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

Headline strongly debunked here:<p><a href="https:&#x2F;&#x2F;twitter.com&#x2F;p_millerd&#x2F;status&#x2F;1118071142311288838" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;p_millerd&#x2F;status&#x2F;1118071142311288838</a><p>Highlights:<p>&quot;After some digging I found the 2016 appendix (again, 2017 not to be found). Only 12% of people couldn&#x27;t actually pay the expense&quot;<p>&quot;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].&quot;<p>Note that &quot;12% couldn&#x27;t actually pay&quot; is about equal to the 2017 official poverty rate of 12.3%. I don&#x27;t find it surprising that people counted as &quot;in poverty&quot; would have problems covering a $400 immediate cash expense.

It is scary stuff as I don&#x27;t think I can make a visit to a doctor for a non checkup type situation (injury) without the bill being more than $400.*<p>And I have &quot;good&quot; insurance.<p>*Granted that largely depends on how much I&#x27;ve paid YTD, so it could be more than $400, or less, but hell who knows as the plan changes every year.<p>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.

While a surprising statistic, this number has actually improved in the last five years. &quot;This is an improvement from half of adults in 2013 being ill-prepared for such an expense [$400]&quot; - Report on the Economic Well-Being of U.S. Households in 2017 [0]<p>[0]<a href="https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;publications&#x2F;files&#x2F;2017-report-economic-well-being-us-households-201805.pdf" rel="nofollow">https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;publications&#x2F;files&#x2F;2017-repor...</a>

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

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.

I see articles like this from time to time, and from my own experience, can&#x27;t help but wonder how much of said inability to cover a $400 emergency isn&#x27;t self-inflicted.<p>My personal anectdatum:<p>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&#x27;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&#x27;t it?<p>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&#x27;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.<p>Yes, having a higher income now than I did then has certainly helped with that. But as I&#x27;ve reviewed my spending habits from my $20k&#x2F;yr days, I&#x27;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&#x27;d be in even better shape today.

The article&#x27;s claim is almost entirely bullshit. The reasons why are nicely outlined here: <a href="https:&#x2F;&#x2F;twitter.com&#x2F;p_millerd&#x2F;status&#x2F;1118071142311288838" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;p_millerd&#x2F;status&#x2F;1118071142311288838</a><p>This &quot;can&#x27;t cover a $400 expense&quot; 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.<p>Quotes from the above twitter thread:<p>&gt; 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&#x27;t actually pay the expense and a smaller amount would have to borrow money (keep in mind this could be double counted)<p>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.<p>update: clarify uses of &quot;this&quot; and &quot;it&quot;.

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].<p>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&#x27;t have been easy.<p>[1]: <a href="https:&#x2F;&#x2F;statisticalatlas.com&#x2F;metro-area&#x2F;California&#x2F;San-Francisco&#x2F;Household-Income" rel="nofollow">https:&#x2F;&#x2F;statisticalatlas.com&#x2F;metro-area&#x2F;California&#x2F;San-Franc...</a><p>[2]: I put a household income of $65k with a family of 4 (married filing joint) into the tax estimator at <a href="https:&#x2F;&#x2F;smartasset.com&#x2F;taxes&#x2F;income-taxes#WF5trlFESC" rel="nofollow">https:&#x2F;&#x2F;smartasset.com&#x2F;taxes&#x2F;income-taxes#WF5trlFESC</a>

Throwing my own anecdote into the barrel:<p>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&#x27;s office is now billing us for $20k for a procedure my wife had to undergo.<p>We&#x27;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-&gt;provider-&gt;insurer, until we get paid back. I wonder how many of my coworkers couldn&#x27;t.

With super-low unemployment, and rising wages, this is truly of concern.<p>If the headline is true, it really underscores the need for basic financial education. If people can&#x27;t help themselves in this economy, there is little hope for them without some big change. (To the struggling people. Not to the economy.)

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&#x27;t over leverage for that new truck, would we see a noticeable economic impact?

What a dishonest title&#x2F;article. Taken directly from the report itself:<p>&quot;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.<p>In many ways, the latest findings underscore the overall economic recovery and expansion over the five years of the survey.&quot;

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&#x27;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?

&gt;<i>Almost 40% of Americans Would Struggle to Cover a $400 Emergency</i><p>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...

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&#x27;t follow strict discipline of saving small (%) of their income.

“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”<p>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...”