Are Americans Really So Financially Unprepared?

Are Americans really so financially unprepared?

Americans seem financially unprepared. According to an American Psychological Association survey, 72% of Americans say they’ve felt stressed about money at some point in the last month. Meanwhile, as many as 50% were so stressed out they admitted to not being able to sleep. 

Is that you? Hope not, because this is Financial Samurai! If so, please read every single post on my site before spending your next buck.

I also found a Federal Reserve survey monitoring the economic well-being of U.S. households. The survey reports that 46% of adults claim they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.

Hmm. Did the Federal Reserve only survey the most impoverished communities in America? Surely many of you can go to the bank and withdraw $400 to pay to fix a leaky window, a burst pipe, or a tow truck. If not, there's always the Bank of Mom and Dad.

The Fed says the 5,600 survey respondents were selected at random. But I'm highly doubtful given the median household income is roughly $68,000 or $5,666 a month.

Alleviating Consumer Anxiety About Money

Despite a bull market in stocks and real estate, there does seem to be some growing consumer anxiety around having enough control over their personal finances. As a result, Capital One, one of my supporters, is leading an effort to redesign the banking experience and inspire a new era of confidence when it comes to people’s relationship with their money. If you are feeling financially unprepared, Capital One can help you.

They've launched a Banking Reimagined 10-city Tour and recently stopped by San Francisco. Each participant visiting the tour will be invited to go through an interactive session that will help uncover the financial behaviors that best match their value system. The experience includes:

Banking Reimagined

  • Advanced Interactive Touchscreens – 9 Multi-Taction Touchscreens spanning 22’ wide and 5’ tall that allow up to three people to interactively scroll through values and goals, giving you an understanding of how your outlook shapes the way you view your money.
  • HoloLens Augmented Reality – Interact with 3D holographic imagery in real space and time, bringing your financial goals to life.
  • Video Selfie Booths – Participants can record a message for their future selves with the knowledge they’ve gained from the experience. I'm going to remind myself to never stop grinding!

Sounds like fun, especially since our torrential downpour of rain will have abated by then! I'll update this post with some pictures of my experience right after I get some Dungeness crab with melted butter.

Capital One Banking Reimagined Country Tour Are Americans Really So Financially Unprepared?

Finally, in addition to Capital One's Union Square Café, they're also opening up another Capital One Café in Walnut Creek in the East Bay. If you've never been, it's a chill place to grab some food and drink, lounge around, and seek financial help.

They're offering complimentary Money Coaching sessions by appointment. I'm going to go through one and report back my experience in a future post. Anytime something is free and has the potential to help readers achieve financial independence sooner, I'm all over it.

Financial Samurai Reader Demographics

Can this be true? Snippet from the Fed 2015 survey

Below is the Financial Samurai reader demographic survey based on over 80 polls I've conducted over the past four years. My #1 goal is to help as many people as possible reach financial freedom sooner, rather than later. I don't want financially unprepared people.

It's interesting to see the numbers compared to nationwide medians and averages. Are people getting wealthier reading personal finance sites? Or do wealthier people have a higher proclivity for reading personal finance sites? I'm sure there's a mixture of both. But one thing I do know is that any of you who've been taking my advice since 2009 should have seen your net worth more than triple since!

Specific Demographic Data

* Age: 76% of you are between the ages of 26 – 45. 11% are under age 26. 13% are over 45.

* Annual Income: 51% of readers make over $100,000. 33% of you make between $100,000 – $200,000 a year. 18% of you make over $200,000 a year, while 17% of you make between $75,000 – $100,000 a year. 3.3% of you make over $500,000 a year, the level which I consider to be the definition of rich. 

* Value Of Primary Residence: 39% of you said your apartment or house is worth between $250,000 – $500,000. 28% said your apartment or house is worth between $500,000 – $1,000,000. And 9% of you said your apartment or house is worth more than $1,000,000. Most homeowners have refinanced at least once over the past 10 years to take advantage of record low interest rates.

* Retirement Savings: About 19% of you have saved over $1 million dollars for retirement, excluding the value of your primary residence. Another 18% of you have saved between $500,000 – $1 million dollars. While 38% of you have saved between $100,000 – $500,000.

* Social Class: 67% believe you are part of the Mass Affluent Class followed by 20% who believe you are Middle Class.

* Education: 62% of you went to public university while 29% of you went to private school with grants or scholarships worth at least $4,000 a year. Roughly half of public university attendees got grants or scholarships worth at least $2,000 a year.

Wealth Demographics

* Debt Levels: 52% of you have $0 consumer debt outstanding. While 22% of you have less than $10,000 in consumer debt outstanding. 36% of you have total debt outstanding (mortgages, credit cards, student loans, etc) between $150,000 – $500,000. 15.5% of you have no debt of any kind.

* Net Worth: 35% of you have a net worth of between $300,000 – $1 million. 23% of you have a net worth over $1 million. 80% meticulously track their net worth with today's free tools.

* 401k/IRA Savings: 21% of you have between $100,000 – $200,000 in your 401k or IRA. 25% of you have between $201,000 – $500,000. 17.5% have over $500,000.

* Ideal Income For Happiness: 14% say you need to make $101,000 – $150,000 a year to feel “very happy.” 22% say $151,000 – $250,000. While 52% of you need to make over $250,000 a year to feel very happy.

* Savings Discipline: 15% of you save between 11% – 20% of your after tax income each month. 18% save between 21% – 30%. 28% save between 31% – 50%. While 23% of you save over 50% of your after tax savings.

Are You Financially Unprepared Or Prepared?

Please take a moment to fill out this simple poll regarding whether you can pay for a $400 emergency expense without having to go into debt or sell something. My guess is that only 15% of you will say you can't cover a $400 emergency expense compared to the 46% nationwide average. What percentage do you guess?

Financial Samurai readers hail from all 50 states, all ages, all races, and all incomes. I believe we're as good a representation of Americana as any other survey. Perhaps I'll see some of you at Pier 39 this weekend!

Related posts:

The Benefits Of Debit Cards Over Cash Or Credit Cards

Confessions From An Angry Retail Banker

A Peek Inside A Celebrity's Income And Spending Habits

How financially prepared are you to come up with a $400 surprise expense?

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The best way to grow your net worth is to track your net worth. Don't be financially unprepared. I've been using Personal Capital's free financial tools and app to optimize my wealth since 2012. It is the best free money management tool on the web.

Just link up all your financial accounts to measure your cash flow, x-ray your portfolio for excessive fees, calculate your retirement income, and more. There's no rewind button in life. Therefore, you need to do your best to optimize the wealth you have now.

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Readers, do you believe that ~46% of Americans will have trouble coming up with a $400 emergency expense? If so, why do you think this is given the median household income is ~$56,000? How large of an emergency fund do you keep? I've usually got at least three months of living expenses on hand. If I need more liquidity, I'll just sell some public securities. Thank you Capital One for sponsoring this post!

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135 thoughts on “Are Americans Really So Financially Unprepared?”

  1. Man you rich people are totally isolated from the rest of us. There are whole counties in the US of poor people on dope, life expectancy is going down, empty houses collapsing, roads falling apart, schools closing. Come to McDowell County, WVa. I’ll show you thousands who couldn’t come up with $40 let alone $400. Or short of that, read “The Gilded Rage” and get an idea what this country is now like outside of NYC, San Francisco and your holiday homes and yaught clubs.

      1. Terry Pratt

        Welcome to Two Americas, where each one is clueless about the other. Guess this is my ONE comment for today.

    1. I hate to tell you, Joe, a lot of areas of these cities are just as bad. But more expensive. Trust me. Read about conditions in public housing and minority neighborhoods in big cities.

      ARB–Angry Retail Banker

      1. If there’s an American Pol Pot in the making, and I truly believe there is, he won’t come from the urban ghettos that have been hell holes from their origins in the segregation, redlining and white flight of the 1950’s and 1960’s. The American Pol Pot will undoubtedly emerge from the tinder kegs smoldering in the formerly prosperous Rust Belt where society is literally falling apart at the seams in process that is much more recent.

        Take away a man’s bread and you leave him hungry. Take away a man’s ability to bake bread for his family and you leave him furious.

          1. You can buy houses in my hometown for 9,000 now. Even though they rent out for 800 a month (because no one has 9000 saved up, and no banks will do a mortgage for less than 50000).

            But for me it’s not worth it. I don’t want to control a man’s home. I wouldn’t want to throw him out into the streets because he can’t pay. And he can’t, because the closest work to town is now a Walmart, which is 45 minutes away by car and only pays $1000 a month.

            Even if I did want to kick him out, by law it would take six months of court proceedings. And in that time he’d probably destroy the house.

            This kind of thing is why 100 year old houses are left to rot and collapse while people are living in their cars.

            This is the Rust Belt in the richest country in the history of the world in 2017.

  2. Absolutely, Americans are financially unprepared. One statistic that I’ve quoted on my blog a few times is that 7 out of 10 Americans don’t have an emergency savings account. Not that they don’t have enough to cover X amount of expenses, but they don’t even have an account!

    One thing you have to realize, Sam, is that you can’t use the median gross salary and Financial Samurai readership demographic (a group with much higher earnings power than most) to get an accurate portrayal of the average American’s earnings. Just because the median is around $50,000/year doesn’t mean that half the population is making more and the other half is making less. I have a feeling that WAY more people are making below the median salary than above it. Whether that’s the fault of those people, society at large, or whoever else is a different conversation altogether.

    But yeah, it is sad, scary, and a bit hard to believe that so many people in one of the most prosperous nations in the world can be so close to destitution.

    ARB–Angry Retail Banker

  3. Hi Sam, great post and this hits home. I may have asked this before but in my case I have a pension and it’s not always clear to me where I account for it in net worth (or not?)

    From 55-62 it’s $43K a year. From 62 and on until I expire it’s $36K a year (no COLA). Can I assume if I go down to John and Sally’s annuity shop and it would cost ~ $625K to get the same income stream I can add that to my net worth?

    Thanks in advance. Cheers.

  4. Right on point. I have been in that situation for years – strugling when starting a business, and making around $700 a week – I then bought a brand new BMW with monthly payments of $800 a month – for the next 5 years! Back in that time, I didn’t realize how stupid it was, and on top of that, I had no savings. I was part of that 46%. Driving a new BMW but putting the cheapest parts when the time came to service the car.

    I ended up changing my mindset and business started booming. When I became a millionaire, it became even more obvious, with my staff spending almost all their income on superficial stuff that they didn’t really need – to find out that they had virtually nothing left at the end of each pay period.

    I would blame this on the consumerism mentality with encourages people to spend every dime they have on things to impress people rather than saving intelligently, investing, and creating wealth.

  5. David Wendelken

    We rarely have credit card debt.

    Occasionally we spend a lot one month and choose not to draw down our savings to pay it off right away. Instead, we just tighten our belts and cut our spending way back until we pay it off over 2 to 3 months.

    Mathematically that’s not the optimum choice. But if we don’t feel the pain, we don’t reinforce the need to keep our spending in line.

  6. I was very well prepared financially. During my PhD, I gathered a lot more than most of the folks would imagined. Then our son was born, with special needs. There went all my financial preparedness. US medical system successfully bankrupted me. Within 8 years, from well prepared to living paycheck to paycheck..

  7. I definitely am on the lower end of all of those polls. I’m younger, I make much less, don’t own a home, have student debt, the list goes on. My wife and I together have a very small net worth, which fortunately is no longer negative. Currently, it will take years for me to get to some of those lists, but I think the people who are simply conscientious of money and where it goes end up richer. I have many friends who simply don’t budget well and they make up the demographics of having no emergency funds.

    FinancialSamurai becomes one of those places where I can experience people who are better off financially than my family, and hopefully those experiences will rub off onto me and how I handle money.

    1. Christian, the great thing about starting off small is that there’s NOTHING BUT UPSIDE! I always think this way when I’m first starting out at anything. Being the assistant varsity boys tennis coach at a high school is as close to as bottom as things go. But I know that if I work hard, develop good relationships, and inspire the kids, I will be asked back to work another year. And after maybe 3-5 years, I might get a promotion. I don’t expect anything except to work hard.

      The Money Mindset WILL rub off on you, and you WILL get into the money mindset if you read, interact, and practice long enough.

      Fight on!


  8. Reading through the posts and my favorite comment is by the 140k a year guy complaining about how the 25k a year employees are always in some sort of a financial ;)

    1. I’m not sure I understand whether you were agreeing with me or think that it’s not my place to judge them due to the wide difference of our incomes. To clarify my point, I was commenting on the poor day to day choices they make with the money they have. Yes, I make much more than they do, but I still spend much less on meals, transportation, etc.

  9. Financial Bounty

    First off, I LOVE that FS reader demo statistic – 52% of you have $0 consumer debt outstanding!!! That’s awesome!! I totally believe the statistic. It matches the other statistic that in Mar 2016 the average household debt CC debt is $16,048, an increase of 1.16% from the month prior. So that would make the debt/income ratio of 28%. Yikes….those CC min payments have to be catching up to people.

    Personally, I keep 3-6 mths worth of expenses. I would even advocate greater then 3mths emergency fund, if you are in an industry fraught with churn and M&A.

  10. I believe the statistic. I used to date a CPA and she made 80K a year and I was fresh out of school and made 20K that year. She was so terrible with her money that I had to loan her 1000 for an “emergency.” She did not pay back according to our terms either. Late payments. I was so angry at her for being so irresponsible. She was angry at me because I did not care that she drove a fancy car. Our relationship did not last long after her borrowing the money.

  11. It seems most Americans buy things on credit and save almost nothing. According to several sources average American has less than $1000 in savings which is alarming.

    Compare this to Chinese or South Koreans who save each dime and then you get to wonder how they pay big investments like real estate with cash.

  12. 58% of my net worth is in cash right now earning just below 1%– ironically my biggest worry is not a $400.00 emergency but that I’m losing money to inflation. I’d like to invest more in the stock market but it seems dumb to invest at record highs. I know the wisest thing is to never time the market and just buy and hold, but man I just can’t get myself to do it with Trump there and stocks being so expensive. Maybe one of you smarter guys or gals can convince me to just pull the trigger. This is the kind of shit I lose sleep to, I can’t imagine how people live knowing they couldn’t come up with $400.00 if they needed it….. yikes.

    1. savingforarainyday

      Why don’t you at least buy some bonds if you can’t bring yourself to buy stocks?

    2. When you have a strategy and have been following it for a while, it can be ruinous to change it. If you went more into stocks and bonds now and both corrected, you just might wind up 100% invested in cash.

      You should probably commit to investing more when the conditions to invest meet your criteria. By definition things “may not look good” at that point. It is at that time, that you will need to have discipline.

    3. Start simply by buying a little bit at a time. The Vanguard fund – VWELX – is cheap in terms of fees, 0.26%. It is basically 2/3 stocks and 1/3 bonds. Every month try to take your savings and put 20-30% into it. Of course, before you do any of this, make sure to separate your cash into two piles: 1- emergency fund (not to be touched, 6-18 mos, depending upon your needs), 2- investment cash ($ sitting around that you are scared to deploy but are more than needed for emergencies).

      Another good trick I learned is to calculate how much you would lose if the stock market drops by 50%. For ex, if you have $100k in cash and you put $25k into VWELX and the market drops 50%, you will have ~$17k in stocks, so you will only be down $8k (and only if you sell). If you are planning to hold for 20+ yrs, who cares? In fact, you will be so excited because now you can buy more stocks for cheap. If you are over 60, you need to be more conservative, but even then 50/50 stock/bond will be ok for most people.

      Note this only works if you buy the “entire” market (S&P, VT, VTI, VWELX, etc) or several 100 diversified stocks. If you put it in one company, like GOOG, this plan completely fails, because when the company drops, you have to figure out if it is the company that is going to fall or emotional. That is tough even for the guys at GS, almost impossible to do this on your own!

    4. Dollar cost averaging is designed to buy high and low and take timing out of it. Pick a number and put purchasing on automatic. You might buy high now, but you’ll ride anything that goes up and you’ll buy when it goes down. But not getting in at all will lose money either way.

  13. I think the 46% is wrong, being misinterpreted, or both.

    47% of people indicated that they could cover 3 months of expenses from an emergency fund. And of people who experienced a financial hardship (lost job, health emergency, etc) of presumably more than $400, only 16.5% used high risk borrowing.

    Those 3 numbers just don’t go together. Something smells off.

    1. So the question is: why does the Fed/gov’t make things so hard to understand? Why does the Fed/gov’t/media try and make it seem like things are so dire in America?

      Once folks understand the why, things realize there’s a lot of smoke and mirrors.

      1. I think, if I’m reading correctly, the question was asked “how would you pay for an emergency of $400?” Which leaves things open to more interpretation. It isn’t that people COULDN’T pay cash for an emergency, but that they WOULDN’T.

        There are various manipulative reasons they massage data. In this case I think it could be more lazy thinking leading to misinterpretation than deliberate misdirection. This is why I always try to find quoted poll questions, not summaries.

  14. Boocoo Money

    I’m really not surprise to see that 46% can’t cover a $400 emergency. Working in advertising, its my job to create a need out of a want from shoppers. Frankly, its pretty easy because as Americans, we are condition to buy now and save later instead of save now and buy later. Our economy is built to spend money rather then save it. What really shock me is the amount of free education and advice you can get today but yet people tend not to take advantage of it. Do I see this type of behavior changing in the future, maybe. But for now, I don’t see any changes anytime soon.

  15. I also don’t believe that the 46% number is accurate. Something doesn’t smell right. No way that’s a random selection of US adults. Or perhaps the wording of their question was off? Who knows, but I’m not buying it.

    I’d also say that the results of your polls definitely reveal some self-selection (this most recent poll says that 99% of your readers could cover a $400 emergency).

    Looking forward to your post on the future of banking tour. I’m a fan of CapitalOne; I’ve used them for years. Looks like my city is next up on the tour (after SF) – I’ll see if I can’t get down there and then we can compare notes!

  16. At some level I do think that statistic is correct. What galls me to some extent is that $400 comes from the Atlantic article where the author lives in a home in the Hamptons, sent his children to private schools that he paid for, and he didn’t follow the basic #1 rule of personal finance to pay yourself first. I have a lot of sympathy for people who live on or below the median income, but forgive me if I don’t have a lot of sympathy for his situation. That said, financial literacy is so much more needed in this country.

  17. SavvyFinancialLatina

    I think most people that read your blog are financially savvy people. Or people who are trying to learn to be financially savvy like me!
    I don’t know how people live paycheck to paycheck. I have always had savings even as a broke college student. And when things were dire I only spent on the basics. But I learned one of my previous coworkers was/is living paycheck to paycheck. She has a combined household income of $200K a year at least. And somehow every single dollar is being spent. She’s in her 50s, no retirement savings, massive debt, student loans, car loans. It was so astonishing.

  18. I’m actually inclined to believe that 46% number. I think that we are just biased as financial bloggers and readers of PF web sites. The average person doesn’t live below their means. They are also unlikely to be debt free and instead may be carrying multiple obligations at the same time… credit card(s), student loans, new care, mortgage, etc.

  19. I imagine I am in the bottom 1% of your readers. I make about $30k per year and struggle to keep $1000 in my emergency fund. I am 43, have a college degree from Berkeley, and work in restaurants because I have not been able to get a decent job since the last financial meltdown. I live in the Sacramento area which I think is part of the problem. Jobs here are scarce and entry level jobs don’t tend to pay more than $14 to $16 per hour. After taxes that is way less than I make at the restaurant.

    I read FinSam to gain insight into how to do things correctly. I follow as much wisdom as I can, but in the end I always come back to my real issue: not enough income. I have about $14k in student loans, no credit cards, no car payment, and a very tight budget. I don’t have cable, don’t smoke, don’t eat out, and I still have a hard time saving money. I have about $20k in investments, own a property in the Bay Area worth about $200k that I rent out (mortgage=$140k.)

    1. The entry level job may pay way less than restaurant work to start but if there is growth potential, in a few years time it may pay way more.

      1. Thanks for the reply. You have a point, and I’ve become more open to such jobs. I’m trying to be selective about taking one so that I will have upside potential. I’ve even looked into apprenticeships where the pay raises are automatic based on tenure. I have had no luck yet, despite applying with 4 apprenticeships (I always score really highly and do well in the interviews at the hall, but there are no jobs to place anyone into.)

    2. Hi Philo,

      Go Bears! First of all, great job not having any revolving credit card debt. So many people dig themselves in a hole b/c of CC debt and can’t get out due to usurious rates.

      With $20K in investments and a property you’re renting out, perhaps you aren’t doing as bad as you think you are?

      The income issue is the biggest problem. Do you have skills you can offer to tutor/teach after work? Perhaps do some gig economy work? Have you started your own website to brand yourself to attract side hustle work? Perhaps look for a job and get an offer in the SF Bay Area, run the numbers, and see if the benefits outweigh the cons? How many hours a week are you working now?


      1. Thanks for the reply Sam. And yes, Go Bears!

        I appreciate the encouragement, but I think only $20k in investments is pretty far behind for someone my age. My two closest friends from high school have at least 5x that, but I try not to compare myself to them since they both stayed in sales and I loathed sales.

        This part is going to make you mad, and I agree I need to change it, but right now I only work about 25 hours a week, and some weeks less! Part of the issue is I’m a natural introvert, and waiting tables can be stressful at times, so if I can live on three or four days a week that’s a break from having to be “on” in front of people.

        I have considered tutoring, but it would have to be before work or days off since I get home around midnight. I would like to tutor in math. I’ve considered doing what you’ve recommended and drive Uber (sorry, but someone else referred me.) My friends who’ve done it in Sacramento say it’s not very lucrative, but who knows. What I really want to get started on is a blog. I love tinkering with the web and I’ve made some basic sights in the past. I’m just not sure I could come up with great content on a regular basis. As far as regular jobs go I do apply weekly to various industries with the hopes of getting a foot in the door.

        I like your ideas and I thank you. I need a good kick in the ass I guess.

        1. Philo – can I suggest taking a public speaking course? Not so that you can become a motivational speaker but to increase your confidence level. I hear a lot of doubt in your posts. From personal experience I can tell you that you can overcome. However, it will take hard work and a commitment to earning more.

          I would set a goal that you should get 2 side hustles to bring in a few more $ and to 1 thing that could lead to something more lasting. I know you can do it!

          1. Highly recommend you sign up for the Dale Carnegie course. It helps people with public speaking, google for your local chapter or read How to Win Friends and Influence People (horrible title, great book).

            There are several free links to the pdf on google.

            Also, definitely hours worked is critical. I have been working in the 80-100 hr range from the time I was about 23. Now, I still work 80 hrs but I focus on doing things I love that make money, so it doesn’t feel like work. However, most of the time, I was doing things I didn’t like. That’s the only way I know to get ahead in the beginning.

          2. Thanks Rutley. You are pretty insightful. I always considered myself fortunate because I got out of Cal before they required a public speaking course like the state schools! Not sure how you gleaned that from my posts, but I’ve always dreaded public speaking. It’s gotten a little easier over the years, but I probably should just take a course. Thanks again.

        2. Philo,

          You are right. $20,000 in investments is not a lot for your age, but that just means you’ve got a lot of upside.

          If you work only 25 hours a week, that means your $30,000 is really worth $48,000 a year based on a “normal” 40 hour work week. Hence, not bad, given you’re living in Sacramento!

          The way I see things for you, it seems like you’ve got a lot more time to hustle and make more money if you really, really want to.

          The idea of having your own site is to not build a blog like this one. But to brand yourself online and make yourself more searchable to prospective customers in whatever field that interests you most. You can of course write 3X a week like I do here, but you’ve got to stay disciplined and really love your topic. Plenty of introverts run a website. It’s the perfect introvert activity actually!


  20. Sadly, I believe that this number is true. I have many employees in this situation. A few of them have gone from making ~$10-14/hr to ~$20-25/hr in 3 yrs due to good work ethic (I’ve given one a 200% raise in 3 years). Yet, on a personal financial basis, I cannot get them to save or invest even a dime. Therefore, they go from crisis to crisis and I typically step in and give them 0% interest loans or other subsidies (typically no more than $10k per year) to help them out. They used to get an investment lecture on the day that I would disperse the money because I really don’t like to have to step in to do this. However, I have now done away with the lecture. Unfortunately, bad habits have to be changed from within. As they are bombarded with consumerist culture and are unable to think individually and independently from the herd, in some ways, this is not entirely their fault, as there is a human genetic predilection to do what others around you are doing. Furthermore, I know several professionals, who although have $400, do not have anything close to 6 months of expenses in cash and are in their 40s, many of which make more than $200k annually!

    For my part, I like to keep at least 2 years in cash, or more, in some instances, mainly because I view cash as a call-option on all investments with no expiration date and minimal theta decay due to inflation (as per Warren Buffett’s suggestion).

    1. Could you explain the last paragraph to me? I keep a lot of cash as well. I want to know what you mean by call option in this case. Thanks!

  21. Sam – I think those survey numbers are right, even though it’s hard for us more financially savvy people to fathom. It’s incomprehensible how terrible some are with money. A few examples from my life:

    My retired father works at our church food bank a few days a week. The food bank provides free food to people that can’t afford it based on an income threshold. He regularly tells me about people showing up driving Cadillacs or other high end vehicles and sometimes being accompanied by a few kids each with their own iPhone.

    Another family member makes minimum wage and recently bought a $30,000 new SUV and then commented to me that it’s more expensive than my car (which is true, and I pay more fed income taxes every year than her entire income).

    I also know a coworker that makes more than I do and lives paycheck to paycheck . . .

    My guess is that none of these people read Financial Samurai or any other finance blogs. I think you have to have the mental capacity to make the right financial choices and actually have the desire and interest in following through. Some don’t have the ability but most don’t care, which is why they don’t have a $400 emergency fund.

  22. As fate would have it, I have done well but still have my childhood friend even though I am almost 51. I grew up in working class neighborhood that was anything but affluent. Of those I grew up with, only a couple (maybe 3 out of 20), could pay an unexpected expense of $400 without difficulty. Here are the reason I have seen for this:

    1. A lack of ambition. Many get stuck in a low paying job and just refuse to better themselves. “I can’t” is what I hear most from them. I can’t go to school. I can’t acquire a new skill. The mindset keeps them poor. A lack of curiousity on how things could be better.

    2. Out of control spending. A friend of mine worked for a large bank in the 90’s (still does)in tech and was making great money. They bought the Mcmasion and expensive cars. I tried to convince him to save $. He never saw the need. I even had to lend him money 1 time. Then supply and demand took hold and the skills he has weren’t that rare. His comp decreased (99 was still his highest earning year) but they still spend like they did before only they have 2 children now. The wife refuses to work. He has actually taken more than half of his 401k out with taxes and penalties to keep up the lifestyle.

    3. Those that are unlucky. Bad things can happen to people who are trying to do everything he right way. A lady I grew up with had so many bad things happen to her, that I really started to believe in dark clouds. Makes me depressed to go into details.

  23. I’d be so stressed out if I didn’t have enough in savings to cover a $400 emergency. When I first started working and was paying off student loans I was probably in that boat, but could utilize my credit card if something urgent came up. I think a lot of people under estimate the importance of building up emergency savings to cover at least 3-6 months of living expenses if not 6-12 months. Glad to see the readers here are well above average and financially secure.

  24. I think its time to stop be emotionally blackmailed with reports such as this. Of course this sounds bad, but is it really? First off, if this number is somewhat static over time, then these forty six percenters have made it through their lives living in this way and if it suits them, who am I to tell them to up their game? Having the freedom to live your life means if you choose to go for FI, good for you. But if you want to live paycheck to paycheck, then thats your decision. But these 46%-ers don’t then get to complain later on about the (100%-46%) 54%-ers being rich and having things they don’t. You don’t get to have it both ways. Its time to have a balanced argument here (which the media never does. They just thrive on reporting on “injustices” with little to no balance). The fact is that this country makes the tools available for people to achieve great things and if you don’t take it upon yourself to do that, its on you, not society. I know people that came here with not one penny to their name nor did they even speak the language, and now are very rich, having just dedicated themselves and taken responsibility for their education/career/investments. This is the real story here, that if you want to do it, you can, and if you are not motivated to do so, then its your own fault and just man up and accept your fate.

    1. “But these 46%-ers don’t then get to complain later on about the (100%-46%) 54%-ers being rich and having things they don’t.”

      The problem is that they both, 1- do get to complain, and 2- with large numbers, do get to affect policy and force the rest of us to essentially “bail” them out in all sorts of different ways (perhaps not as severe as the bailouts we have to give to the bankers). It’s a bit like that joke about if you owe the bank $100k, it’s your problem, but if you owe them $100m, it’s their problem. Specifically, I mean the fact that since 46% of people have this issue, it’s our collective problem, as opposed to if 3% of people did this, then they would just be out of luck, due to lack of significant representation.

      To put it into context as to how horrible money is mismanaged, Bernie’s net worth is ~$800k supposedly on an income of $200k at age 75! I think there are crackheads with better investment skills and I say this as someone who respect’s Bernie’s character.

      1. mercury, thanks for the reply.

        I have thought about that exact thing before and its whats on my mind more and more as the Bernies of this country gain a following. The suggestion that the govt will just institute confiscatory measures isn’t that far off, based on “paying your fair share”. Tell me, when i busted my ass and was frugal and saved while others were lazy and uninterested, why is it now on me to “pay my fair share” when I am already disproportionally taxed? If someone in SF puts their capital at risk, recently passed prop W just rapes 5M+ owners (sell a 5M house, be prepared to lose 112.5K transfer tax, which is now going to pay for “free” college for everyone). At the fed level, we just had a $700 stealth tax increase this year in terms of the SS payroll tax whose upper limit increased 10k this year. And this for a Ponzi scheme of a system that they are already talking about paying out 75 cents on the dollar and likely will be subject to means testing (so again, if you were diligent and sacrificed and maxed your 401k, you were dumb, cause that will just reduce your SS, or whats left of it). The AMT and Pease phase outs of deductions on tax returns are yet more of the same. The list goes on and on. My only recourse is just to opt out of this corrupt system. I’m seriously thinking of the GoCurryCracker approach (google for GoCurryCracker & “never pay taxes again”) as a principled position. Luckily striving for FI has provided that option, although its not my preference, once things get bad enough.

      2. Bernie is only worth $800K on a $200K salary at 75? Wow! What’s he been up to all these years during the biggest bull market of all time?

        You make a VERY good point that because such a large portion of the population may be financially unstable, the rest of the population will have to help out. Really good comment here Mercury.

        Hence, I hope these type of articles help others who are not in financially good shape, to help themselves, so they can help us who are, and help all of the country in the process! USA!

        Related: Tax Rates Based On Work Ethic Shall Fix The World

        1. FWIW, I was born in a 3rd world country, came to the US at the age of 3, my parents started on a 1-income engineer salary (which at that time was really low for immigrants, ~$20-30k in early ’80s). They pushed me to educate myself, and over time, I bootstrapped myself up to 1% income and now 0.1% income before turning 40.

          Many of my friends seem to think this is because I am some type of genius and/or hard-working and therefore deserve it.

          However, it is likely that someone in the town I was born in, without plumbing/electricity, is likely much smarter than I am and works harder than I do, yet will never earn even 10% of my income.

          For this reason, although I agree we should focus on sustainable capital allocation plans for the government, so that we don’t go bust, I also have learned to temper any “anger” or “frustration” at those less fortunate. They may be lazier and/or less knowledgeable and/or less intelligent, etc, however, a lot of who I am is because of my parents and/or adversity faced as a child.

          If I can give one piece of advice to everyone (not to be patronizing), I would say thank your blessings. We are lucky to be able to sit in our apts/houses and talk to each other today and live peaceful, meaningful lives.

          If they increase or decrease my taxes, I will continue to work as hard as possible, because when I get older, I intend to give everything away, hoping that my money will one day get to the next “Elon Musk” somewhere who was not given a chance, so that humanity can move forward to a more logical and rational world. I am ok if 99% of the population squanders the money, because on a biological genetic basis, we are predisposed to act stupidly and think short-term in times of scarcity, which as of today, has been every time humans have ever known. By ok, I don’t mean I think it is great, nor do I think I should just let it happen without giving my opinion to people to change their behavior, but I don’t let it get under my skin daily.

          That doesn’t mean I don’t throw a hissy fit every tax season (this year I am paying over $600k in taxes), but I try to limit it to a few hours of bitching a year. If you are making enough money to even know what AMT, don’t forget that someone out there is trying to find a source for water every day! And that someone may have an IQ of greater than 150 and incredible character!

          And, if you make even more, eventually AMT will be in your rear-view mirror as well, lol.

          1. mercury, I admire your magnanimousness, esp in reading your reply to another posting about giving your employees advice & interest free loan. However, I have to disagree with the predilection for just following the heard. If so, what incentive is there for people to to ever rise above? Unlike Sam Harris, I believe that there is some element of free will, and people make their own decisions. I can see the utility of charity for those who, through bad luck or other unfortunate circumstances, have things go badly. For those who otherwise live in more propitious circumstances, I think its on them. However, I can see we disagree. In any case, thanks for your contribution here and good luck.

            1. Actually I agree with you. What I don’t agree with is the idea that we can just tell people to work harder. These types of “lazy” mentalities start at a very young age, probably pre-K school. We need a longer systematic fix for these & perhaps more carrots and sticks, even tougher now in the time of emerging AI!

        2. Bernie is only worth $800K on a $200K salary at 75? Wow! What’s he been up to all these years during the biggest bull market of all time?

          I bet he has a smoking pension coming tho!

          1. Currently he is at 41% of salary. He gets 1.7% for the first 20 years than 1% after. He’s been in congress since 1990

  25. Fiscally Free

    All the stats you see about the finances of Americans as a whole are terrifying. The numbers you see on the average retirement savings of Americans are pretty shocking. I have no idea if they are really accurate, but if they are, a lot of people are going to have some serious problems in the future.
    Anyway, I’m not surprised that many people couldn’t come up with $400. I’m disappointed, but not surprised.

  26. Kevin Blanchard


    To answer your questions, we keep a $15K emergency fund and make about $130K/yr combined.

    With regards to your readers being reflective of society, my opinion is that most of us find your site by googling financial questions that we have whereas the rest of the country doesn’t even think to research the type of information you provide. They may be too busy googling the kardashians or trumpkins.

    I’m a finance major who is constantly watching his financial situation. I’ve been caught very much off guard when having financial conversations with some of my friends in learning that most of them have no idea what their net worth is, minimal idea about what’s in the bank, and no long term financial goals. These are people whose household gross income is in the neighborhood of $150K+.

    I think the reality is that the readers coming to your site by nature of financially minded and therefore much better educated on the time-value of money and also have a desire to compare themselves against a benchmark of their peers. Unfortunately, most of the rest of the country is clueless on a lot of this information, which is why they can’t cover a $400 unexpected expense.

  27. I had no idea that Capital One (I bank with them) was trying out all this stuff to make folks more financially aware. I do have to say though that going over my financial behaviour and values on a giant public screen wouldn’t motivate me. I look forward to hearing your feedback about their free financial advice.

    I’m not sure I understand the Fed survey results. The results also say that “Sixty-eight percent of non-retired respondents saved at least a portion of their income in the prior year.” If 68% are saving how do so few have access to $400?

    1. Guessing but probably because for a huge # of them their only savings was 401k at work, which you can’t access easily.

  28. $400 is a pretty low bar, but I guess a lot of people are not financially prepared. For those people, $400 or $4,000 would be a difficult hurdle. I think your readers are skewed toward financially secure people. Unfortunately, poor people probably aren’t reading FS much.

  29. Jack Catchem

    Ugh. I hope people are overstating it. Thanks to all the taxes, fines, and fees involved, a traffic ticket costs over $400 in California.

    It’s a scary to live knowing you are potentially headed into debt as you leave the driveway and accelerate onto the freeway. My emergency isn’t where I want it to be, but I can cover that.

    Thanks for sharing the poll results, Sam. It’s always interesting to see what the general makeup of the rest of your reader-sphere is.

  30. Love the article, Sam. Americans will always be concerned about money as long as they consume all of the income they generate. Income without savings will never bring security.

    Not sure if I’m doing my math right, but you say that “45% of readers make over $100,000. 33% of you make between $100,000 – $200,000 a year. 18% of you make over $200,000 a year”. Shouldn’t it be 33 + 18 = 51%?

  31. Hey Sam — I have no trouble believing the 46% statistic.

    In an imagined scenario, Couple that with the ’emergency’ being a firing or layoff, and if the person cannot replace their job in 90 days they are in dire straights, aren’t they?

    Seems like there could be many contributing factors to this, many of which you’ve covered in the past — living beyond one’s means, not following the 10% rule of car buying, and the skyrocketing costs of education could all impact ones ability to save (and invest).

    I still can’t get over how many Americans are living paycheck-to-paycheck looking rich on the surface, driving leased vehicles that are so far beyond what they can actually afford that it’s staggering. Some perspective: a new Ford Explorer (marketed as a mid-range, SUV) with a decent trim level (no one really opts for cloth/zero options, do they?) ranges from $41,675 up to $53,235.


  32. It is funny how 46% cannot come up with $400 when their Iphone cost more than twice that amount.

    I am sure that folks could cover the $400 expense by putting it on their credit card. This is why so many people have mountains of CC debt, because a $400 expense is routine. These expenses gets put on the CC and paid for $30 bucks a month for the rest of their lives.

    I used to work at a payday loan establishment in which a $500 dollar loan was given at a 365% interest rate. It was amazing! People would pay the minimum payment every month for years thinking nothing of it, not realizing the money is being thrown away. Most would never finish paying it of but payed 5X the original loan amount.

    1. Gotta love those payday loans! Meeting a demand, I guess. There is a payday loan company here in SF called LendUP I think. It’s interesting they are going after the payday loan market, yet they are still charging massive spreads. CEO is a nice guy, and they are helping those with poor credit pay less. But still…. charging multiples and multiples higher than the risk-free rate seems bad.

      How does any debtor get ahead when they have to pay 10% or higher interest rate?

      1. Wow Sam, thank you for the reply!

        Honestly, I don’t think companies providing payday loans are expecting costumers to payoff the loans. Most companies are hoping to get you hooked, squeeze as may payments out of you as possible, then sell your debt.

        The kicker was, if the loan was payed in full, within 2 pay periods, a single $50 fee was charged. No interest. Some people used it to pay a bill in between paychecks. In those cases, I felt like I helping someone keep the lights on and their bill just happened to land between paychecks.

        I think it is great that LendUp is including educational resources to encourage borrowers to become more aware. Hopefully one of the education resources helps borrowers create a budget.

        I think the anatomy of the emergency fund applies differently in this case. Typically, an emergency fund is for replacing lost income (losing a job).

        For unexpected expenses; car repairs, house hold repairs, and fines or taxes I budget that cost. An emergency fund to replace lost income, I think, should also include time in which it takes to replace income (find a new job). So you’re pretty confidant that you can replace your income level in 3 months? (not including your emergency emergency fund of securities:))

  33. I think possibly your readers are high achievers. Hey, I’m a reader! lol! anyway, if you were perhaps to do this poll on CNN or MSN, I think it might be quite different! But I think it’s cool many of us PF people seem to be on track!

  34. Sam, don’t forget your very loyal Canadian, European and other readers!

    I don’t have an equivalent non-US, developed world stat to offer, but my humble informed opinion (I’m at the top end skew of your demographic and a keen observer of human nature) is: since our societies are slightly less demographically polarised and slightly more economically conservative, our percentage of readiness to respond to an (normalized PPP) emergency spending need would be slightly better (lower) than the US.


    I lived in a small town in West Texas during my high school and college years. During that time in that town, I became friends with many people who did not have the ability to come up with $400 for an emergency. Now these people were not poor college students, but regular working high school graduates (not making close to the median income of $56K). Most of these people lived paycheck to paycheck, spending every cent of each paycheck. There were lots of trips to the bar, TVs, video games, etc. I saw many cars get repossessed, no one owned their home, and credit scores were dismal. While I’m not sure that 46% is the right number, I do believe that unfortunately, there are a lot of people out there who would have difficulty covering a $400 emergency.

    Personally, I try to keep 3 months of living expenses on hand. If push came to shove, I could also liquidate some investments, but that is a last resort. I have never had an emergency come up that I could not easily handle. I am even prepared for the loss of a job if necessary.

    1. Hopefully they are at least having a lot of fun!

      My friend told me a story about a guy she just went on a date with:

      Drives a $80,000 Porsche 911, lives in a an average 1 bedroom, also owns a Mini as his commuting car, when the $86 bill came, he came up with a 40% off coupon! When the bill came back after the deduction, he was triple checking all the numbers before giving the waitress his card!


  36. I’d absolutely believe nearly 1 in 2 can’t afford a $400 bill without family or credit cards based on my extended family on both sides of both my parents and my wife’s parents and just my general observations of people. Tends to be about every other person is responsible and the other is not. I can’t imagine many on this site would fit that bill, though. People that make any kind of effort to be financially smart or work towards retirement should hit that level of savings in fairly short order.

    Even when I was just ~20-22 working retail, I hated not having at least $1k in my savings account.

  37. I don’t consider $400 to be an emergency expense. That’s something that I would deal with on a monthly cash-flow basis. I consider a single unplanned expenditure of more than $2,000 to be an emergency expense that would require a visit to savings. I have about a year’s worth of savings for that potential need.

  38. Jim @ Route To Retire

    I’ve heard that statistic before and I can see how that number would be accurate. As your demographics point out, a lot of your readers are on, or working on, being financially on-track. I would venture to guess that most of your readers would be able to come up with that money (as the poll shows right now).

    However, I know a lot of people, even in my own social circles, that just don’t do well with money. No savings, no investments (or just 1-2% in their 401(k)) and no plans for their future. This isn’t even a “I don’t make enough money to get by.” It’s a problem of materialism and debt – way too prevalent in our society.

    — Jim

  39. Chicken or Egg? Do financially savvy folks read PF blogs, or do PF blogs lead folks to become financially savvy?

    I think there’s a poll in there for you, Sam (LOVE your polls, great overview of your reader base, maybe they can help us answer the perplexing “Chicken Or Egg” riddle??).

    1. :-) Probably a bit of both Fritz. I wasn’t happy at one time with my financial situation and started searching the web. You could say that that was a financially savvy move to do.

      Than I stumbled on sites like these, and I’ve been dramatically improved my financial situation.

      Question for a poll: how much has reading PF blogs “saved” you? :-)

  40. 6 month emergency funds as a minimum and a trading account that I can liquidate very quickly. $400 does appear to be very low. A furnace: $1000.00, A major car issue: $1,500.00, A trip to the ER $500+ (depending on deductible). I always think 6 months is a great target, but $2,000.00 emergency fun should be a top financial priority for everyone, even if it takes 3 years to accumulate for some people.

  41. When I was working in Philadelphia about 15 years ago, ING Bank had a cafe near Rittenhouse Square. If I remember correctly, a coffee and a donut cost $1, so I stopped in from time to time. It was an odd concept because you couldn’t really do any banking there, but folks would offer information about bank products and direct you the shared PCs to learn more.
    It’s hard to image banks putting money into physical locations these days versus improving online banking.
    PS – I think the CapitalOne cafe in Philadelphia is in the exact same location as the old ING Cafe.

  42. No, I wouldn’t have a problem, but I don’t think that FS readers represent a slice of typical America and I do think that 46%, or even more, would have a hard time with an unexpected $400 expenditure. Sam, you need to come live in the heartland, rust belt, inner city or rural anywhere. What you write about is absolutely foreign to most Americans.

  43. Apathy Ends

    $400 is new brakes or a fairly minor auto repair – 46% is concerning in a country that has opportunities around every corner to earn extra cash with low barriers to entry.

    Glad to see your poll at 100%

    1. I notice a lot of people have an unexpected $400 plus car maintenance and then decide to spend $30k to $60k on a new car (financed) so the they won’t need to spend just a hundred on maintenance.

      1. It’s a shockingly dumb argument for spending up huge on a car, one that you read over and over again in the comments section of:

        Eventually, the $30K – $60K will ALSO require maintenance after warranty, and you’re either going to have to pay even higher maintenance costs or get in the cycle of convincing you need ANOTHER expensive vehicle that takes up too much a percentage of your gross income.

      2. A 66 year old acquaintance who can “never retire”…her words…bought a new car after the battery died in her 50,000 mile-ish Nissan. Because EVERYONE knows that once the battery goes the rest of the car is right behind and she can’t afford to be stranded. OMG…I am sure the salesman who sold her a new car and took her trade in agreed with her reasoning.

      3. Had a co-worker do exactly this. Even worse he was 1 payment away from paying off the previous car.

  44. The Green Swan

    I’m shocked that 46% of Americans couldn’t cover a $400 emergency bill. The median income of the survey doesn’t seem completely off and I would expect the median income of readers of your blog to be higher. What is the median income of the entire US? I’d like to compare that with the survey respondents. Either way, we need to decrease that percentage and I wish for more people to have more of an emergency fund and means for saving.

  45. Erik @ The Mastermind Within

    I believe it. My roommate is an investment advisor at Fidelity, yet told me he had to wait until his next paycheck before he could pay me rent. He gets paid bi weekly and Thursdays. I’m assuming this is because he is going to Colorado in a week and bought tickets which left him short on cash.

    If you are truly living paycheck to paycheck, which many people are, I definitely can imagine a good portion of America not being able to afford a $400 emergency.

    For me, I want to have about $10k-15k in cash for my house and self. If I quit my job or get fired and negotiate a severance, I want to be able to do what I want in the meantime. In addition, if an investment opportunity arises, I want to have cash on hand to be able to make a play on that investment.

  46. Charleston.C

    I can go both ways on this argument. On one hand it is a matter of personal responsibility to have a rainy day fund, so that emergencies can be covered. To have an emergency fund – one would need to spend less than they make, which for most of the readers here is a complete no brainer.

    On the flip side, if making $200k doesn’t feel rich (, it is also logical that many families making $50k or less would have trouble saving any money what so ever. I am well aware that it is a matter of living below your means, but for most it would be easier said than done when the world around us tells reinforces the idea that having credit card debt is the norm.

    I am very conflicted by this because while I am very comfortable with saving ~50% of my current income, I see myself having a much tougher time saving a meaningful amount if my income is halved.

    1. So the question for everybody to think about given we know credit cards charge usurious rates and there are plenty of irresponsible people is: Should we be regulating who can get a credit card and limit how many credit cards per person?

      Further, should we be looking at companies who depend on credit card lead generation with a suspicious eye?

      I cherish my two rewards credit cards, but I will never, ever have a revolving monthly balance.

  47. The Capital One tour sounds interesting. Would come up to talk shop but already have weekend plans. Looking forward to hearing more about it.

    I remember what it was like to be poor -my divorced mom being on food assistance when I was a kid, living paycheck to paycheck after my accident. I took those experiences to heart and it drove me to become financially secure, and eventually financially independent. But many people don’t have the drive to take the hard road to success.

    I’m not at all surprised by the survey. Just saddened. When it comes to money, most of us have to learn the hard way, and many of us need multiple lessons before we’re willing to change.

  48. Go Finance Yourself!

    I have a hard time believing that 46% of Americans can’t come up with $400. Also, 50% have been so stressed out they can’t sleep? If true, that’s just crazy. I’d like to see if they expanded on that what these people are actually stressed about. Are they stressed about paying their bills? Stressed about paying for the ever rising cost of college? Stressed about having enough to retire?

    I think a lot of this could be helped by teaching kids about money while they’re in school, but that’s a whole other topic. People making at least the median income should not be stressed so much over money that they lose sleep from it. The likely reason for this is people spending money on things they don’t need and can’t afford. At a house warming party I attended recently, all anyone talked about was all the new shit they had bought and how awesome they are. People are still spending a ton of money, which can definitely lead to stressing over it. Be it you spend too much and don’t save any, or you stress over not having enough money to keep up with your neighbors.

  49. It’s definitely a scary statistic, and there’ve been many other similar studies that confirm how financially unprepared a large segment of the population is. I predict your results will be heavily skewed. My guess is you’ll end up with 5% of people voting that they aren’t prepared, since many of your readers are actively seeking out financial optimization.

    In my analysis on how much money it takes to become a millionaire, I used an average household expense level of $48,000. If you factor in taxes into your $56,000 median household income, it doesn’t leave much breathing room. Our consumerist culture keeps the spending levels inflated, by convincing people that they NEED all those things to live/be happy.

    I keep too big an emergency fund, and need to cut back, but I’ve had a heavy cash bias this past year. I can believe the stats. Thanks for the great summary of your past polls, I always loved taking them!

    1. To be fair, a family of 3 or 4 making $55k/yr will barely pay any taxes with deductions, credits, etc (hence why 47% pay 0 fed income taxes) – probably 0-4% effective rate federal and similar state. FICA @ 7.65% would be the largest taxes they have but they should still clear $48-$51k net of taxes depending on the state. But you are absolutely right that our consmerist culture keeps spending to keep up with the Jones and have the latest iphone will mean a median household income isn’t saving much, if anything, outside of maybe their 401k at work.

  50. I wonder if The first question about money anxiety Is a question of framing. Do I have money anxiety, yes. However a 400 dollar emergency expenditure would barely cause us to blink. I’m just someone who naturally stresses about the next step. So the second question in the survey is more meaningful as a concern for society imho. Even that question though would depend on how you do an emergency fund I guess…

    1. Emergency funds should be kept in a Money Market account (max of 5 transactions per month) or a high interest saving account which are separate from your main bank and accounts (Ally bank currently has a 1% rate). Doing this makes one login into two separate areas where your money is kept and allows a manual shift in perspective on the funds held. This my current cash position (main accounts) and this is my restricted cash (emergency funds). Money market accounts also provide debt cards like a normal check while providing some interest. At least this is what I have found works best.

      1. I tend to use a ten year cd ladder for my emergency account. Incurring a emergency issue in my case requires breaking a cd with a six month penalty in interest. That’s enough of a disincentive for me. But I’ve also seen home equity lines of credit and even stocks themselves used as such a fund. Hence it’s all about the context. I wouldn’t break my emergency account for 400 dollars either, but if I were making 30k a year 400 dollars might be a larger emergency.

  51. I find it unfathomable to not be able to come up with $400 for an emergency. Just yesterday, I spent $700 for new tires and alignment on my wife’s car after she wiped out in the snow. (No on was hurt, just damage to tires). Although a lot of the people who work for me, (I buy and rent out houses), live payday to payday. They cant cover the most basic needs. I pay them well, they just consistently make bad choices like…..

    Should I get a dog even though I cant afford to feed it, take care of it, or train it
    Should I buy a useful work truck or a beat up sports car that will suck up time & money
    Should I drink tonight or stay home and be well rested for work tomorrow
    Should I eat healthy and take care of my body, or eat fast food every day
    Should I save money, or buy plastic trinkets from China for my kids, that get broken in a month
    Should I spend money on a tattoo, or pay the rent
    Should I mindlessly watch TV for hours each night or go back to school, or learn anything new

    Interesting note. I was working with one of my employees and we went to McDonalds for lunch (His choice). But I noticed he spent $9 buying the most expensive burger meal, while I spent $3 purchasing off the dollar value meal. I mentioned to him, that even though I could afford to buy anything, I still spent 1/3 what he spent. He didnt understand the point I was trying to make.

    1. So spot on. I would add “Should I have protected sex or should I just have fun and end up with a kid 9 months from now that I can’t afford to support” That one in particular seems to be a big one for many poor and lower middle class people (from what I’ve seen)

    2. Ten Bucks a Week

      Good for you buying a decent set of tires. So many people cheap out and don’t care for their safety.

      I think the number is correct. I think us who are doing well don’t often get out of or bubble and see how the others are doing. Also I agree that often they are spending money a but recklessly. Cable, iPhones, rims rather than saving for things that will come up.

    3. This is my experience exactly. I am a retail pharmacist, making about 140k per year. The technicians I work with make $11/hour to $16/hour depending on experience, 1 is full time, 5 are part time. I drive the oldest vehicle (2000 toyota van, 230k miles) of the bunch, and usually buy cheap meals at the supermarket I work for. They often leave the store to buy fast food meals at much higher prices. I drink water or make tea, they buy boutique water or red bull, or individual soft drinks at $2 per. They are always in financial crisis of some sort or another. It drives me crazy to see how they handle money but this is how the surveys mentioned above are probably correct.

      1. Right on Greg! 1/2 + of the people I come in contact with (store sales people, restaurant people, gas people – in other words service people – are making $10 or less an hour. I feel Financial Samurai is “creaming” the better paid more financially literate. Very interesting post, one that would probably benefit all of those $10 or less people, if they read it then applied it.

      2. Jack Catchem

        I’m here in defense of “boutique water!”

        I had a terminal addiction to soda. (Step one is admitting it). Still, that’s a LOT of sugar and calories to absorb. Through military deployments to deserts I have found copious amounts of unflavored water leads to depression.

        Then I made a radical discovery. My true attachment was to the carbination! Since then I usually have 2 bottles of the stuff a day. In terms of health and happiness, worth the cost.

        I digress.

      3. Seems like they do not possess a money mindset. One logical conclusion is that they LOVE their jobs and are willing to do it forever. If they hated their jobs, they would save like crazy.

        I didn’t hate my job coming out of college, but I knew I could NOT last for 20 years. Hence, I saved aggressively to one day have the option to get out.

      4. I’m also a pharmacist at an institution with about 15 pharmacists, 20+ techs. The running joke among the pharmacists is that the average age and cost of our cars is inversely proportional to everyone’s income. The pharmacists all have old beaters and minivans while the techs have BMWs and brand new lifted Toyota Tundras.
        I think all these issues are interrelated. I’m sure most of those techs couldn’t come up with $400 to repair their cars. Most of them don’t own a home. Most of them will never have a better job. None of them will go to school because what they have is good enough in their eyes.

        1. Ha ha another pharmacist here, how come I am not surprised seeing so many of my folks hanging out here, we do have a TYPE! I completely agree with you guys. I remember once one of my fellow pharmacists was giving me a ride in the car and was joking how all the techs drive nice cars. I had a tech whose BMW was totaled and went and got another one, I am not even sure how he can afford it? My dad is a retired surgeon and he still drives around in a Toyota Corolla.
          I honestly believe it is all about the lack of financial literacy. It’s a vicious cycle, you grow up a family with not much education , and you do not learn about the Value of money. I even see that in my colleagues who grew up very poor and were able to get themselves a good education and job. A lot of them just know how to MAKE money but have no idea how to make money work for them. It’s hard to change the mindset from trying to barely make it to more value based system….

      5. I’m an insurance broker in a red “flyover state.” My peers drive $50k pickups, Mercedes and the like. My 14 year old sedan does just fine getting me between client meetings though there are times I trade with my wife (Newer sedan) if I have to drive clients (interior wear and tear is a fact regardless of how much care you put in to maintain).

        That being said, though most of my peers and I are in six figures (still not making enough off of job income alone to meet 1/10 rule of car buying), there are support staff driving vehicles with values EQUAL to their annual pay. Crazy. And more than likely unable to come up with $400 in savings in a pinch. Not surprised at all with the statistics.

    4. But the Filet-O-Fish is so good! Too bad it’s $4 versus a $1 double cheeseburger. I hit the dollar menu as well, partially b/c I DON’T want to eat too much of that stuff and feel guilty after.

    5. Chris, i do get your point. I have 10 plus employees with same issues.

      Now, did you love that 3$ burger or its just to save money? Because if you like the $5 one better but always made a choice based on dollars i dont think you are enjoying the fruits of your labor.

    6. Romeo Jeremiah

      Yeah, but your assumption is that all people are rational thinkers…all the time, and that everyone has or should have the same goals. More specifically, the assumption is that having an emergency fund of $400 (or more) is better than spending the $400.

      To an analytical person, personal finance is well…analytical. So for them, it’s easy to think, if I have $10 and spend $6, I’ll have only $4 remaining.

      For those who are more emotional, it’s easy to think, I have $10, this sandwich that will make me feel good is only $6 and I’ll still have $4 remaining to buy fries!

      There in lies a balance, which we all assume people are capable of finding (or want to find). The reality is far from the truth.

      When it comes down to it, our desires often overcome our rationality.

      “Bad choice” is really a relative term.

      1. I think everybody is rational. Letting desire overpower what’s good for us is rational.

        For example, if someone put a gun to my head to lose 15 lbs within 3 months, I would do it. But b/c the joy of heating unhealthy food outweighs the annoyance of my heftier weight, I continue to eat bad stuff.

        We’ll all change when the pain gets too difficult to bear, eventually.

  52. 46% seems a little hard to believe. If that is indeed true, then we truly are in a sad state of affairs as a country.

    Thank you for sharing the demographics of your readers. I found them to be quite interesting. I think the information can be summarized by saying Financial Samurai readers are smarter than the average bear, at least financially speaking. It’s not a surprise given the quality of content you produce here.

      1. Not a surprise younger people have less money.

        I can understand having a difficult time coming up with $1,000+. But $400 seems low given the cost of everything has gone up so drastically.

      2. Just through talking with and observing the spending habits of individuals in my community, I’m not entirely surprised by the study. I was thinking the number would be closer to $1000 before really feeling the pain, but there are a lot of people who will spend ten dollars if they make one. This is coming from a rural area in the Midwest near a town with around 1,200 people and a town around 12,000 people.

  53. John C @ Action Economics

    I keep a 6 month emergency fund on hand, and can pay a $400 or even a $4,000 expense if needed. I certainly think that personal finance blog readers will skew to a higher income/savings demographic.

    From my observations where I live (southwest, MI) I don’t find it far fetched that 46% of people don’t have $400 for an emergency, I think 33% is closer to right, but 46% isn’t far of a stretch from that. I know many people from 18 to 60 who can’t afford a $400 emergency and literally live paycheck to paycheck. Many of these people won’t think twice about having a $400 car payment, spending $50 at the bar, or buying a pack of smokes a day.

    The problem is that it is human nature to spend what we have available,so anything that is left over after paying bills is seen as discretionary income. In conversations I have had with people who live paycheck to paycheck most of them see this little bit that is left over as a reward, or a little enjoyment that they should be entitled to spend on themselves as a reward for taking care of everything else. Since saving money has no short term tangible rewards it isn’t given a high priority. It’s really difficult for humans to delay gratification. Learning that ability is the key to getting away from the paycheck to paycheck lifestyle.

  54. Sam, I don’t know if 46% of American’s wouldn’t be able to come up with $400. That seems a bit low. In addition to the bank of Mom and Dad, those with negative net worths could always get a cash advance from a credit card.

    I typically keep about 10 months of living expenses on hand. It’s probably too much, but it gives my wife and I comfort knowing there is cash that’s available. Where are your favorite places to stash cash securely and have access to it within a few days if needed?

    1. I agree Michael, but if you read the question closely it says “paying for a $400 expense from SAVINGS. I do not need to go into CREDIT CARD DEBT or sell anything.”

      1. Ahh, good catch Chris. In that case, it’s not as hard to believe. Our consumer culture teaches us to live paycheck to paycheck which is a sad and unfortunate reality for many (most of who do not but should read this blog!).

        1. The are as always two sides: In countries like Germany people have always been very conservative in terms of saving money. No credit cards, no loans etc.. Now with the 0% interest rate of the ECB (which will maybe even go negative) they lose their money without having spent it. So I think you have to find a balance between both extremes.

    2. “Where are your favorite places to stash cash securely and have access to it within a few days if needed?”

      I am curious about answers to this question as well with a detailed breakdown is possible like say out of your 9 month emergency fund 50% is cash and 50% is bonds, for example.

      1. My favorite place is a mixture of 3 months of expenses in cash, enough for me to feel secure, but not so much that it causes a “cash drag.” I invested over 30 months of cash into municipal bonds after the election because MUB and CMF were starting to yield 2.5%+ tax free (4%+ gross yield).

        So far, my bond position is in the money (stabilized and rebounded) and has paid out their monthly dividends. If the 10-year bond yield goes higher, I plan to buy more.

        See: The Case For Bonds

    3. Terry Pratt

      Some of us can’t get a credit card, so, no it’s not correct to say we could get a cash advance from a credit card. 15 years ago I had a catastrophic health event which put me in hospital for several months and left me unable to work for an additional 12 monthsw. During this time without earning, all my open accounts were closed and charged off, with two money judgments I cannot resolve on my near-minimum wage earnings. Other than the judgments which won’t go away, there is nothing on my credit report.

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