On May 27, 2015, the Board of Governors of the Federal Reserve released a survey regarding the financial health of the U.S. Economy. The report, titled the “Report on the Economic Well-Being of U.S. Households in 2014” focused on the current state of the U.S. Economy from the perspective of its citizenry. The report is full of very useful and insightful information concerning the financial health of its citizens.
However, one item in particular stood out for me. In a category titled “Economic Fragility”, the survey found that forty-seven percent of all respondents could not cover an unexpected $400.00 expense without selling something or borrowing the money. This is shocking to say the least. The report then analyzed various income brackets; less than $40,000, $40,000 to $100,000 and above $100,000; and ethnicities; White, Black and Hispanic. As would be expected, those making less than $40,000 have more difficulty handling a $400.00 emergency with sixty-nine percent indicating they could not afford to pay this without borrowing the money or selling an asset.
Most shocking, however, is that twenty-seven percent of respondents that make more than $100,000 per year stated they could not handle a $400.00 unexpected expense without it creating a financial hardship. The economy may be in better shape today than it was 6 years ago, but when more than ¼ of those making more than $100,000 per year respond that they could not handle buying a new set of tires, or an unexpectedly high utility bill or any unexpected expense of $400.00 or more, we are reminded that we still have a long way to go. I highly recommend reading the entire survey. Here is a link to the report.
If you find yourself needing to go to a high-interest rate loan company or needing to incur debt on a credit card you cannot pay off in 30 days to pay a $400 unexpected expense, you should consult with an attorney who practices bankruptcy. The definition of bankruptcy is when your income minus your normal living expenses leaves you needing to borrow money to make those normal living expenses. Consult an attorney with Bond & Botes to get a review of your debt and finances and determine if you need to file bankruptcy or just revise your budget to avoid a bankruptcy.