Even high-earning Americans don’t have enough cash for unforeseen expenses.
It’s enough to make you sick and drive you crazy.
Nearly two-thirds Americans don’t have $1,000 for an emergency room bill or even $500 for an unexpected car repair.
“Only 37 percent of U.S. adults have enough savings to pay for these unexpected expenses,” says a study by Bankrate, a personal finance research firm. It doesn’t even matter how much they earn, Bankrate says:
While savings predictably increase with income and education, even 46 percent of the highest-income households ($75,000+ per year) and 52 percent of college graduates lack enough savings to cover a $500 car repair or $1,000 emergency room visit.
Cutting back to get ahead
Should the worst happen, only 28 percent of us would cut back in other areas to pay the emergency expenses. Where we would cut is interesting:
- Eat out less: 58 percent
- Cut back on cable or satellite TV: 46 percent
- Buy less coffee: 41 percent
- Get a cheaper cell phone plan: 39 percent
Interestingly, the one place most of us don’t want to cut: drinking alcohol. It came in last at 35 percent.
Where else to get the money
What about the rest of Americans who don’t want to cut back on their living expenses? Turns out 15 percent would borrow the money from family or friends – while another 15 percent would simply max out their credit cards.
“That last statistic is the most worrisome,” says Gary Herman, president of Consolidated Credit. “If you max out your credit cards to take care of one emergency, you’ve just created another – and it’s an emergency that just gets worse each month, as the interest rates keep piling on.”
So what should you do? Just as with your health, you often seek a second opinion. Herman suggests asking a certified financial counselor for a free debt analysis. Consolidated Credit is one of the nonprofits that offer this service, and even the phone call is free: 1-888-294-3130.
“You don’t have to call us,” Herman says, “but make sure wherever you call, the counselors are certified, the business has been around for a long time, and the Better Business Bureau has awarded its top rating of A-plus. Otherwise, you’re just creating yet another emergency.”