Smart SpendingSmart Spending

Got $2,000 in a pinch?

Half of Americans said they'd probably be unable to come up with that kind of emergency cash in a month's time.

By MSN Money Partner May 25, 2011 1:39PM

This post comes from Seth Fiegerman at partner site MainStreet.

 

If you needed money in an emergency, would you be able to scrounge up a few thousand dollars on short notice? If the answer is no, take heart -- you're in good company.

 

Roughly 28% of Americans said they would be unable to come up with $2,000 in a month's time if they needed it, while another 22% said they would probably be unable to do so during that time period, according to a new report from the National Bureau of Economic Research. Just one quarter of those surveyed expressed complete confidence that they could get that much money if necessary. Post continues after video.

While the $2,000 figure seems arbitrary, the researchers picked it as a ballpark figure that the average consumer might incur for an unexpected expense, whether it be a hospital bill or the cost of fixing up a car. Indeed, for many families, the amount one should have stowed away in emergency funds is far greater, as experts recommend having five to six months' worth of living expenses set aside.

But, according to NBER, the fact that so many Americans would be unable to conjure up even $2,000 shows just how precarious the financial situation is for many households.

 

"If we consider the respondents who report being 'certain' or 'probably not' able to cope with an ordinary financial shock of this size, we find that nearly half of Americans are financially fragile," the researchers write.

 

So, what would these families do if they faced a situation where they absolutely needed the money?

 

According to the report, consumers are most likely to tap into their savings for funds, but if that proves to be inadequate, their next options are asking for help from friends and family, taking out more credit or working extra hours. About a fifth of Americans would even go so far as to sell off their possessions or, worse, take out a payday loan in order to come up with the money.

To avoid winding up in this situation, one should be proactive in building up an emergency fund by getting into the habit of putting aside money from every paycheck. As MainStreet has reported before, talk to your bank about setting up an automatic deduction from your paycheck so that you can put money away every few weeks, whether you remember to do it or not.

 

More on MainStreet and MSN Money:

91Comments
Jul 26, 2011 8:56AM
avatar

The root of the problem is right in front of us.  What do you spend in a year on phones?  Right, at least two grand.  And your computer and dsl?  Uh-huh.  These are expenses that didn't exist just twenty years ago.  Paying to watch tv was a new idea just 30 years ago.  Etc.  When I was a kid (walking to school, barefoot in the snow, uphill both ways), My parents paid a mortgage, an electric bill, and bought food and gas.  You got clothes for school and at christmas.  People only drove when and where they had to. Central heat and air? yeah, we had heard of it.  Etc.

 

It is a different world now, but it is lifestyle choices that we make.  NO ONE that can post to this article can claim hardship.  If it was really that tough, you'd cancel your internet, cable, etc.  We CHOOSE to spend the money we make instead of save it.  It's how we (Americans) want to live.  Then we are upset because we took on more than we could afford?  Lord help!  If you want to spend more money than you have, without any consequences, get elected and move to washington!

Jul 26, 2011 12:04PM
avatar
I make $30k per year and have about 10k saved... plus i put 120/mo in my 401k... We are surviving quite well with 2 kids. My fiance makes the house payment and I pay EVERYTHING else... It takes discipline and not having to have everything your friends have... I can't believe the money that our friends spend every month of car payments and eating out... I often wonder how they survive month to month... Savings is my priority... We live very comfortably... and just got back from a little vacation that cost about $900 but we had soo much fun! Its about quality of life not quantity!
Jul 26, 2011 9:33AM
avatar
I am one of those who has $2000 in my emergency fund. it's there because I have made sacrifices to have it. I don't have a home computer (apt business center), no internet, no cable TV, no I Phone, no big screen TV. I  drive a VW, not a BMW, cook my meals, make my own coffee, etc.  It is the choices we make that determine if we have savings. My Dad told me when I was a teen, pay savings first out of every paycheck, even if it's only $10. I have done that ever since and it has been a blessing. I have siblings who have not and guess who they come to for money in an emergency? Everyone can have an emergency fund if they choose, it may not be $2000 now, but it will be if you keep it up! 
Jul 26, 2011 12:13PM
avatar
That is because most people do not live within their means, They have no concept of what is really needed vs what is desired. Do you really need that 45K brand newSUV? do you really need that brand new 25 ft Boat? Do you really need that top of the line cellphone with the data package? Do you really need to eat out 3 times a week? What is wrong with drinking a regular cup of Coffee vs that $5 latte.The list goes on and on.
Jul 26, 2011 12:15PM
avatar
One of the biggest news stories over the past week was about Netflix raising their prices. People all over internet land lost their minds. They all started crying about 8 extra dollars a month....EIGHT DOLLARS!!! Not to mention they all complained about it on an internet service they were probably paying at minimum, 50 dollars a month or on smart phones that cost them around $200 every time they want to upgrade with a $50 service plan. Or they watched the news story on a 60" flat screen HDTV on a cable service that is costing them about $100 a month. Where are the priorities anymore in this country....hell, in this world??? Do you realize how quickly you could save up $2000? If you are working and making enough to pay for even half the things I've mentioned, you could cut all of them out for a year and have a huge amount in savings. But those kind of people will never save...they will always spend because they feel they have to in order to keep up. People who are self-wealthy...meaning they didn't inherit their money or steal it or win it in the lottery...get and stay wealthy by NOT spending all of their money on expensive things. They have modest houses and modest vehicles and live not only within their means, but below their means. They understand the value of SAVING their money...not flaunting it. Sure, they take vacations and have fun....but they pay with cash, they don't build up debt, they don't buy stuff because they MUST have it....they spend their money on things they need and can afford. People who work and don't have a nest egg and live above their means are the number one reason for the economy today. You can blame the banks and CEO's all you want. You can say the predatory lending practices over the past 8 years were the cause. But the real reason our economy is where it is today, is because the middle to lower class could not stop throwing their money away. Now the middle and lower class are looking for scapegoats....the mirror is not big enough to reflect all the faces of who is to blame for this mess.
Jul 26, 2011 11:49AM
avatar

I barely graduated high school, quit college two years in,...started off in my family business netting 16 to 18 grand a year, now im netting 38 to 42.....I have managed to save almost 100k in almost 12 years...have a mortgage thats 12 years old, that will be paid for in 4 years.  Its called doing without people!!...NOt keepin up with the joneses....the latest technology, driving 5 grand cars till they have 200k....so ur not  a interest slave to banks....no 8 grand vacations every year,....ect ect ect......its called disapline. If you want to retire, and not work till ur 70,.,..its what you must do in today age....its just the plain and simple, my friends call me cheap...but guess what, in about 20 years they will still be paying off there oversize mortages and I'll be sitting on a beach somewhere..............live below your means america! not 150% above..

Jul 26, 2011 9:54AM
avatar
wow...look at all the heated remarks.  talk about hitting a nerve.  the truth is our country is in very bad shape because of the majority's lack of good financial decisions, and that includes our politicians, big corporations and general population.  there is enough blame to go around, so everyone needs to own up and start making better decisions. 
Jul 26, 2011 11:56AM
avatar

People will  always have money for what they want to have money for. How many have no cell phone, usually 2 nice cars and always eating out? That is my big one. On any given day there is a wait at Olive Garden, Applebee's even IHOP. Two of us eating out with a soda each, are hard pressed to get out of any establishment for less than $ 30 bucks. Now take a family, times a few times a week, and that will spell disaster for any budget.

Harping on those that have a little more is pointless. You would not want their tax bill either.

As a nation overall, we need to get back to basics and cut out the nonsense and live without it. evaluate what you really need. It will blow your mind, all the junk we don't need.

Jul 26, 2011 2:33PM
avatar
In our generation I remember classes in High School about budgeting and planning and I was taught, as most were, that you should keep a minimum of 2 months pay saved for Emergencies.  The reality I found as I got older is 4 months was a better figure and for many years I managed to save and maintain 6 months.  After 4 years of unemployment that is gone.  Looking at the state of things now you better be planning on having 2 yeas of salary stashed for emergency.  One trip to an Emergency room with a Broken leg will end up running you $20,000, if your lucky. 
I've given up on recovering from this as I don't think it will happen for my generation.  The Government doesn't have the common sense or ability to put aside their wants and needs in order to do what the country needs done.   When this country was formed and the Constitution was written Politics was not seen as a way to get rich, it was seen as doing one's duty and working to better things for your fellow man.  The Government, particularly Congress and the Senate have lost sight of this.  Congress and the Senate give themselves pay raises and uncalled for benefit packages and at the same time cut or freeze pay for others.  They no longer care about what is good for the country as long as they get what they want to make themselves richer.  Both parties are to blame and have been for the last 50 +Years.  They say what they need to to get elected and no one checks up on them to see what they actually did before voting for them again.  Stop being lemmings folks and start looking at voting records and actual actions of these incumbents. 
Before we get to a point where Americans are going to be able to save for Emergencies, we are going to have to clean house and bring that figure down to something a lot more reasonable because $2000 isn't enough in the US Today.  I doubt if even $20,000 would be enough.

Jul 26, 2011 12:55PM
avatar
I would like to see how many of these people who could not come up with $2k have tattoos, smoke cigarettes, pay for premium cable or otherwise engage in wasting money on useless crap. I have no moral opposition to people having their vices and pleasures, but it's idiotic to place them as the priority over being at least somewhat fiscally responsible. Too much emphasis is placed on instant gratification, rather than considering the consequences of our decisions. 
Jul 26, 2011 4:58PM
avatar
Wages have actually declined over the last 20 years, 20% of working Americans unemployed, and millions more under employed and prices continue to rise each year. Is there any suprise that middle America has no emergency fund? I've got a news flash... just making ends meet each day IS a financial emergency for millions.
Jul 26, 2011 11:29AM
avatar

"You know, I'm one of those that can't come up with $2000 in a month. Right now, I work full time, my wife is pregnant with our first child."

 

Hello!!  You can't come up with $2,000, but you're starting a family?!!  If you don't have savings in the bank, health insurance, disability insurance and life insurance you are putting your family, including an innocent child, at risk.   Bringing a child into the world without the financial means to protect that child from the inevitable problems of life  is irresponsible.

That degree of financial ignorance in this country is startling.

Jul 26, 2011 11:29AM
avatar
Check out Dave Ramsey's Financial Peace University.  If your willing to sacrifice and follow the plan you can succeed.  It helped my wife and I get out of debt.  Now we are trying to build wealth so we can enjoy it as well as give more of it away.

Quit all of this class warfare.  Quite blaming the rich.  We all have thee ability to succeed and it's not some guy in Washington that going to give it to you ... it's you.

Jul 26, 2011 2:58PM
avatar

I think it's time for schools to teach kids a financial map to the real world. Math knowledge is not the same thing as knowing how to manage your finances. A lot of things have changed in the last 20 years and yet the school system is not revising the curriculum. All high school graduates are going to the real world not knowing a thing about budgeting their financials and how much they can spend based on their income.

Jul 26, 2011 11:26AM
avatar
Yet, how many have unlimited smartphone plans, the full premium cable package, etc.?
Jul 26, 2011 11:55AM
avatar

It is tough out there right now, but is it is tougher when you don't have some money set aside for an emergency. Start by saving $10 a week and eventually you will get there.

 

Have a garage sale, brown bag it for lunch and maybe even work an extra job  - I made $1000 umpiring for the local parks and rec department.

 

Hang in there and don't give up!

Jul 26, 2011 11:50AM
avatar
I do believe that most of the folks who do not have any money saved COULD have some savings but, as many have said, it requires a reassessment of "needs" and "wants".  For example, I have read many articles on how to save money on food which include how to save money eating out.  Until you start eating only food you have prepared at home (bringing your lunch to work), you are not serious about cutting food costs.  I am fortunate to have a well-paying job, earning more than the average household income.  I live in a neighborhood where I believe household income is probably about average.  I do not have the nicest/biggest house and I do not have the grandest car; many if not most of my neighbors live fancier than we do.  I always wonder how so many in the neighborhood think they can afford so much more than I can.  My closest friend has always been paycheck-to-paycheck, and she carries a cell phone with lots more capabilities than mine and can afford several movie channels that I don't have.  She smokes.  If you smoke or drink, you're wasting money as well as ruining health.  I haven't always been blessed with a well-paying job, but I have always saved, even if only $5 in a week.  You MUST put the money into savings first - have it direct deposited from your paycheck into an account for which you do not have an ATM card, as someone suggested.  If you wait to see what's left at the end of the week, you will always find that somehow all the money always seems to disappear.  But I guarantee if you have the money taken from your pay and put directly into savings at the beginning, you will somehow make it through the week with what is left.  Try it.
Jul 26, 2011 11:42AM
avatar
I've been amazed for years.  I'm always asking myself  "how do people do it?" .  I make  a decent living (about 95k a year) and I live life pretty frugally.  I see folks driving lifted trucks, towing expensive boats, all the while struggling to make their payments.  It's just weird. 
avatar

Im sorry for the people that have had colossal health issues, ect....I wasnt talking about people like this.....im talking about healthy, american families, that there kids must drive 40k suvs to high school....wear the $100+ latest shoes, have a cell with every app know to man at hundred of dollars per month cost....ect ......these are the people that need to wake up....I do not feel sorry for these people when there over budgeted world comes crashing down when the get hurt, or laid off...lose there job......life is cruel.....**** happens.....dont be a downer..but u have to be realistic about life and what it can serve you!....save....think ahead.....its basically common sense here. 

Jul 26, 2011 12:20PM
avatar
For those here that talk about how they manage; good job and well done.  For those that expect more from the govenrment and from society get real and find another place better than this one.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More