America has been in dire financial straits for a while and this state is certainly felt by the American population. A recent Bankrate study indicated that approximately 50% of the American population cannot cover an expense of $500, so writing up a $500 check for those appliance upgrades is out of the question for most. But how did we get there? And could we still save the money to cover those expenses in this economic climate?
The End of the Recession?
Even though recovery from the recession has been claimed by many experts over the past eight years, many American families are still struggling with their basic finances. Most families live from paycheck to paycheck, which is surprising since the recession was declared over seven years ago.
The Impact of the Obama Administration
Studies have shown that more jobs were created during Obama’s administration, although these jobs appeared limited to minimum wage industries. Despite the new jobs, wages also appeared to recover much slower. Unfortunately, this phenomenon is paired with an increase in costs for household essentials and childcare, without the necessary adjustments being made to the average American paycheck.
The result of the inflation and the slow rate of wage recovery has led to Americans not being able to cover for unforeseen large expenses. Approximately 21% try to cope with unforeseen expenses by using their credit cards, while others try to cut back on other expenses they might have. Some even must count on friends and family to come up with the money, which could mean that the American recession is far from over.
Millennials Versus Older Americans
Despite the considerable problems within the American economy, the millennials seem to be the part of the population that is most prepared for large expenses. More than 47% of millennials stated they had enough money in their savings to cover the cost of one unforeseen expense, while other age groups would need to take special measures to come up with the needed cash.
Expenses Facing the Chopping Block
To be prepared for larger expenses and ensure their financial security, many families look to saving money by cutting back on other expenses. Most people stated they would start to eat out less, even though there is another more apparent expense that Americans could save on.
The least likely expense Americans want to save on is their mobile phone plan, which is surprising considering that wireless plans can take a huge chunk out of the American’s budget. According to Bankrate, only 37% of the population would be willing to cut their wireless plans, meaning that mobile phone service providers are the real winners, despite the troublesome financial state of the average American.
Until wages start to recover and balances out with inflation, the average American is forced to seek his funds elsewhere. In most cases, it means tightening the belt once again. Unfortunately, many of these savings are made in the essentials category, opposed to the luxury category such as cellphones. In conclusion, smart saving and an honest look at your current luxury expenditures may provide a temporary solution to deal with unforeseen expenses. Here are a few ways to expand your emergency fund