I was recently turned on to the Freakonomics podcast and listened to a show which provided a startling piece of info: "A survey showed that nearly half of Americans couldn't come up with $2000 in 30 days if they had to. Which means that they stand only one emergency or crisis away from really quite dire circumstances." *
I find it fascinating that people are so quick to blame the state of the economy, the job market, or the president for their situation. But I look around at our society that is enamored with $5 cups of coffee, $100 per month cell phone/cable packages, and an average car payment of $475 **, and can't help but wonder: maybe it's their own fault?
$2000 may seem like a lot of money, but let's break this down. If an “Average American” cuts his regular Starbucks habit, that would save $100 a month. Dropping a cell phone / cable plan to bare bones would save $75 a month. If he drove a cheap used car with no payment, he could save his average payment of $475 a month. In other words, if our "Average American" made just these three sacrifices, he would be able to sit on his $2000 emergency fund in just shy of three months!
It's easy to blame other people for our problems, but owning up to poor spending habits is the start to good financial planning. Emergencies WILL happen. And when they do and our “Average American” is broke, I wonder if he will think the coffee, cable, and car payment were worth it...?
* Source: http://www.freakonomics.com/2010/11/18/freakonomics-radio-could-a-lottery-be-the-answer-to-americas-poor-savings-rate/
** Source: http://www.daveramsey.com/article/the-truth-about-car-payments/lifeandmoney_automobiles/
I find it fascinating that people are so quick to blame the state of the economy, the job market, or the president for their situation. But I look around at our society that is enamored with $5 cups of coffee, $100 per month cell phone/cable packages, and an average car payment of $475 **, and can't help but wonder: maybe it's their own fault?
$2000 may seem like a lot of money, but let's break this down. If an “Average American” cuts his regular Starbucks habit, that would save $100 a month. Dropping a cell phone / cable plan to bare bones would save $75 a month. If he drove a cheap used car with no payment, he could save his average payment of $475 a month. In other words, if our "Average American" made just these three sacrifices, he would be able to sit on his $2000 emergency fund in just shy of three months!
It's easy to blame other people for our problems, but owning up to poor spending habits is the start to good financial planning. Emergencies WILL happen. And when they do and our “Average American” is broke, I wonder if he will think the coffee, cable, and car payment were worth it...?
* Source: http://www.freakonomics.com/2010/11/18/freakonomics-radio-could-a-lottery-be-the-answer-to-americas-poor-savings-rate/
** Source: http://www.daveramsey.com/article/the-truth-about-car-payments/lifeandmoney_automobiles/