Survey: About one in three have just a month (or less) of savings for housing costs
Here's a sobering statistic: Nearly a third of Americans surveyed in September said they would at most be able to pay their rent or mortgage for a single month if they lost their job.
The survey of 1,021 adults was conducted for the Certified Financial Planner Board of Standards, Financial Planning Association, Foundation for Financial Planning and the U.S. Conference of Mayors, which together are trying to promote better financial planning. (Free financial-planning events have been scheduled across the country, including in Baltimore.)
I've often heard six months suggested for emergency savings -- to have enough money socked away to cover expenses for that long.
Considering the way a stretch of unemployment can last these days, more would be even better. (About 58,000 Marylanders have been out of work so long -- more than 18 months -- that they could be eligible for newly extended unemployment benefits.)
A survey released in June by Bankrate.com had fairly similar findings in terms of savings: Twenty-four percent said they had no emergency savings and an additional 22 percent said their savings added up to less than three months of expenses.
"Those most likely to have six months' expenses in an emergency fund are higher-income households and people in their 50s and 60s, but even among these groups, at least half do not have six months' expenses in an emergency fund," Bankrate.com said at the time. "People younger than age 30 and the lowest-income households are the most likely to report having no emergency savings at all."
Yikes. Where do you stand?
I hope if you don't already have generous emergency savings, you're in a position to put more away. Or to take on a roommate to cut your costs.
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Comments
I'm a Suze Orman fanatic so I have an emergency fund but it wasn't easy to build after financial stresses. A coworker and I was just discussing how when we finally get financially comfortable GROWN KIDS find a way to "borrow" the extra funds! hahaha I'm addicted to HGTV and the guy said last night "This is double our rent payment" and that's the reality check most aren't prepared for.....
Posted by: Deb | October 5, 2011 8:58 AM
Back in my early twenties this concept was explained as F.U. Money.
Having enough cash to cover ALL of your living expenses (not just rent) for the six-twelve months it might take to find another job after telling your boss FU as you breeze on out the door.
Having such a fund will dramatically affect your attitude toward your work, what you're willing to put up with, and what you'll insist on receiving in the way of wages, benefits and time off too. Though I had it... I still never had to use it.
Without first establishing that reserve I doubt I'd have been able to accumulate anything more beyond it.
Posted by: MrRational | October 5, 2011 9:36 AM
I have 4 months of payments, though that would leave nothing for bills or anything else. This is general savings, though, so if I have any expenses it'll go down significantly. Right now I'm saving for work on my gutters and to eventually get some electrical work on the house. Then I'll be saving for eventually replacing part of the front porch, who knows what breaks next, etc.
Posted by: Amy | October 5, 2011 9:37 AM
In general, you need 3 months PITI in reserves to qualify for a home loan be it purchase or refi. As an LO for 12 years-3 years removed- i was stunned how many people that would apply for mortgage loan that could not show they had the reserves. Anything of cash value would do such as bank accounts, life insurance policies, 401k's etc.... What doesn’t count is your comic book collection, your mothers mothers silverware and other items. Without sounding snobbery about others financial wherewithal, I would find myself scratching my head. Why on earth would these folks want to buy a house with no money in your accounts?
I think it also speaks to our country’s financial discipline. Everyone can save SOME portion of their income. There are anecdotal stories about hardship but the overwhelming majority of cases of being broke are related to a series of poor choices by the individual. Goofing off in school, getting a meaningless degree in photography/basket weaving, buying new vs used, falling prey to the xmas guilt trip to bankrupt yourself etc etc etc. Devastating medical condition aside, poor planning/education and refusing to live within your means is what leads to most hardships.
Posted by: elweedz | October 5, 2011 4:48 PM
I myself have only two months since this year ive had to invest in a lot of toools for my business. Overall though, im actually surprised the figures werent worse. Most people that i know have only a week or two worths of savings at the most
Posted by: Pete from Highlandtown | October 5, 2011 8:38 PM
Wow I must be RICH. Does that mean I should start paying "my fair share" because I saved?
Posted by: Jack Daniels | October 6, 2011 3:50 PM
Actually if you make more than a million dollars a year yes it does mean that you are rich and yes we should tax the hell out of you!
Posted by: Jaded | October 6, 2011 6:17 PM