the hard way, I could've been stuck with devastating bills and a "pre-existing condition" that could prevent getting insurance coverage in the future (given that ACA was/is under attack). There was such a Kafkaesque and underhanded butt-covering by everyone, I never did even get reimbursed for the insurance I paid for but didn't receive. I had better things to do than to sue.)
wonder_er 7y ago
The article's claim is almost entirely bullshit. The reasons why are nicely outlined here: https://twitter.com/p_millerd/status/1118071142311288838 https://twitter.com/p_millerd/status/1118071142311288838 This "can't cover a $400 expense" makes for a nice narrative, and we can all insert our perspectives about the world into this narrative, and walk away feeling good about it. Quotes from the above twitter thread: > I was curious about this because it seemed low. After some digging I found the 2016 appendix (again, 2017 not to be found). Only 12% of people couldn't actually pay the expense and a smaller amount would have to borrow money (keep in mind this could be double counted) Another survey question not highlighted actually gives some direct clarity on this question. It turns out only about 15% of people would not be able to cover a $400 expense. update: clarify uses of "this" and "it".
- why-el 7y ago
  For me, having to put it on a credit card is effectively not being able to cover it, so the numbers do check out, from this perspective. Again, we are talking an emergency, not a mortgage.
  - patejam 7y ago
    https://twitter.com/p_millerd/status/1118071182534660096 https://twitter.com/p_millerd/status/1118071182534660096 Response #1 and #3 equal ~80%. I'd count those as being able to cover it. Many people use credit cards and pay it off in full on time (including me).
  - ghaff 7y ago
    Except that, in addition to the 41% who can pay in cash (or from their bank account), 39% would put it on their credit card and pay at the end of the month. https://twitter.com/p_millerd/status/1118071182534660096?s=20 https://twitter.com/p_millerd/status/1118071182534660096?s=2... I expect that many of the people who can best afford an unexpected $400 expense would just put it on their credit card which they pay off every month. After all, might as well get the airline miles at least. Even if they could just write a check. So the 40% is really misleading. It's more like 80%.
  - 7y ago
coldtea 7y ago
>Almost 40% of Americans Would Struggle to Cover a $400 Emergency Let that soak in for those in the US (and on HN) who insist that the economy is great, unemployment is low (and measured properly), the middle class has no problem, etc...
- maerF0x0 7y ago
  > Let that soak in for those in the US (and on HN) who insist that the economy is great, unemployment is low (and measured properly), the middle class has no problem, etc... Everyone in the country could be making $100k a year, if their savings rate is 0% they'll still struggle with a surprise $400. IMO it's a problem with spending frivolously...
kcorbitt 7y ago
In the Bay Area at least, this is pretty understandable. 40th-percentile income in the Bay Area is $66k [1]. An income-tax estimator puts after-tax pay for a family of 4 on that salary in California at $55k [2]. I live in the Bay Area, and my family of 4 lives fairly frugally by choice. Even so, we spent more than $55k last year and squeezing even our modest lifestyle into that budget wouldn't have been easy. [1]: https://statisticalatlas.com/metro-area/California/San-Francisco/Household-Income https://statisticalatlas.com/metro-area/California/San-Franc... [2]: I put a household income of $65k with a family of 4 (married filing joint) into the tax estimator at https://smartasset.com/taxes/income-taxes#WF5trlFESC https://smartasset.com/taxes/income-taxes#WF5trlFESC
- GuiA 7y ago
  Congrats on managing to live frugally with a family of 4! Certainly an accomplishment. Out of curiosity, how much of that $64k is housing?
  - kcorbitt 7y ago
    We spent $33k on rent and utilities! And that's a deal, compared to what many of our neighbors are paying. We live near SF to keep my commute into the city manageable, and there simply isn't cheap housing to be had in the area.
throwaway13000 7y ago
Can someone explain to me how this is possible? America is among richest nations in the world. Plus its citizens have access to all amenities of life. How come they don't have enough for emergency expenses? Is it because of wealth inequality? Or is it that its a mature capitalist society, so most things are priced such that people have very little disposable income?
- bluGill 7y ago
  The problem isn't income, the problem is spending. People in general want more than they have. There is always another toy, A bigger widget, a better model next year.
- wtdata 7y ago
  I would say it's because of their consumerist culture and financial illiteracy, not because of extremely low wages. I wonder how many of these 40% have a high end smartphone and a big LCD TV in their living room.
- tbirrell 7y ago
  A lot of people are living paycheck to paycheck. Money in == money out, both by necessity and by increasing spending whenever they have increased income. Some people are deep in CC or Student debt, so extra money goes there, some are spending beyond their means (or right up to their means). Basically, people don't or can't save (much). So any unexpected expenses need to be covered by income.
toiletfuneral 7y ago
Really enjoying all the comments which basically equate "poor people need the rich to tell them to stop buying iPhones". Can't think of anything more American.
herplederple 7y ago
What a dishonest title/article. Taken directly from the report itself: "The findings show many signs of growth and improvement along with remaining pockets of distress and fragility. They also reveal new insights into how households approach their financial lives and decisions. In many ways, the latest findings underscore the overall economic recovery and expansion over the five years of the survey."
pkaye 7y ago
I see these kind of statistics but then you see phones in the range of $400-$1500. An average car costs $25-$35k according to data online. And you see pictures of people with grandiose homes if you have ever seen any of those home shows. Or people going out for grand meals or pricey drinks. Somehow those expensive things continue getting sold yet 40% struggle to cover a $400 emergency.
- throwayEngineer 7y ago
  I run a website that focuses on math driven, low cost living. The longer I run this website, the less sympathic I've become. I see so much waste, I see so many excuses. I think this paycheck to paycheck lifestyle is chosen by the person (or their biology). There are plenty of opportunities to save money or make more, but people choose not to.
  - SamReidHughes 7y ago
    Definitely. The only reason many software developers don't live paycheck to paycheck is because it is actually a hassle to spend that amount of money.
korethr 7y ago
I see articles like this from time to time, and from my own experience, can't help but wonder how much of said inability to cover a $400 emergency isn't self-inflicted. My personal anectdatum: I was not smart with my money in my younger years. I spent my money freely on whatever I wanted at that moment, and then was always wondering why I was so broke all the time. Savings? Why would I do that when that means I can't have money right now to get the thing I want right now? It took the clue-by-four that was the 2008-2009 recession to get me to realize that living beyond my means with no savings and a growing pile of debt was in fact a Bad Idea. During that time, and in the first few years following as I educated myself about finance and slowly cleaned up the mess I made, I also would have had a hard time covering a $400 emergency. But, that was my own damn fault now, wasn't it? In the time since, as my financial situation has improved, both because of the economy picking back up and my financial education helping me to be smarter with my money, I've been increasing my savings, reducing my debt, and getting less stupid with my purchases. And doing this, I am now able to cover a $400 emergency without stress. I did exactly that just last week. Yes, having a higher income now than I did then has certainly helped with that. But as I've reviewed my spending habits from my $20k/yr days, I've become a little embarrassed by them. A modicum of savings discipline would have let me ride out the 2008-2009 crisis more smoothly, and I'd be in even better shape today.
RickJWagner 7y ago
With super-low unemployment, and rising wages, this is truly of concern. If the headline is true, it really underscores the need for basic financial education. If people can't help themselves in this economy, there is little hope for them without some big change. (To the struggling people. Not to the economy.)

112 points by Geeek 7y ago

I always wonder what proportion of that group is due to insufficient income, and what proportion is due to terrible financial literacy.

whalesalad 7y ago
Yeah there were times that even when I was making a ton of cash at a startup, living in SF, a $400 emergency could kick my ass too because I was such a financial idiot.
mAEStro-paNDa 7y ago
I'd suggest that these groups are less distinguishable, or that there is more overlap of these groups, than you may think.
- josephorjoe 7y ago
  Indeed. Most of my family falls into both categories. One the one hand it is infuriating to see them pay more for everything they buy because they are paying interest on everything they buy partly because they buy stuff they don't need or buy it sooner than they need to. On the other hand there are incredible cultural pressures in america to spend spend spend and get newer/better stuff than you need (cars, houses, phones) and almost no cultural pressure to be prudent and responsible. Probably doesn't help that there is a whole 'industry' whose only function is to capture 5-35% of the income of the poor and distribute it to the rich.
  - war1025 7y ago
    What industry are you referring to?
    - josephorjoe 7y ago
      Credit card, payday loans, etc. To a lesser degree car loans. It often does make sense for many people to take out a loan to buy a car, but car loans tend to be described to people in terms of 'monthly payment' rather than total cost, which makes it easier for people to make bad decisions (e.g., buying that new $30,000 SUV w a 5 year loan instead of the used $15,000 sedan w a 2 year loan).
mrandish 7y ago
Yeah, even when I was younger and only had irregular, low paid work, I never had less than a few thousand dollars in cash available in case of emergency. Sure, I had to defer things I wanted to have that but it there was more than once that it kept my life from going off the rails when an emergency did arise.
- slashcom 7y ago
  Indeed it may somewhat be a result of financial illiteracy, but today's young people are significantly better educated than previous generations (https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States#/media/File:Educational_Attainment_in_the_United_States_2009.png https://en.wikipedia.org/wiki/Educational_attainment_in_the_...). With the cost of education, healthcare, and housing all rising significantly faster than inflation, it's possibly just harder for many to save up that emergency fund. Indeed, it's particularly difficult to justify having an emergency fund if you're also facing five figure 8% interest student loans.
  - tspike 7y ago
    The education system does do a poor job of educating people on financial matters, however.
  - malvosenior 7y ago
    There was just a post on HN the other day about how the top priority for Millenials and Gen Z is travel, so I would say that the younger generations are not significantly better at financial literacy and in fact may have expectations even more out of line with their financial reality than other generations. https://news.ycombinator.com/item?id=19963476 https://news.ycombinator.com/item?id=19963476
  - war1025 7y ago
    A difference I've noticed between myself and many of my friends is that I view savings as "Money you don't touch", whereas they view it as "Money you haven't spent yet" That difference in perception leads to me having a constantly growing bank balance, while they have developed a habit of saving then splurging, repeatedly. Which isn't really building wealth, but more buffering for large pre-planned expenses.
the_gastropod 7y ago
I don't think these things are necessarily mutually exclusive. A fair bit of financial literacy should enable someone to save at least some income even at minimum wage (barring catastrophes and good old fashioned bad luck). The lifestyle you'd need to save on a minimum wage is pretty unsavory, though, and not many would enjoy living that way forever.
- imsofuture 7y ago
  And of course, billions of dollars are being spent to convince you that you shouldn't actually live that thrifty lifestyle, even if you are able to.
  - brighter2morrow 7y ago
    This is the bigger thing. "Go to the movies, buy Netflix, buy Amazon Prime" etc etc etc. There's so much more things the financially illiterate feel compelled to buy these days.
- zanny 7y ago
  I feel like this might be coming from a position far above minimum wage, because in practice the poor aren't that stupid. You get trapped in cycles of incredible housing expenses keeping you in constant short term debt and the lack of income leading you to constantly seek new revenue sources, but being in that condition is inherently expensive and money in is always trying to fill up a bucket with a hole in it.
  - bluGill 7y ago
    Back in my college days I was able to live on minimum wage, including paying tuition. I knew several other people doing the same thing and even supporting a family on their income. Their housing expenses where a lot lower than you would believe possible: they lived in a tiny apartment in the bad part of time: they had a warm place (hot in summer: no AC), a dry roof, a kitchen and bathroom. We all had a cheap car, with enough money set aside to fix it as required. Of course we were the minority. Most people live exactly at their means (including whatever they can borrow). I understand, I like more space as well: I like my toys as much as everybody. I just believed my future was better if I didn't get myself into debt now.
imsofuture 7y ago
Both being hallmarks of capitalism, does it really matter?
- war1025 7y ago
  It matters because giving someone who can't manage money more money doesn't improve anything. Further, being semi-financially literate is probably a prerequisite for clawing your way out of poverty.
- mfatica 7y ago
  Financial illiteracy is a hallmark of capitalism?
  - imsofuture 7y ago
    Extracting as much money as possible from the financially illiterate absolutely is.
    - SkyBelow 7y ago
      Extracting resources from those who don't protect those resources is core behavior in most evolved animals. That we do it with money instead of other resources due to capitalism does not change that the root problem is on a deeper level than even human nature.
- RhodesianHunter 7y ago
  Yep, only capitalism has poor people and people with poor financial literacy. rolls eyes
  - imsofuture 7y ago
    I didn't even sort of say that.
peterwwillis 7y ago
It seems more like a cumulative effect than one cause. Rising costs [of housing, health care, education, etc], stagnant wages, loss of retirement support, increased dependence on credit, recessions, and a continued disposable consumerism, all have an effect not just on personal wealth, but what one's wealth can do. And I don't think people were significantly more financially literate 20 years ago.
deleted 7y ago
[deleted]
michaelchisari 7y ago
When you know someone who is $400 away from absolute ruin, it's reasonable to ask them whether this is due to personal failings or external forces. When 40% of your population is dealing with it, you have an economic problem that needs to be addressed on a policy level.
- war1025 7y ago
  40% of the population isn't $400 from ruin. They just can't easily absorb unexpected expenses. Given the frequency of unexpected expenses, the majority of the population obviously figures out how to get by. If 40% of the population was that close to "absulute ruin" there would be rioting in the streets.
  - Kye 7y ago
    They mostly do it with emergency funds from friends and family who are not necessarily any better off, selling things off, and putting off essential maintenance. Sometimes they can get by this way for a long time, but it's not sustainable.
    - michaelchisari 7y ago
      Or if all else fails, putting it on a high interest credit card.
- badpun 7y ago
  Why? This was always the case in world's history, and we survived. If it was possible to address it with policy at a relatively low cost, then I'd be up for it, but something tells me that there is no policy that can make 100% (or even 90%) of people make rational life choices. Which means that the only option left is cleaning the messes caused by irrationality, and that's very expensive.
minikites 7y ago
This is as disingenuous as the Fox News graphic citing a study that 99.6% of "poor" households own a refrigerator. Growing up poor impacts a lot of your future decision making priorities; poor financial literacy is often a symptom, not a cause. The personal finance "industry" (racket) preys on the anxious and blames the victim: https://slate.com/business/2016/05/the-latte-is-a-lie-and-buying-coffee-has-nothing-to-do-with-debt-an-excerpt-from-helaine-olens-pound-foolish.html https://slate.com/business/2016/05/the-latte-is-a-lie-and-bu...
- war1025 7y ago
  My comment is disingenuous? How?
  - minikites 7y ago
    In the way I described, you're reversing cause and effect in many cases and putting the blame on people for being in a situation mostly out of their control. Poor people aren't poor because they spend all their money on avocado toast and fidget spinners, they're poor because wages have stagnated and the costs of housing, education, and healthcare have skyrocketed. The "welfare queen" stereotype of a poor person recklessly spending money doesn't reflect the evidence. https://en.wikipedia.org/wiki/Welfare_queen#Gender_and_racial_stereotypes https://en.wikipedia.org/wiki/Welfare_queen#Gender_and_racia... It costs a lot of money to be poor in the USA: “The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.” ― Terry Pratchett, Men at Arms: The Play
westurner 7y ago
> I always wonder what proportion of that group is due to insufficient income According to the Social Security Administration [1]: 2017 Average net compensation: 48,251.57 2017 Median net compensation: 31,561.49 The FPL (Federal Poverty Level) income numbers for Medicaid and the Children's Health Insurance Program (CHIP) eligibility [2]: >> $12,140 for individuals, $16,460 for a family of 2, $20,780 for a family of 3, $25,100 for a family of 4, $29,420 for a family of 5, $33,740 for a family of 6, $38,060 for a family of 7, $42,380 for a family of 8 Wages are not keeping up with corporate profits. That can't all be due to automation. The minimum wage is only one factor linked to price inflation. We can raise wages and still keep inflation down to an ideal range. Maybe it's that we don't understand what it's like to live on $12K or $32K a year (without healthcare due to lack of Medicaid expansion; due to our collective failure to instill charity as a virtue and getting people back on their feet as a good investment). How could we learn (or remember!) about what it's like to be in this position (without zero-interest bank loans to bail us out)? > and what proportion is due to terrible financial literacy. The r/personalfinance wiki is one good resource for personal finance. From [3]: >> Personal Finance (budgets, interest, growth, inflation, retirement) Personal Finance https://en.wikipedia.org/wiki/Personal_finance https://en.wikipedia.org/wiki/Personal_finance Khan Academy > College, careers, and more > Personal finance https://www.khanacademy.org/college-careers-more/personal-finance https://www.khanacademy.org/college-careers-more/personal-fi... "CS 007: Personal Finance For Engineers" https://cs007.blog https://cs007.blog https://reddit.com/r/personalfinance/wiki https://reddit.com/r/personalfinance/wiki ... How can we make personal finance a required middle and high school curriculum component? [4] "What are some ways that you can save money in order to meet or exceed inflation?" Dave Ramsey's 7 Baby Steps to financial freedom [5] seem like good advice? Is the debt snowball method ideal for minimizing interest payments? [1] https://www.ssa.gov/OACT/COLA/central.html https://www.ssa.gov/OACT/COLA/central.html [2] https://www.healthcare.gov/glossary/federal-poverty-level-fpl/ https://www.healthcare.gov/glossary/federal-poverty-level-fp... [3] "Ask HN: How can you save money while living on poverty level?" https://news.ycombinator.com/item?id=18894582 https://news.ycombinator.com/item?id=18894582 [4] "Consumer science (a.k.a. home economics) as a college major" https://news.ycombinator.com/item?id=17894632 https://news.ycombinator.com/item?id=17894632 [5] https://www.daveramsey.com/dave-ramsey-7-baby-steps https://www.daveramsey.com/dave-ramsey-7-baby-steps

duxup 7y ago

It is scary stuff as I don't think I can make a visit to a doctor for a non checkup type situation (injury) without the bill being more than $400.* And I have "good" insurance. *Granted that largely depends on how much I've paid YTD, so it could be more than $400, or less, but hell who knows as the plan changes every year. To be clear I can foot the bill just fine, but it demonstrates how on the edge and out of control you are when $400 breaks the bank.

dragonwriter 7y ago
> It is scary stuff as I don't think I can make a visit to a doctor for a non checkup type situation (injury) without the bill being more than $400.* > And I have "good" insurance. Well, not really, because even a crappy HMO gives you better guarantees than that. You have a “good” insurance plan probably in the sense that providing the illusion of choice while heavily exposing you to cost for “covered” services is widely sold as “better” than a slight reduction in mostly illusory choice with far performance on the risk protection function that is the whole reason to buy insurance.
- duxup 7y ago
  Plans are way more complex to say what a $400 bill is in relation to the quality of the plan. Example: 1. My plan could cover squat of the first $400 for the year... but cover EVERYTHING after $400 of out of pocket costs for the year. If you've got a family, that's a hell of a plan. 2. My plan could cover squat of the first $10k ... that would suck. A single $400 bill doesn't tell you much as far as what a good plan in the US is or isn't.... and we haven't even gotten into what the premiums are per month. Of course this also goes to show how much of a pain health insurance in the US is ...
glaurung_ 7y ago
Not to mention that if you're in that <$40,000 income bracket, you're almost guaranteed driving a car that has a very high probability of needing a $400 (or worse) repair quite regularly. You also likely live somewhere where you need that car functioning to get to work.

prepend 7y ago

“Among the remaining 4 in 10 adults who would have more difficulty covering such an expense, the most common approaches include carrying a balance on credit cards and borrowing from friends or family” Having to carry a credit card balance isn’t much of a struggle. This article needs to do more work to make a better headline so it’s not actually “40% of Americans would be inconvenienced...”

bennylope 7y ago
Carrying a balance isn't the struggle, it's paying off the accumulation that is.
cbanek 7y ago
Well if you don't have the money to pay it off right away, and it's on your credit card, then how are you supposed to find even more money to pay that off? What if another surprise bill came at that time? You'd be going down the debt spiral.
- prepend 7y ago
  That’s why it’s inconvenient. I mean the average cc rate is 20% so every month you can’t pay off the $400 means you’re paying $70 in interest. It sucks but I don’t know how much of a struggle that is.
Causality1 7y ago
Many people haven't been taught the difference between spending money you don't have and spending money you won't have. The former is dangerous, the latter is nigh-suicidal.
Raphmedia 7y ago
> Having to carry a credit card balance isn’t much of a struggle. Let's say you put $400 on a CC that has 18% interest rate. By paying only the minimum payment each month you end up paying a total of $598 after 4 years and 11 months. This means that for the next 4 years, a credit card is no longer a safe escape for you. A better example would be an emergency Root Canal at $1,600. This would take you 12 years and 7 months to pay off.

akshayB 7y ago

I am bit surprised by the fact that with unemployment rate that is all time low, people should eventually see that savings amount go up overall. This is almost saving like $8 per week which is close to hourly minimum wage. Personally I think either people spend way too much money or they don't follow strict discipline of saving small (%) of their income.

mAEStro-paNDa 7y ago
Perhaps instead the employment rate doesn't tell the whole story?
- cirgue 7y ago
  The people working in the sharing economy because they don't have other options for income get counted in employment statistics. The PhD working at starbucks gets counted in the employment statistics. People who are not actively seeking employment don't. The unemployment rate might be low, but the labor participation rate has been hovering around 63% since 2016. It was above 66% for most of the 90s through the early 2000s, until the financial crisis. Employment statistics are, at best, useful for comparing last year to this year, or last quarter to this quarter. They say little about the overall structure of the economy.
metalliqaz 7y ago
Low unemployment rate only improves savings if incomes rise as a result of the increased demand for labor. Though wages have ticked up a little bit, we haven't seen the expected rise in incomes that would be expected for our historically low unemployment rate. I'm not sure anyone knows exactly why, but I've been led to understand that the rosy picture painted by the unemployment rate is undercut by the copious amounts of underemployed americans, as well as leftovers from the great recessions that never re-entered the workforce. There is also the current trends of automating the workforce, and the gig economy, both of which suppress the value of labor.

samcampbell 7y ago

While a surprising statistic, this number has actually improved in the last five years. "This is an improvement from half of adults in 2013 being ill-prepared for such an expense [$400]" - Report on the Economic Well-Being of U.S. Households in 2017 [0] [0]https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf https://www.federalreserve.gov/publications/files/2017-repor...

kibwen 7y ago
This feels a bit like damning with faint praise; the most likely cause of an emergency debt is a trip to the hospital, and the average deductible of a US employee on private health insurance is $1500 (closer to $3000 for family coverage). (We don't need to bother considering people who don't have jobs and thus don't have insurance; the failure mode for them, as before, is "resign yourself to lifelong financial ruin and dodging debt collectors".) So the question then is: what percentage of households can cover a $1500 emergency bill, rather than a mere $400 bill? And, at the rate of growth since 2013, how many decades will it take for that number to creep up to 50% (and don't forget to adjust for inflation).
gshubert17 7y ago
Here's the actual Federal Reserve Board news release from which Bloomberg made their report: https://www.federalreserve.gov/newsevents/pressreleases/other20190523b.htm https://www.federalreserve.gov/newsevents/pressreleases/othe...

jorblumesea 7y ago

I wonder how much the American economy is propped up by rampant debt spending and financial illiteracy. If everyone in the US saved 20% of their income, and didn't over leverage for that new truck, would we see a noticeable economic impact?

bdcravens 7y ago
Or more relevant to HN, a new phone or tablet. And paying $15 surcharges to get lunch delivered. And multiple entertainment services at $10-20/month.
perfunctory 7y ago
People not saving for pension is a ticking economic bomb. The economy might be prompt now but I am afraid to think about what happens when the current working generation retires.
- bluGill 7y ago
  You will so the current generation at WalMart in a few years pushing carts and other such tasks when they are forced to realize their retirement savings doesn't cover their needs. Actually it isn't that bad, a fair number of people don't plan to retire while they can work. A job provides a social experience and meaning in life. If you retire you need to replace that (if you don't you will die quickly - this is known medically), if the job isn't that bad why not keep working? For such people retirement means a nursing home, and if they don't have any money the government will cover that. It isn't for me, I have my own projects I want to do, but maybe it is for you: so long as it is a real decision I don't have a problem with it.

gojomo 7y ago

Headline strongly debunked here: https://twitter.com/p_millerd/status/1118071142311288838 https://twitter.com/p_millerd/status/1118071142311288838 Highlights: "After some digging I found the 2016 appendix (again, 2017 not to be found). Only 12% of people couldn't actually pay the expense" "Another survey question not highlighted actually gives some direct clarity on this question. It turns out only about 15% of people would not be able to cover a $400 expense [without impacting their ability to pay other bills]." Note that "12% couldn't actually pay" is about equal to the 2017 official poverty rate of 12.3%. I don't find it surprising that people counted as "in poverty" would have problems covering a $400 immediate cash expense.

wonder_er 7y ago
hah! I saw this article, came here to post the same twitter thread. Good eye, /u/gojomo.
- deleted 7y ago
  [deleted]
mrguyorama 7y ago
I don't see how "I would have to accrue unexpected and emergency debt to manage this expense" is any different from "I can't afford this expense"
- metalliqaz 7y ago
  the difference is that the former requires credit. Some people are so poor they don't even have that. I'd say that both count as "struggle", though
- SilasX 7y ago
  "Afford" is a four-letter word. You can break it into: 1) I have the cash ready to spend right now or in liquid assets. 2) I can get the cash, but from an account/asset I'd rather not withdraw from (IRA, jewelry). 3) I can go into debt to pay it, and it wouldn't make a big difference over the next year. 4) I can go into debt to pay it, but my financial situation would be close to bankruptcy over the next year. 5) I can't access that kind of money by any means. A good survey should iron out this spectrum of "affording" the expense to make the result robust and easy to interpret.

pavel_lishin 7y ago

Throwing my own anecdote into the barrel: Somehow, our HR provider company fucked up, and signed me up for the shittier of the two healthcare plans my employer provides, despite me signing up for the better version. All the paperwork shows that we had the good plan last year, but Aetna says we were on the shitty plan, with no out-of-pocket limit. To that end, our doctor's office is now billing us for $20k for a procedure my wife had to undergo. We're lucky; we have $20k in savings. We can cover this without the bill going to collections and dinging our credit, while we deal with the god-awful chain of HR->provider->insurer, until we get paid back. I wonder how many of my coworkers couldn't.

john-radio 7y ago
Don't pay it! You negotiate with healthcare providers! Don't tell them you have the money.
- xmprt 7y ago
  This is the right approach. A healthcare provider would prefer $10k (<- arbitrary number) now over the potential to get $20k while also having to deal with debt collectors.
  - pavel_lishin 7y ago
    What happens if I negotiate down, and three months later Aetna finally unfucks my asshole and agrees to pay the $20k? I guess this is a question for a lawyer, and not a stranger on the internet.
btilly 7y ago
For this sum, if you have paperwork showing what you should have been covered to, you have grounds for a lawsuit.
neilv 7y ago
Unless you don't mind losing the $20K, talk to a lawyer ASAP, and before you pay. Also, HR/benefits mistakes happen, and that kind of arrangement with an outsourced company can lead to both individuals and organizations trying to cover their butts when a mistake happens, to a ridiculous degree. (I had paperwork showing I'd paid for and gotten insurance, but the actual insurance company said I didn't have coverage. Fortunately, I didn't get sick or injured, and found out on a routine health appointment. Had I found out the hard way, I could've been stuck with devastating bills and a "pre-existing condition" that could prevent getting insurance coverage in the future (given that ACA was/is under attack). There was such a Kafkaesque and underhanded butt-covering by everyone, I never did even get reimbursed for the insurance I paid for but didn't receive. I had better things to do than to sue.)

wonder_er 7y ago

The article's claim is almost entirely bullshit. The reasons why are nicely outlined here: https://twitter.com/p_millerd/status/1118071142311288838 https://twitter.com/p_millerd/status/1118071142311288838 This "can't cover a $400 expense" makes for a nice narrative, and we can all insert our perspectives about the world into this narrative, and walk away feeling good about it. Quotes from the above twitter thread: > I was curious about this because it seemed low. After some digging I found the 2016 appendix (again, 2017 not to be found). Only 12% of people couldn't actually pay the expense and a smaller amount would have to borrow money (keep in mind this could be double counted) Another survey question not highlighted actually gives some direct clarity on this question. It turns out only about 15% of people would not be able to cover a $400 expense. update: clarify uses of "this" and "it".

why-el 7y ago
For me, having to put it on a credit card is effectively not being able to cover it, so the numbers do check out, from this perspective. Again, we are talking an emergency, not a mortgage.
- patejam 7y ago
  https://twitter.com/p_millerd/status/1118071182534660096 https://twitter.com/p_millerd/status/1118071182534660096 Response #1 and #3 equal ~80%. I'd count those as being able to cover it. Many people use credit cards and pay it off in full on time (including me).
- ghaff 7y ago
  Except that, in addition to the 41% who can pay in cash (or from their bank account), 39% would put it on their credit card and pay at the end of the month. https://twitter.com/p_millerd/status/1118071182534660096?s=20 https://twitter.com/p_millerd/status/1118071182534660096?s=2... I expect that many of the people who can best afford an unexpected $400 expense would just put it on their credit card which they pay off every month. After all, might as well get the airline miles at least. Even if they could just write a check. So the 40% is really misleading. It's more like 80%.
- 7y ago

coldtea 7y ago

>Almost 40% of Americans Would Struggle to Cover a $400 Emergency Let that soak in for those in the US (and on HN) who insist that the economy is great, unemployment is low (and measured properly), the middle class has no problem, etc...

maerF0x0 7y ago
> Let that soak in for those in the US (and on HN) who insist that the economy is great, unemployment is low (and measured properly), the middle class has no problem, etc... Everyone in the country could be making $100k a year, if their savings rate is 0% they'll still struggle with a surprise $400. IMO it's a problem with spending frivolously...

kcorbitt 7y ago

In the Bay Area at least, this is pretty understandable. 40th-percentile income in the Bay Area is $66k [1]. An income-tax estimator puts after-tax pay for a family of 4 on that salary in California at $55k [2]. I live in the Bay Area, and my family of 4 lives fairly frugally by choice. Even so, we spent more than $55k last year and squeezing even our modest lifestyle into that budget wouldn't have been easy. [1]: https://statisticalatlas.com/metro-area/California/San-Francisco/Household-Income https://statisticalatlas.com/metro-area/California/San-Franc... [2]: I put a household income of $65k with a family of 4 (married filing joint) into the tax estimator at https://smartasset.com/taxes/income-taxes#WF5trlFESC https://smartasset.com/taxes/income-taxes#WF5trlFESC

GuiA 7y ago
Congrats on managing to live frugally with a family of 4! Certainly an accomplishment. Out of curiosity, how much of that $64k is housing?
- kcorbitt 7y ago
  We spent $33k on rent and utilities! And that's a deal, compared to what many of our neighbors are paying. We live near SF to keep my commute into the city manageable, and there simply isn't cheap housing to be had in the area.

throwaway13000 7y ago

Can someone explain to me how this is possible? America is among richest nations in the world. Plus its citizens have access to all amenities of life. How come they don't have enough for emergency expenses? Is it because of wealth inequality? Or is it that its a mature capitalist society, so most things are priced such that people have very little disposable income?

bluGill 7y ago
The problem isn't income, the problem is spending. People in general want more than they have. There is always another toy, A bigger widget, a better model next year.
wtdata 7y ago
I would say it's because of their consumerist culture and financial illiteracy, not because of extremely low wages. I wonder how many of these 40% have a high end smartphone and a big LCD TV in their living room.
tbirrell 7y ago
A lot of people are living paycheck to paycheck. Money in == money out, both by necessity and by increasing spending whenever they have increased income. Some people are deep in CC or Student debt, so extra money goes there, some are spending beyond their means (or right up to their means). Basically, people don't or can't save (much). So any unexpected expenses need to be covered by income.

toiletfuneral 7y ago

Really enjoying all the comments which basically equate "poor people need the rich to tell them to stop buying iPhones". Can't think of anything more American.

herplederple 7y ago

What a dishonest title/article. Taken directly from the report itself: "The findings show many signs of growth and improvement along with remaining pockets of distress and fragility. They also reveal new insights into how households approach their financial lives and decisions. In many ways, the latest findings underscore the overall economic recovery and expansion over the five years of the survey."

pkaye 7y ago

I see these kind of statistics but then you see phones in the range of $400-$1500. An average car costs $25-$35k according to data online. And you see pictures of people with grandiose homes if you have ever seen any of those home shows. Or people going out for grand meals or pricey drinks. Somehow those expensive things continue getting sold yet 40% struggle to cover a $400 emergency.

throwayEngineer 7y ago
I run a website that focuses on math driven, low cost living. The longer I run this website, the less sympathic I've become. I see so much waste, I see so many excuses. I think this paycheck to paycheck lifestyle is chosen by the person (or their biology). There are plenty of opportunities to save money or make more, but people choose not to.
- SamReidHughes 7y ago
  Definitely. The only reason many software developers don't live paycheck to paycheck is because it is actually a hassle to spend that amount of money.

korethr 7y ago

I see articles like this from time to time, and from my own experience, can't help but wonder how much of said inability to cover a $400 emergency isn't self-inflicted. My personal anectdatum: I was not smart with my money in my younger years. I spent my money freely on whatever I wanted at that moment, and then was always wondering why I was so broke all the time. Savings? Why would I do that when that means I can't have money right now to get the thing I want right now? It took the clue-by-four that was the 2008-2009 recession to get me to realize that living beyond my means with no savings and a growing pile of debt was in fact a Bad Idea. During that time, and in the first few years following as I educated myself about finance and slowly cleaned up the mess I made, I also would have had a hard time covering a $400 emergency. But, that was my own damn fault now, wasn't it? In the time since, as my financial situation has improved, both because of the economy picking back up and my financial education helping me to be smarter with my money, I've been increasing my savings, reducing my debt, and getting less stupid with my purchases. And doing this, I am now able to cover a $400 emergency without stress. I did exactly that just last week. Yes, having a higher income now than I did then has certainly helped with that. But as I've reviewed my spending habits from my $20k/yr days, I've become a little embarrassed by them. A modicum of savings discipline would have let me ride out the 2008-2009 crisis more smoothly, and I'd be in even better shape today.

RickJWagner 7y ago

With super-low unemployment, and rising wages, this is truly of concern. If the headline is true, it really underscores the need for basic financial education. If people can't help themselves in this economy, there is little hope for them without some big change. (To the struggling people. Not to the economy.)