Friday, August 26, 2011

Do you have $1000 in the bank?

“Bad planning on your part does not constitute an emergency on my part”
-Proverb
According to a new survey from the National Foundation for Credit Counseling (NFCC) 64% of Americans don't have enough cash available to them to cover a $1,000 emergency.

"It's alarming," a NFCC spokeswoman tells CNN Money. "For consumers who live paycheck to paycheck — having spent tomorrow's money — an unplanned expense can truly put them in financial distress."

CNN reports,

“Many respondents, 17%, said they would borrow money from friends or family. Another 17% said they would neglect other financial obligations — like a credit card bill or mortgage payment — in order to free up some funds.

Alternatively, 12% of the respondents said they would have to sell or pawn some assets to come up with $1,000 and 9% said they would need to take out a loan. Another 9% said they would get a cash advance from a credit card, according to the NFCC.”
Bottom Line

The recommended safety net was THREE MONTHS of income in a bank account for emergency use. If you take home $40,000 after deductions, then you should have $10,000 in the bank to cover three months of unemployed or a large medical bill, etc.

Today however three months of unemployment may be a best case scenario instead of worst case if you're laid off. People are now unemployed for 6 months to a year or more so you may want to increase your emergency fund. If you don't have an emergency fund - start one immediately with an automatic deposit into a special account of as much as you can afford each month, $100, $500, etc.

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