A typical American household cannot raise $400 without borrowing money or selling possessions, according to the results of a survey published recently by the Federal Reserve, the US central bank (The Fed’s Report on the Economic Well-Being of U.S. Households in 2013). The agency asked 50,000 people if they could handle an unexpected “financial disruption” costing them $400. Just over half (53 percent) said they could “fairly easily handle such an expense” by using money in their bank accounts (checking or savings) or by leaning on a credit card. But the rest of the respondents would have to borrow, sell something, or ask a friend or family member for help. Wow, that is disturbing!
This seems to point to a fragile financial state for most Americans, who risk poverty or bankruptcy in the event of even a small life event or expense. I thought we have had five years of “recovery,” yet seventy percent of respondents said they were no better off than they were in 2008. This financial insecurity can manifest itself in many ways.
Of the two-thirds of households who had savings in 2008, a quarter reported using up “some” or “nearly all” of their savings “to pay for bills and expenses.” Have you set aside emergency funds that would cover your expenses for at least 3 months? In the survey of adults 18-45, only 36 percent said yes. The report also found that Americans — through no fault of their own, of course — were largely unprepared for retirement. “Almost half of respondents had not planned financially for retirement, with 24 percent saying they had given only a little thought to financial planning for their retirement and another 25 percent saying they had done no planning at all,” the report concludes.
The Affordable Healthcare Act has made it possible for millions of Americans to get health insurance. Unfortunately, the majority of those plans are high deductible plans where the patient is responsible for a large portion of their healthcare costs annually. A report by the Associated Press-NORC Center for Public Affairs Research showed that one in eight Americans give up essentials such as food or burn through savings because they’re trapped in these high deductible plans. Twenty-three percent of those skipped a medical test or treatment recommended by their doctor, and 29 percent didn’t see a doctor when they became ill or injured because their portion of medical expense was not affordable.
Renting, not buying
Renters, who make up about one-third of the households surveyed, were asked to give their reasons for renting rather than owning their home. The most common responses were that “they can’t afford a down payment to buy a home (45 percent), can’t qualify for a mortgage (29 percent), find it more convenient to rent (24 percent), or find it cheaper to rent than own (23 percent).” Young renters, those 18 to 29, were far more likely to indicate they couldn’t afford a down payment on a house. So what should we do? Let’s look at some steps.
The first step to gaining some financial traction is simply knowing what your income and expenses are . . . a budget on paper. This will allow you and someone else to see the steps you need to take, thereby identifying the shortage of income and overage of expenses. This number measures the amount of the shortage and identifies the areas you need to attend to and adjust.
It is usually easy to see the problem, like stepping on a scale or getting your cholesterol tested. Setting up disciplines to correct and improve your financial status takes effort and time. But with objective help and experienced counsel, there may be both simple fixes and longer term but very beneficial changes you can make.
Many times there are multiple facets to your financial woes; therefore, a multi stage solution is in order. This is what I do for people I work with. I set up disciplines, educate people on good decisions and help them get out or away from bad ones and then support them in the longer term applications of improvement and recovery.
Don’t be shy to get help. You are welcome to call me, and I will give you some preliminary assessment. There are folks like me who feel called to this work (and ministry), so please use us and allow us to be a resource to you. Let’s take steps, even small steps, toward what we need to do. Get counsel, pray and know whatever your circumstance God is our resource both now and forever.
Jeffery Masters is president of Jeffery W. Masters & Associates at 954-977-5150. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners, a registered investment advisor. Independent Financial Partners and Jeffery W. Masters & Associates are separate entities’ from LPL Financial –