America’s Newest Dirty Little Secret

“Not much money, oh, but Honey … ain’t we got fun?”

                                                                                  — 1920s American song lyric

We know it by a variety of names, most often following the word “my.” After all, is there a more fitting indicator of American individualism than our money? So we talk about my savings, my nest egg, my retirement account, my rainy-day fund.

Call it what you will, but it’s slipping away faster than you can drop quarters into a Vegas one-armed bandit.  As reported last week by the AP, an AP-NORC survey shows most Americans wouldn’t be able to come up with a thousand dollars in savings to cover an emergency. The even more astonishing revelation is this same difficulty is shared across all income sectors: three-quarters of Americans who earn less than fifty thousand a year, two-thirds of those earning between fifty and a hundred thousand a year, and almost forty percent of those earning over a hundred thousand a year.

Insane, you think? How can this possibly be? How can such a big segment of the population be a large car-repair bill or medical bill short of destitute?  Didn’t we all just go through the same Great Recession recently?

The AP also reports a study from the Urban Institute shows families that have even a little money saved, as little as between $250 – $749, are less likely to be evicted and less likely to need welfare. According to Urban Institute senior fellow, Caroline Ratcliffe, “People are extremely vulnerable if they don’t have savings….And it’s a cost to taxpayers as well. Lack of savings can lead to homelessness or other problems.”

Do we really need an academic study to tell us that? We can count dollars and cents, can’t we? That’s what I thought, until the AP story went on to report another AP-NORC survey showed despite our lack of emergency funds, two thirds of Americans feel we’re handling our finances just fine. Talk about a disconnect!

If we assume both surveys are valid, what can we say for ourselves? Do we think bad things can’t happen to us? Do we think the government is going to rescue us?  Or are we simply hell-bent on spending beyond our means?  Are we depending on this year’s extreme liberal or conservative presidential candidate – a Sanders or a Trump – to somehow pull us out of our morass?

Or the most important question: How have we learned to value superficial junk and transitory experiences like movies and restaurants more than our own financial independence?  I think it’s time we demand more of ourselves, instead of being resigned to living one dollar to the next.  You may think you can’t possibly spare ten, twenty, or even fifty to put in savings reserved for an emergency (and only an emergency), but do you want to be the guy living in his car?  Neither did he.  The difference is you still have a chance to change course.

It’s going to be an ugly year in the markets, and a very bumpy roller coaster ride to the elections in November.  You need to be prepared with a cash emergency fund, and with a way to protect your future.

So while you’re socking away your cash cushion, you also need to take a hard look at your 401(k) or IRA, and see if you’re protected there.  What happens if the market plunges, the dollar falls, or China uses our stock market for a punching bag again?

Make sure you’ve taken every possible step to ensure your immediate future and your long-term security are in place.  Because even if most people don’t recognize the threats we face, you should.