Behind the MYTH: 40% of Americans Can't Afford A $400 Emergency

00:00 Intro
00:30 The Origins
01:50 Would vs Could
03:39 The Real Picture
04:56 Credit Card
07:16 Borrow From Loved One
07:47 Sell Something
08:24 Bank Loan
09:23 Payday Loan

Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.

Thanks for watching, I appreciate you!

[Peterl]

As always, it's best to invest sensibly and maintain a stop loss amount. Whenever the debt-to-equity ratio deviates from your aim, switch between the two. For the goal, I suggest using a ratio similar to this one. Your debt percentage should match your years of age. Debt is 20% when you're twenty, and equity resets. Your loan percentage will fluctuate depending on how much the market rises or falls; you should adjust it to 20% and increase your equity to 80%. Consequently, according on whether it was a crash or a bull run, you would have either bought low or booked profit.

[tripillthreat]

Looking at those credit card rates, I’m reminded of the old adage, “Being poor is expensive.”

[ehderguyyashootadeerorno]

40% of Americans can't afford a $400 emergency yet 17.5% of new car purchase have over a thousand dollar payment. I'm going to go out on a limb here but maybe if most people didn't spend everything they made they could cover $400 lol. I get there are some low income etc, but big car payments will prevent you from saving money. You do not need a $65k vehicle to drive 10 miles to work every day.

[SuzanneU]

Borrowing from friends and family should not be a first response. From my
personal experience, no matter how apparently sincerely the borrower promises to repay the loan, month after month becomes year after year without even a token repayment...and is often followed by further requests for loans...

Never lend the money. If you're willing and have the cash, make it a gift.

[GAFB]

I can afford any emergency around $10, 000 and yet I do NOT feel good or even comfortable.

The problem with America is even those of us who are frugal and responsible can be literally wiped out by a bad enough emergency especially medical. A disease or injury could take me from prince to pauper or homeowner to homeless in no time and that is just wrong in this "SUPPOSED" greatest country on Earth!

[jameschaves]

People need to get off social media and reassess their priorities. Cars, vacations and clothes are ridiculous things to go in debt for. Hopefully you don’t burying yourself too far before you realize this

[appleztooranges]

Should be 3-6 years emergency fund in 2024! A new furnace was estimated for me to be $12-15k, a new roof would be $10-12k, the list goes on if you have a house. If you have kids even more. Food for thought

[RachellesCrafts]

Very interesting that you touched on the reluctance to tap into emergency savings even in an emergency. This is real. I HAD $2000 in emergency savings and had actual emergencies come up. It took several months to get that $2000 and the security of having it felt really good. I’ve spent the majority of my life not having enough money for the basics so the scarcity mentality is real. If I spend that $2000 I will no longer have $2000. What if I need it? It’s a horrible vicious cycle that’s really hard to break out of.

[valentinaarrelaro]

Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.

[Jimwood-ttje]

I am OCD when it comes to debt. In fact I pay my CC off as soon as a charge post to the account. Since paying off our house in 1992, my wife and I have had zero debt for the last 32 years.
If I can’t afford to pay off something immediately I don’t buy it and that includes the cars we have purchased over the last 30 plus years.

We always keep plenty of money in our emergency fund, so fortunately we never worry about emergencies we can’t pay for.

[scottthomas]

Great video Erin. I tell people who ask me for financial advice is to first pay off all their outstanding credit card balances and then make sure they only use the credit cards to the extent that they can pay off the balance in full every month. Then I tell them after their credit cards are in order to start saving for an emergency fund of at least 3 months of their expenses. After these two hurdles are cleared they can start saving for other things, like retirement or a child’s education. Once again, your message is spot on.

[EricMoore]

I followed Erin's tips and I have an emergency fund!

[Katie-dyzx]

It’s taken me 2 years to save $5k for my EF…and that’s being aggressive. Ugh. So hard to save!

[Averagegunenthusiast]

I’m curious who has $400 emergencies anymore, it’s usually a couple thousand dollars and it usually happens multiple times.

[timpos]

Regarding help from a relative: My son, who just graduated from college as an engineer and has a job, but is under 25, is getting totally hammered by the car insurance company. I told him to up the collision deductible to $2, 000 and that if he got in a bad accident I would kick in the 2K. (He's got a good credit rating and he's never been in an accident.) But he is still paying something like two and a half thousand dollars a year for his one car. By contrast, us old folks are paying $1, 600 a year and that covers two cars! One of the reasons people don't have funds for an emergency is that the oligopoly insurance companies are squeezing every dime out of us to keep us on the edge of desperation. All is not well in middle class America.

[deadpolymers]

I know A LOT of people who can’t pay cash for a less than $1000 unexpected expense. Sure most people can just charge $400 to a credit card, but coming up with a few hundred dollars cash is hard for a lot of people ho budget everything they have just to make rent/mortgage, car payments, food, school, etc expenses.

[Mazlem]

I'd use a CC to pay for an emergency even with the cash, so I get the cash-back bonus from the card. If needed, it pushes out the due date so you can consider where to pull the money from; savings, selling stuff you don't need, etc.

[Queenk]

It took a while to build our emergency fund and things just keep popping up! We just replaced our 22 year old a/c unit and we have mounting medical bills. I’m just exhausted trying to take care of things cash only at our income level. We’ve probably depleted our emergency fund about 9k this month alone. I hate debt but at the same I hate seeing my accounts diminish knowing that there’s no way I rebuild them fast enough before the next emergency.

[jmagicd]

Going into debt to cover an unexpected expense is not being able to cover it. The point of an emergency fund is to protect yourself from going into debt. The people who say they would use a credit card, family help, sell something, or get a loan rather than use their emergency fund, don't have an emergency fund. They might have cash, but it's only an emergency fund if you're prepared to use it when you need it and then rebuild it afterwards.

[jdgolf]

I know a couple of those people, and almost without exception, they do have money to stop at Starbucks every morning. They have the money to lease a big truck for $600 - $800 a month! They always have money for non-essential expenses! I understand there are people hurting, but from my experience, most that I know could easily fix the problem by changing their spending habits.