I read that half of Americans couldn’t cover an unexpected $1,000 expense. This sounds crazy to me. I understand that poverty exists, but the idea that an adult with a job doesn’t even have that amount saved up seems really strange.
What’s your relationship or philosophy with money? What do you credit for your financial success, or alternatively, what do you blame for your failures?
For the extra brave ones: how much savings do you have, and what are you planning to do with them?
I've got $0.85 in savings, because I put my rent and car payment money in my savings account each month until I need to pay those bills. I did at one point have $1000 saved up as a rainy day fun, but then it rained for a whole year (financially speaking). Now I don't even have credit cards to fall back on, as those have been maxed out and gone to collections. I'm looking for a job in an industry I left because it was driving me to alcoholism (software), but that job market sucks a little more than the service industry, so I'm not optimistic.
Oh yeah and I'd be homeless if I didn't have family who were willing and able to loan me rent money.
Not saying the exact number, but well enough that I could go and buy an X5 right now. I'd rather spend any excess money on charities over materialistic status symbols though, and I've donated a lot of money to research charities in particular.
I'm digging myself out of a $13k credit card debt hole. I burned through my savings when a job that I had ended on my unexpectedly, and because it was contract work I wouldn't qualify for benefits. They kept me around as a sub, promising me a full time position if I just stuck around long enough and I was foolish enough to believe them.
I'm self employed now and making do with the best I can, but I'm planning on ending my dream as a musician/ teacher and moving home. I don't know who would want my skills, but I know they are specialized and strong. I just gotta see what kind of work would value them.
Im doing pretty well. Living in Germany, educated parents. Did okay in school, never studied much though. Went to university, got my Masters in Mathematics (needed to study a lot for that, but its my passion anyway). Started working at an IT company in the same city.
3 years later, I have around 50k in savings now. We live in a small apartment, are in the middle of buying a house.
Capitalism is really fckd up, especially in the US. I try not to take advantage of it too much, up my monthly donations with every raise, vote left-ish, dont support big corporations.
I think the biggest factor for success is luck for being born under the right circumstances. Thats like 99%, the rest is having some self control.
There are a lot of very poor people in the US compared to other developed countries. There are also a lot more extremely rich people. The inequality is palpable, and it shows in the stats. The US government also doesn't step in with coverage when it comes to healthcare, unemployment and other emergencies to the same degree as governments in other western countries.
I can't cover an unexpected 1k. Thats my entire bank account. Every month my paycheck is eaten by bills and obligations and every other month my rent raises while my salary stays the same. I have 1 dollar in my savings, but a 401k with 5k in it. I also have kids and a wife that stays at home to watch them. May not be the best financially but I can't actually afford daycare to begin with.
Better than ever. But I hate my job with a deep and burning passion, and I'm pretty deeply burnt out. So I'm not sure what to do. I'm worried that I won't be able to find anything that pays as well.
What’s your relationship or philosophy with money?
A life-changing shift to my approach has been to worry about absolute amounts rather than percentages. Saving $10 on a $20 item feels great but ultimately is the same thing as saving $10 on a $500 item (which feels like nothing).
I grew up lower middle class: never had to worry about not having a roof over my head, but there were times we were somewhat food insecure, and spending money on leisure/entertainment or anything unnecessary for survival was a foreign concept until I got to high school and some my parents' career moves paid off and put us in upper middle class. It took them a good 10+ years before they could relax a little bit and feel secure with their money, though, and that was as much driven by the fact that their kids were adults who had moved out.
So life has been about deciding which of my parents' frugal attitudes and approaches to money to keep and which to discard.
Things I decided not to adopt:
I slowly learned to stop caring as much about wasted food. Food is just cheaper now compared to when I was growing up (even if the last 5 years has shown an uptick), and as a society we have more issues with obesity than hunger, so cleaning off a plate seems like it doesn't actually do that much good.
My time is worth something to me. I will gladly pay the few dollars here and there for convenience.
I'm glad I ignored my parents advice to buy a home as soon as I could and build equity or whatever. I rented and it worked out great for me, giving me the flexibility to make changes at different stages of my life.
Things I kept:
Life is uncertain. Always be prepared with whatever you can accumulate for financial resilience: cash, other property, lines of credit, marketable job skills, literal insurance policies, etc. Don't underestimate the importance of personal relationships, whether it's "credit" from friends and family who can help you out of a bind, colleagues who can refer work to you, bosses who will fight for your career, etc.
Develop your career. Education and credentials are important early on, and up-to-date skills and a good understanding of the landscape in your field (both in the type of job and the type of industry you work in), plus solid relationships with people, can help you know when switching jobs is right for you.
Things I had to learn on my own:
Life is unfair. Many types of unfairness are systematic. So why not position yourself to where the unfairness works in your favor, if available?
Higher income makes it easier to survive mistakes on the spending side. To flip around Ben Franklin's quote, a penny earned is a penny saved.
Know yourself and your own laziness. Set up automatic functions wherever possible: automatic bill pay, automatic savings, automatic investments, etc. Steer away from any strategy that requires active management, and towards strategies that tend towards a set it and forget it philosophy.
I've also made a shitload of mistakes, some of them pretty costly, especially back in my 20's:
Paid probably thousands in credit card interest in my early 20's chasing lifestyle bullshit.
Paid thousands in unnecessary car loan interest in my mid 20's by getting suckered by a dealer.
Paid hundreds, maybe thousands, in late fees and interest from forgetting deadlines to pay shit I actually already had the money on hand for.
I'm rich now, most of it from luck (especially timing), much of it from personal relationships (good family, good marriage, good friends), some of it from actual effort (good grades from a good law school), and some of it from conscious decisions to steer towards my strengths and away from my weaknesses (lazy but smart, prototypical "gifted" slacker with undiagnosed ADHD).
It took a while to get here, though, and I was financially insecure well into my 30's. Sorta figured shit out then, and then married someone who complements me pretty well on these things, and covers my blind spots.
For the extra brave ones: how much savings do you have, and what are you planning to do with them?
I have some savings, and it's an emergency fund. It's representing 1-2 months of typical spending, that could be stretched to 3-4 months if I needed to stop the frivolous spending. But I have credit beyond that, and less liquid assets I'd be able to tap into if I were facing a longer term issue.
But I'm not saving for any particular thing other than retirement. If things accumulate and grow, great. I'll make a judgment call on when to retire based on how I feel and how much I have and what I want to do. I anticipate my wife and I will probably want to retire in our early 60's, based on our anticipated career trajectories and the ages of our children.
The but about higher income making it easier to have mistakes is a big one.
I have a friend online who wants to make money, but doesn't seem to have the ability to do so without going back to school. Going back to school would incur student loan debt, so they do not wish to do so.
I have a crazy amount of student loan debt, maybe $150k. But people don't understand that federal student loan debt is absolutely nothing like credit card debt. There are basically no downsides to it besides paying another monthly bill (that you can use an income based repayment plan for).
People don't understand how incredibly useful excess income is even if it ends up with a lot of loan debt. I had a similar hesitancy back before I went back to school, but I don't regret it at all. I think I ended up like tripling my income.
Even if you end up with a lot of loans, making say $80k/yr is astronomically easier to survive on than $40k/yr for example. You have to think that something like rent or food prices are going to be somewhat similar in your area no matter how much you make. Sure, you could choose to live in a lavish place I suppose, but if you live reasonably then it's more than worth it.
As an example, the average rent price for a not shitty one bedroom apartment in my area is maybe around $1.6k, which would equate to $19.2k/yr. That's almost 50% of the gross income of the person making $40k/yr while only around 25% of the person making $80k/yr. So even if the person making $80k/yr has a $1k/mo student loan bill (you can get it cheaper if you wish), the difference is dramatic.
The person making $40k/yr will have a little over $20k left over at the end of the year for remaining expenses and savings, but the person making $80k/yr will have more than double that at $48k left over. Obviously there are a lot of nuances in this but still.
So it's absolutely worth it to incur federal student loan debt if it means you will make a lot more more money. Private loan debt is a bit different.
Yes. Cash reserves are like unused RAM to me: I have it, so I might as well put it to work. If it turns out I need it somewhere else, I can always go rearrange things to make that possible.
Realistically, I think I'm rich because my wife and I both have strong ability to command high salaries, switch jobs, etc., even in a pretty severe downturn. The main things that might tank the value of that expected future cash flow are disability or death, and we at least insure against those.
We also only need one of our two incomes to support our lifestyle, so we have a certain resilience that just comes from having that buffer. At our current ages, we also already have substantial retirement savings, so we have some resilience there, too.
Not sure if youre only asking Americans, but in case this is for everyone:
I'm doing pretty well.
Could probably scrape by for a year if my wife and I both lost our jobs.
Mainly lucked into success:
My boss from a summer job when I was in college knew the boss of an internship I was applying for, and put in a good word for me.
They hired me upon graduation, but went under shortly after, however a large company was on a hiring spree right at that time and I landed a job there with a hefty pay bump.
Then I got laid off there right as a local startup was on a hiring spree to increase their valuation because they were looking to be acquired by a major high-tech company, and they hired me, again with a hefty pay bump.
They got acquired, and I started working on a team based on San Francisco. Because wages here were so much lower than the bay area, they were throwing raises at me because it was pennies to them.
I've been there for over 10 years.
As long as AI doesn't make my job redundant, I'll be good for the foreseeable future.
I have a decent amount of money in a 401K that I can't touch, and some stocks I bought during a time when I fell into a bunch of money, but an unexpected $1000 would not be possible. I'm a 42 year old married man with 5 kids and a full time job at a small college.
I don't dress or act like people in my pay range. My house is small and in a quiet neighborhood and cost less than my salary. Car is older but paid off and I know all the quirks and have the toolbox in the back to fix it. It is probably one of the top 5 most reliable cars in history. My work dress shoes are 10 years old and my around the house shoes were new in 2019.
I spend my money where I spend my time. So I have a nice phone, a very nice monitor and mechanical keyboard, and a good computer. And all with the right to repair philosophy. Same for my wife and kids. And also good running shoes, good exercise equipment.
The plan is to get to a point where I can just not work at all and maintain my lifestyle. Three percent rule and all that. And also help launch my kids.
Something about a 25 year roof and a Japanese shit box car in my fortress of solitude.
FWIW I grew up really really really poor like you wouldn't believe so I'm okay with this.
I'm with you on most of this but I think having a reliable car is pretty important in the US due to lack of good public transport. In many cases, after a car gets to be a certain age you end up having to repair too many things on it and it becomes an unreliable money pit. I'm very glad that hasn't happened to you, but I think for a lot of people it makes sense to get rid of their car once it gets too old. And then try to buy a lightly used car outright.
So I have a nice phone, a very nice monitor and mechanical keyboard, and a good computer. And all with the right to repair philosophy. Same for my wife and kids.
Jeez man, I'm happy for you, but most of us are stuck with stock model bullshit that broke in 2016. Go brag about your consumer friendly right-to-repair family in c/BuyItForLife.
(I kid, of course 😊 Solid approach you have there, smart and sustainable)
I grew up upper-middle class and have largely the same philosophy. Always thought my friends’ parents were idiots for buying these gas guzzling Ford/Chevy monstrosities just to haul around 1-2 kids and a dog on occasion. Regular salaried people spending/financing more than half their annual income every few years on cars they don’t need just to keep up with the Joneses who don’t really care in the first place.
I don’t skimp on quality when I buy something, but I only buy what I actually need and if something serves its purpose, I hold onto it for as long as it works. My wife and I do very well now, but aside from living in a fairly nice neighborhood with great public schools and amenities, you wouldn’t think it from the cars we drive and the way we dress.
This is essentially my situation too. I spend quite a bit of money on these small purchases for hobbies. But I'm easily clearing a couple hundred a month to buy stocks, save, do something really stupid, et cetera.
Idk it's pricy to own a home nowadays unfortunately. I bought only last year and my mortgage payments are a bit higher per month than people seem to pay for rent on a similar type of unit. It's not that I got a "bad deal" on the residence either. Home prices just don't make sense nowadays.
I will say that around 2931, rent prices in my area skyrocketed up a whopping $400-600 in one year, but they have since seemed to stabilize.
While your fixed rate mortgage costs don't go up every year, your property taxes, insurance, and HOA fees will. So with the above in mind, it doesn't really seem as economical anymore to own a home.
I read that half of Americans couldn’t cover an unexpected $1,000 expense.
Without borrowing or selling property, yeah. Not a lot of people have that much liquid cash laying around.
But I wouldn't assume that this would be some kind of economic devastation. Our whole system revolves around easy credit.
If the unexpected expense is something that can be paid for on a credit card, that 20% interest isn't exactly ideal but for many people it can be a simple task of buying now and paying it off over 2 or 3 months. For them, $1000 isn't a lifestyle changing expense.
For others, $1000 might be devastating. It might be the difference between making rent or not, and ultimately lead to eviction and maybe even homelessness.
So liquidity is a different question from financial health or resilience, even if they're somewhat correlated. There are other metrics out there more directly measuring financial stability or vulnerability.
I made a few bad moves in my 20s because I had no basis of understanding when it came to money (parents are bad with money too and never taught me anything useful), have spent my 30s desperately treading water trying to get ahead, but it seems impossible with rent going through the roof, food going crazy, plus now I have medical debt on top of my school debt... my really big mistake was wanting to help people by becoming a social worker.
What pisses me off the most is that if you're a plumber you get to walk in and demand whatever price you feel like, but if you're someone who helps society, society gets to cram it up your ass and tell you to smile about it. Same goes for anyone who works for society: teachers, cops, firefighters, EMTs, social workers, librarians, nurses, etc... I don't get why we don't all just join together and let society fucking die until they agree to pay us what we're really worth.
All my jobs have been paycheck-to-paycheck until about 3 years ago. My last job allowed me to save up $24k, but then I lost my job. Now I'm down to $7k and getting worried.
Since I left college and started out into the "adult world", I've always spent less than I made, the rest going to savings or investments toward retirement. I accomplish this by "paying myself first". If I have already saved the money as my first priority, I can't spend it on things like rent or groceries. So my financial choices are forced to be more conservative by design.
Example: I forget what the max limit to IRAs were at the time (say $5k/yr) but for my first job I set up auto contributions each month and mentally took a $5k/yr salary "cut" for that job. Every time I got a raise, I made sure that at least a portion of that raise went to increasing my savings rate and attempted to avoid lifestyle creep.
Thanks to my savings, I've been able to handle some emergencies in cash vs having to utilize debt to cover the expenses. It really is a snowball. I started out small, now my savings is significant compared to my income.
I have always strived to keep between 1-2 month’s worth of expenses in savings at all times. That small buffer has allowed me to ride out almost everything without going into debt, then when I am in debt I pay it off as quick as possible.
The worst thing you can do is get on a payment plan, as that normalizes having debt and you end up paying thousands in interest. All interest is, is you giving your money to someone else. I like to keep my money, so if I have to live off of ramen and hot dogs for a couple months, so be it.
I do well enough to comfortably support my wife and me. I have a retirement plan, put a small amount into saving, and don't buy things on credit (besides to pay them off immediately for rewards points). I have paid off my car and it should last me a good long while. I do have student loans outstanding but I pay those down and my work provides a stipend each month that effectively doubles my payment on that. I have some small investment accounts to play the stock market, but not life-changing money. We have plenty of money leftover after the mortgage to live just as comfortably as I would like.
This all being said, I am an outlier in the current economy. Most are paid too little for too much work and I would happily pay more for most products if I thought the money was going to the employees, but I know they are given the smallest amount possible.
No debts, but I burned through all my work coping mechanisms on the way to paying them off, burned out badly and now I can barely look after myself, let alone do things for someone else.
Luckily, if you can call it luck, at least one of the benefits agencies of my country (can't really say government as they don't change much if at all when the government does) agrees with my self-assessment and is providing me a pittance to live on. If I still had a mortgage (or rent) though, I'd be f--ked. Then again maybe I'd qualify for some other kind of assistance. I don't exactly want to have to find out.
One of the other agencies largely implied that all I needed was a nagging wife and I'd be A-OK. Yeah, no, that's not how mental illness works. Pretty sure at least one of us would end up in the ground. Probably just me, because I don't think I could bring myself to harm anyone else.
But, to drag this back on topic, I have some funds put by for emergencies, which might cover me a couple of times. After that, well, I try not to think about it.
The last year has been rough on my savings. The retirement savings are untouched but the general savings have been emptied by a combination of travelling for family weddings and a downturn at work. I'm not worried but I do need to make a change.
After school I had one week of cash left when I got my first job. I moved to a tiny town to work in the mining industry. Pay to cost of living is very good. I've always been careful with money and dislike shopping.
I save about 50% annual income. This is piled up in various investments. I can retire before 40.
I have about 1 year worth of expenses in cash I can access tomorrow. I try to keep at least 3 months but I'm squirreling away extra for known upcoming expenses.
My wife and I are comfortable. Both of our parents have worked in banking and taught us budgeting beyond what school taught us.
Keeping a steady well paying job is key. Sadly, there are so many people who no fault of their own can't get well paying jobs or live in areas where well paying jobs are rare.
It's not remotely crazy, and I have lived there. I had times where I foraged for berries and plants for food, and was lucky enough to know how and where to do so. That was a long time ago, before wages stagnated and inflation went bananas. I'm surprised more people aren't starving to death today, just looking at the numbers.
Look up prices for housing, food, etc. in your area and compare that to full time at minimum wage. Then consider a lot of companies only hire part-time and not full time. Then consider minimum wage is still the federal $7.25 in a lot of the country. See how that math looks.
It sounds crazy to you because you have apparently had success handed to you through no work or special virtue of your own. Maybe get out of your comfy bubble a bit
They may be in a comfy bubble but that doesn't necessarily mean that haven't worked hard and/or been lucky. Kind of a harsh assumption about a stranger.
I get job contracts for a few months at a time. Sometimes there are months when I'm unemployed, and those are hard on my savings. I used to do just fine, but this year has been very difficult and my normal savings are pretty much gone. (I still got some in funds/investments though.) So basically, I had a buffer but I had to use it, and now I have nothing. I guess it's because of the rise in prices? I don't "waste" money on frivolous things like I might have in the past, but it's only getting more and more difficult. Add to this student loans. I wouldn't have €1000 to spare for an unexpected expense. I am really angry at society, to be honest. If the job market wasn't so ass, I wouldn't have to deal with these short contracts.
Started paying off debt, saving, and investing consistently over 25 years ago. It has really worked out, and my wife and I are more financially secure than most. Even still, we're one health crisis away from potential bankruptcy, because we live in the United States.
I'm tied down by one financial anchor and have opted to add two more smaller ones on top of that for giggles. I live very comfortably paycheck to paycheck, if I need to save for anything I can fairly easily put away around 3k a month. I can afford a random 1k expense without issue, currently anything above 2k would be a bit tougher, but still manageable.