Can you come up with $ 1000 in an emergency?

[MillCreek]

http://bigstory.ap.org/article/965e48ed609245539ed315f83e01b6a2

This is apparently a followup to the recent Federal survey about coming up with $ 400 in an emergency.

[Hutch]

My mental state is such that I could not function in society without some sort of financial cushion.  That fact that this occurs simply mystifies me.  I hope this doesn't sound smug, uncaring, or dismissive.

[brimic]

I was reading on Zerohedge the other day about the Fed's potential to raise interest rates.
One commenter stated : Raise rates to 16%, it will reward the honest people.
-Not sure that I could disagree.

$1000? pffffft.... a year's salary might be a bit of a challenge, but I could come close to pulling it off given 2-3 days...

I was raised on the concept of 'pay yourself first before spending your money.'

[K Frame]

"Raise rates to 16%, it will reward the honest people.
-Not sure that I could disagree."

Until you realize that that would kick the living hell out of a lot of honest people, too, in the form of skyrocketing loan interest rates.

I know, chant the mantra "Smart people don't carry debt, smart people don't carry debt..."

Yeah. That's REALLY realistic...

[brimic]

"Raise rates to 16%, it will reward the honest people.
-Not sure that I could disagree."

Until you realize that that would kick the living hell out of a lot of honest people, too, in the form of skyrocketing loan interest rates.

I know, chant the mantra "Smart people don't carry debt, smart people don't carry debt..."

Yeah. That's REALLY realistic...

My mortgage is set at <4% for the next 29 years, so all the better.


I've heard endless arguments made that endless QE and Fed money printing is good for those in debt- (low interest + inflation to mitigate the value of debt), but it eventually screws people who actually have savings.

[MillCreek]

My mortgage is at 4% with a monthly payment of about $ 1250.  I pay $ 1800 per month on it.  The current outstanding balance is about $ 162,000 and the house is worth about $ 501,000.  I could write a check tomorrow to pay off the house, but since my goal is to have it paid off at retirement (in the next 8-9 years, depending), I figure we will keep on making payments and get somewhat of a mortgage deduction for the taxes.  I like to have a healthy amount of cash money in the bank, crappy ROI these days notwithstanding.  I would not mind earning more than 0.01% interest or so.

[Ben]

I remember the early 80s when you could get a one year CD at 11%. Of course back then I didn't have big chunks of cash to put into them. Now I'm in a position where  I would love to see that rate again. For retirement security (especially with the flat market last year and this year), I keep at least a year's "salary" handily liquid. I'd be psyched to be getting 10% on that dough instead of 0.1%. :)

In fact, I'd convert quite a few assets to cash in CDs and similar if we got back to double digit interest rates.

[grampster]

If the Fed took an action that would enable savers at banks, credit unions to get 4%-6% interest which are reasonable returns, it would wreck the stock market.

[brimic]

If the Fed took an action that would enable savers at banks, credit unions to get 4%-6% interest which are reasonable returns, it would wreck the stock market.

Hence the reason why they will continue the zero rate increase until the stock market bubble gets to be the size of Mt Vesuvius, and bursts- no worries, Wall Street will have their money out and safe and Joe Pensioner will be left holding the bag.

[Ben]

Hence the reason why they will continue the zero rate increase until the stock market bubble gets to be the size of Mt Vesuvius, and bursts- no worries, Wall Street will have their money out and safe and Joe Pensioner will be left holding the bag.

Hence diversification. I moved a lot of dough from stocks to bonds when I quit working, knowing I'd take a hit on potential profits, but comfortable with less returns and more security. While I still have a significant percentage in stocks, it's not money that I'd count on any time soon. It's there more for the fact that if all goes well, I'll probably still be alive and kickin' for thirty or so more years, so it's money I'll move to "safe" investments in a couple of decades maybe.

[Perd Hapley]

Yes, I could.

I once did it, with almost nothing in savings. It's easy enough, if you (and your spouse) have full-time work, and a credit card. You spend one or two pay-checks on that $1000 expense, and then put everything on the credit card for the next couple of weeks.

Not that I'd recommend it, but it's quite doable in the short term.

[Perd Hapley]

Hence the reason why they will continue the zero rate increase until the stock market bubble gets to be the size of Mt Vesuvius, and bursts- no worries, Wall Street will have their money out and safe and Joe Pensioner will be left holding the bag.

I believe the Fed just said yesterday that they were getting ready to raise them.

[K Frame]

My mortgage is set at <4% for the next 29 years, so all the better.


I've heard endless arguments made that endless QE and Fed money printing is good for those in debt- (low interest + inflation to mitigate the value of debt), but it eventually screws people who actually have savings.

OK, so you've got yours. Tits for you.

Until you need a new loan for something. Then it sucks to be you.

[RoadKingLarry]

My local savings account is my "at hand" emergency fund I try to keep a self imposed hard bottom of $1500 in it.

[HankB]

I remember the early 80s when you could get a one year CD at 11%. Of course back then I didn't have big chunks of cash to put into them. Now I'm in a position where  I would love to see that rate again. For retirement security (especially with the flat market last year and this year), I keep at least a year's "salary" handily liquid. I'd be psyched to be getting 10% on that dough instead of 0.1%. :)

10% is probably out of reach today, but you should be able to get over a dozen times that paltry 0.1% on a one year CD.

 

I remember when CDs were paying in the teens . . . and I remember buying Treasury Bills that paid about the same for a 6 month term, with the interest being exempt from state income tax. (I lived in MN at the time.)

As for coming up with $1k in an emergency . . . no problem; when I go to a gun show, I usually have twice that in cash "just in case" I run across something really good. 

[Ben]

10% is probably out of reach today, but you should be able to get over a dozen times that paltry 0.1% on a one year CD.

 

Exactly why I don't have any CDs. 

That 10% time in the 80s would also have been a hell of a time to buy an annuity. No way I would get one at today's rates, but at say 7-8%, I would seriously consider turning a portion of my TSP into an annuity.

[Northwoods]

"Raise rates to 16%, it will reward the honest people.
-Not sure that I could disagree."

Until you realize that that would kick the living hell out of a lot of honest people, too, in the form of skyrocketing loan interest rates.

I know, chant the mantra "Smart people don't carry debt, smart people don't carry debt..."

Yeah. That's REALLY realistic...

Except for your mortgage, yes it is realistic.  You just have to have the discipline to wait to buy stuff until you have the cash, and for things like cars save over time into a sinking fund so that when your current car is no longer economical to keep running you have the ability to go out and just buy what you need.

[K Frame]

Except for your mortgage, yes it is realistic.  You just have to have the discipline to wait to buy stuff until you have the cash, and for things like cars save over time into a sinking fund so that when your current car is no longer economical to keep running you have the ability to go out and just buy what you need.

And that is very unrealistic for many people whose salaries and expenses are close to parity.

And what a lot of you apparently don't realize is that high interest rate returns on money like CDs are almost always accompanied by equally high rates of inflation.

CDs aren't called Certificates of Depreciation for nothing. CDs are rarely, if ever, a worthwhile investment because while the interest return looks good, its value is almost completely eaten away by loss of buying power and taxes.

[Northwoods]

You can't out earn your own stupidity.  (Universal you, not just Mike)

There is a regionally dependent minimum income to survive.  That number is a LOT lower than most think it is.  But mostly people just have a hard time figuring out how to live on less than they make.

The one wierd trick that actually works is to budget and reduce expenses to well below parity with salary.

[brimic]

The one wierd trick that actually works is to budget and reduce expenses to well below parity with salary.

Its the one weird trick that bankers and democrats hate.

[brimic]

Back to the OP question, because I was actually in that situation a few weeks ago when I found a bunch of sharp chunks of metal embedded in one of the tires in my Subie- I had to shell out ~$750 on the spot for a new set of tires, and was able to do it without even blinking.
Also having a $3500 bill coming up at the end of the month for my Son's tuition for next year- budgeted, and have the money on hand.
I make a comfortable living, a bit above average but not much, other than collecting rifles like Imelda Marcos collected shoes, I live way below my means.

[MechAg94]

I had the same issue last year.  40,000 miles tires that were worn out at 30,000.  Last time I buy tires with that short of mileage guarantee.  The cost difference just isn't worth it.  Tires have gotten expensive.

[Ben]

I didn't catch it in the OP link, but I heard it talked about on Varney this morning, and they were saying that the poll stated "no using a credit card to get the $1000". That would likely change the statistics a lot.

I don't really think that taking the money from a card is "cheating" if you do it in the way fistful mentioned above. I think it's still best to have cash on hand (safe, checking account, whatever), but as long as you use credit cards with some common sense (vs as "free money"), there's no reason not to have them as part of the emergency money toolbox.

[Ben]

Except for your mortgage, yes it is realistic.  You just have to have the discipline to wait to buy stuff until you have the cash, and for things like cars save over time into a sinking fund so that when your current car is no longer economical to keep running you have the ability to go out and just buy what you need.

This has always been my modus operandi. It was difficult when I was a 21 with a ~15% mortgage on a crappy condo (can you say "beans for dinner"?  ) but it certainly paid off later in life. The hardest part was when I was in my 20s and watching all my acquaintances using the money from their first real jobs to by new cars and take cool vacations.

[HankB]

Except for your mortgage, yes it is realistic.  You just have to have the discipline to wait to buy stuff until you have the cash, and for things like cars save over time into a sinking fund so that when your current car is no longer economical to keep running you have the ability to go out and just buy what you need.

I don't buy cars very often - I bought in 1973, 1984, 1993, and 2006 - and the day I buy a new car is the day I start saving for my next car.

One rather prominent local financial adviser (with his own radio program) said that when you have a car, you should drive it into the ground. That is, change your oil and other fluids, hoses, belts, etc., and don't abuse it, but do NOT get rid of it until it starts to become troublesome; buying a new car to keep up with the neighbors is dumb.

Here's one of my favorite commercials, which really sums up why a LOT of people - with good jobs!! - feel a budget pinch:

https://www.youtube.com/watch?v=WFMwYNX5qUk