Most national news stories right now are focusing on the seeming ineptness of our Congress and Presidential administration to agree on a plan to avoid the so-called “Fiscal Cliff.” While an agreement has now been reached, none of the information surrounding how this deal came to be is positive.
Americans are mostly annoyed and aggravated, some downright outraged, about this. And we absolutely should be – we elect these people to act on our behalf, not like squabbling children (sorry, that’s offensive to all children).
But maybe we also need to point a finger in the mirror. At least, one in every two Americans should do that, as apparently we’re not much better off at handling our own finances than the federal government is at handling its finances.
A December survey from online lender NetCredit.com has discovered that almost half of Americans indicate that they are living paycheck to paycheck and 44% of Americans are just trying to stay current on their bills and avoid debt and bankruptcy.
Using 1,000 Americans in the poll, there were some demographics that stood out as the most likely to face this financial reality, including: 62% of Americans in their 30s; 54% among those Americans under age 60; 57% of families with children; 64% of families with five or more people in the household; and 53% in southern states, versus those in the northeastern U.S.
Also mirroring our political leaders, borrowing money seems to be the go-to answer in case of an emergency (car repairs, medical bill, high utility bill, etc.).
Twenty-three percent of these Americans would whip out a credit card; 16% would hit up their families and friends; 5% would head to the bank for a loan and 2% would use installment loans. Other possible solutions include using general savings or a separate rainy day fund, selling or pawning items or short-term cash advances.
But the poll’s press release also noted that a recent FDIC study found that nearly half of Americans can’t come up with $2,000 in 30 days if an emergency did arise and they used these options.
So what can be done to prevent this? The first advice I’ve seen from anyone who deals with money and finances is this: have an emergency fund. Start small; say $1,000 in a savings account (separate from the checking account). The ultimate goal is to have three to six months of living expenses in an emergency fund, which would cover a sudden loss of income and delay the added stress that would come with a job loss.
Slow and steady wins the race though; it’s not a quick thing to have six months of living expenses sitting in the bank. Create a budget and stick to it. Live within your means.
Now, would anyone like to share this with the federal government?