
It is a myth that a large share of people can’t cover a $400 emergency expense - MagicPropmaker
https://www.bloomberg.com/opinion/articles/2019-06-04/the-400-emergency-expense-story-is-wrong
======
wilg
I somehow read this article the first time without realizing it's totally
wrong.

Here's the direct quote from the original government report [1]:

> If faced with an unexpected expense of $400, 61 percent of adults say they
> would cover it with cash, savings, or a credit card paid off at the next
> statement—a modest improvement from the prior year. Similar to the prior
> year, 27 percent would borrow or sell something to pay for the expense, and
> 12 percent would not be able to cover the expense at all.

That means 39% of people say they either cannot pay or must sell something or
borrow for it. Representing that as "40% of Americans can't come up with $400
in an emergency" is perfectly fair in my view.

[1]
[https://www.federalreserve.gov/publications/files/2018-repor...](https://www.federalreserve.gov/publications/files/2018-report-
economic-well-being-us-households-201905.pdf)

~~~
thaumaturgy
Credit cards that offer rewards muddies up the waters here a lot. In that
case, it's smarter to put the $400 on the card (and pay it off before paying
interest) for the 1.5% discount or the air miles or whatever.

~~~
olliej
If you’re on the bottom rung I’m guessing your interest rate is >20%, (the max
is apparently 29.9%). Divide by 12 and one month of interest rate is as much,
if not more, than 1.5% cash back.

Using debt to save money depends on starting with a reasonable amount of
money.

~~~
ac29
> put the $400 on the card ( _and pay it off before paying interest_ )

Depending where you are in the credit cycle, it could be ~30-50 days before
incurring any interest.

~~~
olliej
that "without interest" bit is not dependent on where you are in the cycle:
it's 30-50 days from the last point of zero balance.

And of course 30 days without interest is basically "you pay it off in a
months time".

I realized that another part of my problem with this column is of course that
"using debt" for many people means a payday loan, which seem to be forever
relabelling their "service" to avoid being called a 30%/week credit line.

~~~
robjan
When you pay your credit card, it clears the balance on a first in first out
basis. So if I spend 1k today then 1k in 30 days time, I only have to pay 1k
to clear the statement balance and avoid paying interest.

------
loudandskittish
> You’d frequently have a coworker out of the office who can’t afford to buy a
> new tire. You’d frequently hear from friends and neighbors who can’t afford
> to fix their dishwashers.

Ugh. The people who can't come up with $400 to cover an emergency DON'T OWN
CARS! That's why you don't hear about them missing work because they couldn't
afford a new tire. They take public transit, or they walk because they can't
afford bus fare due to an emergency and probably don't talk about it at work
due to feeling ashamed (I know, I've been there).

Nor do they own dishwashers...this is some of the worst logic I've ever heard
and the author of this article _really_ needs to get out of his bubble. (Can't
believe I wasted my last "last free article" on this nonsense.)

~~~
salawat
Clear your cookies for the site, mate.

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~~~
r721
Pro-tip: In desktop Chrome you can get to "clear cookies" popup via clicking
on padlock icon in the URL bar.

------
SerLava
This is splitting hairs.

40% of Americans can't come up with $400 but luckily a majority of those know
a financial institution that can come up with $400 _for them._

Anyone who does not have an emergency $400 is not going to have a great time
with an unexpected $400 debt on top of whatever else their debt obligations
and expenses are.

Is it so hard to believe that we want to live in a country where pretty much
everyone has four hundred measly god damned dollars.

~~~
jackfraser
Of course you want that country. The thing is, the magical panacea of giving
out free money to everyone just devalues the money. $1000 Yang Bucks will
become the equivalent of $100 now within short order, as prices for things go
up.

~~~
SerLava
No yang bucks. Better wages, publicly funded health care, no more war grift
without an actually good reason.

I dont understand why Americans lack this magic spell you're talking about,
meanwhile Harry Potter is running around Europe handing out healthcare and
extending life spans and shit.

Are we just worse at life or something? Maybe we're not good enough?

------
ikeboy
The median household net worth is around 100k.

If your house or whatever is worth 100k more than you owe on it, there's
little meaningful sense in which you can't afford a $400 expense.

You've got a liquidity problem, that's all.

------
rhacker
It's beyond me why two classes aren't in school today that SHOULD have been
taught by ones parents:

* Golden Rule

* Budgeting

(I think we know the reasons why parents don't teach this.)

~~~
loco5niner
Why?

~~~
rhacker
Golden rule - it's quite obvious this lesson is lost on today's generation -
basically called the "me generation". That's quite clearly the opposite of the
golden rule that would have you focus on other people's plight to understand
what you're doing wrong.

Budgeting - The notion that half of Americans can't afford a $400 mistake (and
I know this is contested and there are credit cards, etc.. but the stat came
about from something). In any case, I've met a lot of people that know the
"budgeting" exists but don't actually know how to do it or that it would even
apply to a person. They think of it as something a business or government
does.

Parents don't teach these skills because they don't have them either.

~~~
loco5niner
> Parents don't teach these skills because they don't have them either.

Definitely agree with this! And yes, The Golden Rule and Budgeting should be
taught in our schools.

------
anigbrowl
_I am troubled that 12% say they couldn’t cover the $400 expense, and that 14%
claim it would stop them from paying some of their other bills. But even if
respondents are accurately reporting on their finances, these numbers suggest
their situation is relatively uncommon._

That's between 1/7th and 1/8th of adults responding to a survey, some of whom
presumably have kids to look after. This guy seems so in love with
demonstrating his statistical abilities that it's made him dismissive of
~30-35 million people with severe cash flow problems.

~~~
lukevdp
He isn’t dismissing those people or their hardships, he is saying that the
actual number of 40% that many politicians use is disingenuous.

~~~
dv_dt
He's dismissing it by saying people who can't come up with $400 in cash, can
put it on their credit cards or borrow it from friends or family. That's
pretty dismissive because the issue is that most people doing even reasonably
well should really should be able to pay an emergency $400 bill in cash.

~~~
grkvlt
Except for the fact that the sort of person who cannot come up with USD 400 in
cash is _also_ the sort of person who has a poor credit rating and _no_ credit
cards, and most likely their peer group of friends and family are in exactly
the same situation. This is the same sort of tone deaf advice that rich people
give about starting your own company - "Why can't these poor people just
borrow a few hundred thousand dollars from the family trust fund like I did,
they must just be shiftless and lazy" \- and should be dismissed in the same
way. I suspect the author has neither been short of money in their life, nor
met anyone else who was...

~~~
moonka
Not to mention the fact that a $400 dollar emergency is on the low end. In my
experience, most emergencies that have cropped up have been closer to the
$700-800 price (Doctor bills (after negotiation), vet bills, temporary
relocation, etc).

