According to a recent survey, over 56% of Americans have less than $1,000 in savings, and half of us are living paycheck to paycheck.
What does this mean for the average American? We definitely need a financial cushion should an unexpected emergency come our way, but when we’re already strapped for cash and wages continue to be stagnant, the question is, how?
Living on the edge
As evidenced by this survey and others, it appears that more Americans are living on the edge, but not in the cool Aerosmith sense.
A report from Pew Charitable Trusts found that the typical middle class American family could not support itself for a month with its liquid assets, and its total assets would only be able to support six months of income in the event of a significant financial setback.
Pew found that the most expensive emergency was around $2,000 — an amount 41% of households would not be able to afford. Instead, this group would rely on credit cards or loans from other people in order to get by. Even scarier, one in three American families have absolutely no savings.
These were the most startling findings from the report:
- 41% of households do not have enough liquid savings to cover a $2,000 expense
- Households with less than $25,000 in income have enough savings to replace only six days of household income
- 1 in 10 of those who make $100,00 or more do not have any savings
‘Many American families, even those with relatively high incomes, are walking a financial tightrope,’ said Erin Currier, director of Pew’s financial security and mobility project. ‘Many have little, if any, cushion to absorb an unexpected financial setback. It’s a precarious state that threatens not just financial security, but upward mobility.’
When asked how much money others should have to be adequately prepared for an emergency, most people said six months, but, according to the report, ‘only about one in five households saves at or above the level they advise.’
Read more: 3 ways to get a grip on your money in 2016
How to stop the cycle
Even if you find yourself in the bottom 50% of America that is living hand to mouth, the good thing is, with a little bit of knowledge and the will to move forward, you can change your financial picture. It may not be easy to dig yourself out of any kind of financial setback, but if you really want to, you can do it! The key is having a goal, having a plan to reach that goal, and keeping yourself on track.
Here are some tips to help you plan for a brighter financial future:
Save for an emergency
- Why you need emergency savings and how to start building it
- 4 easy ways to jump start your emergency savings fund
- Save $5,000 a year by cutting back on these 5 little luxuries
- 5 ways I save money that most people don’t try