If the answer is no, you're not alone.
Nearly six in 10 Americans don't have enough savings to cover a $500 or $1,000 unplanned expense, according to a new report from Bankrate.
Only 41% of adults reported having enough in their savings account to cover a surprise bill of this magnitude. A little more than 20% said they would put it on a credit card, the report said, while 20% would cut their spending and 11% would turn to friends and family for financial assistance.
"This is a persistent American problem of how you should handle your finances and spending," said Jill Cornfield, retirement analyst for Bankrate.
But at least the number has improved. Last year, only 37% of Americans reported having enough savings to cover an expense of $500 or more.
Millennials were the most financially prepared to handle monetary headwinds with 47% of those aged 18-29 saying they could dip into savings to cover an unplanned expense, a substantial increase from 33% in 2014.
Personal finance experts tend to stress the importance of having an emergency fund to cover unanticipated expenses to avoid long-term financial damage.
"If you aren't set up to tap cash for something, it can derail you financially if you put it on credit card," said Cornfield. "The original expense can bloom because of interest."
Almost half of the 1,003 adults surveyed reported they or a family member faced a major financial expenditure in the past year.
"If you are human, have a pet, kids, a house or a place to live, something is going to happen that will cost you money," said Cornfield.
Creating a cash cushion can seem like an unrealistic task, especially for those living paycheck to paycheck. But Cornfield said there's usually some wiggle room in a budget to cut back.
"There are ways to track your spending and look where your money is going and find the holes and gaps," she said. "There are places you can cut back: daily coffee, alcohol, vacations, some people take several vacations, maybe cut back on one," said Cornfield.
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A $500 surprise expense would put most Americans into debt
While the jobless rate is down and wages are up, most Americans nevertheless remain one misstep away from a financial crisis.
Fifty-seven percent of Americans don’t have enough cash to cover a $500 unexpected expense, according to a new survey from Bankrate, which interviewed 1,003 adults earlier this month. While that may appear dire, it reflects a slight improvement from 2016, when 63 percent of U.S. residents said they wouldn’t be able to handle such an expense. The improvement reflects the stronger U.S. economy, but is still far from ideal, Bankrate.com said.
The findings shed light on how many households continue to struggle with their basic finances more than seven years after the official end to the recession. Despite steady job growth during the Obama administration, wages have been slow to recover, with the typical American household still earning 2.4 percent below what they brought home in 1999, when income peaked. At the same time, costs for essentials such as housing and child care have surged faster than the rate of inflation, placing stress on household budgets.
Unfortunately, unexpected expenses are far from uncommon, Bankrate.com found. About half of adults said they or a family member incurred a major expense in the last year.
“It’s not a matter of if, but when an unexpected expense will pop up,” Jill Cornfield, a Bankrate.com analyst, said in a statement. “If you have a car, a house or apartment, a pet, or a kid – if you’re a member of the human race – something that costs money is bound to go wrong.”
About four out of 10 Americans said they had enough in savings to cover a surprise $500 expense. Another 21 percent said they would rely on a credit card, while 20 percent said they’d cut back on other expenses. Another 11 percent said they’d turn to family or friends for the money.
Dining out is the first place where consumers would cut back, with six out of 10 respondents saying they would eat out less. The least likely expense to face the chopping block? Mobile phone plans, with the survey finding that only 35 percent said they would cut back on their wireless plans to save money.
Americans who earn more than $75,000 per year -- about a third more than the typical U.S. household earns -- report more savings on hand, although almost half said they wouldn’t be able to cover a $500 surprise expense. Millennials represent the generation most equipped to handle an emergency cost, with 47 percent saying they have enough in savings to cover one.
The findings echo research published last year by the Federal Reserve, which polled more than 5,600 Americans on their household finances. Forty-six percent of respondents said they would be challenged to come up with $400 to cover an emergency expense, and would likely borrow or sell something to afford it. When the Fed asked what types of emergency expenses Americans had actually faced in the last year, more than one out of five cited a major unexpected medical expense. The average expense: $2,782, or almost seven times higher than the Fed’s hypothetical $400 surprise bill.
Other types of hardships reported by Americans included losing a job, suffering from reduced work hours or receiving a foreclosure or eviction notice.
“Many Americans remain ill-prepared for such a financial disruption,” the Federal Reserve noted. “While slightly more Americans have a safety net to withstand a small financial disruption than was the case in recent years, nearly half lack the resources to easily handle such an event.”
Survey: Most Americans lack savings to cover emergencies
When Sarah Ballard's kitchen tile floor shifted and tiles began to crack, she knew she'd have to come up with $2,000 to make the fixes.
"A tilted tile could have sliced my foot open," says Ballard, 38, of Jamestown, New York. "But I just didn't have the money in the bank at the time."
A combination of back-to-school expenses for kids and airplane tickets for the Labor Day weekend had left the family low on ready cash.
The classic emergency fund still eludes more than half of Americans, just like the Ballards, according to a new Bankrate Money Pulse survey.
Expect the unexpected
Just 41 percent of adults said they would pay an unexpected cost from savings. That's a 4 percent increase from last year's survey.
If you have a car, house or apartment, or a pet or child -- shoot, if you're a member of the human race something that costs money is bound to go wrong.
In Bankrate's latest survey, 45 percent of American adults said they or their immediate family had had a major unexpected expense in the past 12 months. That's up 2 percent from last year.
The most common unexpected incidents are related to transportation, appliances or home-related breakdown or injury or illness.
A person's age and work status often determines if he or she is more apt to use savings or credit cards to pay for the unexpected.
Millennials are much likelier to tap savings, with 45 percent saying so, possibly because they continue giving the cold shoulder to credit cards. Members of the "silent generation" (71 years and older) have the highest credit use for unexpected expenses, at 28 percent.
Whether or not you're a parent definitely plays a part in cash flow. Parents were less likely, at 36 percent, to use savings for an unexpected expense than the childless, at 43 percent.
Americans are increasingly aware of the need to save for emergencies, says Carina Diamond, a certified financial planner professional in Akron, Ohio, and board ambassador for the CFP Board.
"I wish I could say it's because people are smarter about it, but it's really the fear factor," she says. "One little thing -- a new roof, a medical emergency -- can set you up for financial disaster if you don't have an emergency fund."
People say they'll borrow from an IRA or 401(k), tap into home equity or turn to family members, but Diamond discourages these options. None of them is without negative implications, and nothing beats emergency cash in the bank, she says.
"It is a much better alternative," she says. "There is nothing as quick and free of negative consequences."
Finding budget cuts
One way to put more into an emergency savings is to cut spending, and different age groups prefer to cut their spending in various ways.
Overall, 37 percent of Americans said they were very or somewhat likely to cut back on alcohol if they needed or wanted to save more money. Millennials were the most in favor of cutting back on alcohol, with 51 percent saying they'd be very or somewhat likely to do so. The silent generation had a 17 percent favorability rating on willingness to cut their alcohol spend.
Younger millennials were the biggest group, at 46 percent, to say they were very likely to cut back on buying coffee in a coffee or doughnut shop. Overall, 44 percent said they'd cut back on coffee purchases.
Set reasonable goals
Paul Golden, a spokesman for the National Endowment for Financial Education in Dallas, is not a fan of the recommendation that you keep the equivalent of six to nine months' expenses in your emergency account.
It's simply unrealistic at some income levels to accumulate that much cash.
"If you tell a family making $60,000 that they need to have $40,000, it's very unrealistic," he says.
When the very goal becomes discouraging, an individual can find it all too easy to give up. Instead, Golden recommends starting with a smaller amount.
"Even $500 has been proven to have a psychological benefit," he says. "It improves people's psychological well-being and shows you have the ability to set (and meet) an achievable goal."
Once you meet that amount, reset the bar.
"Reach a $500 goal, then $1,000," Golden says.
Building emergency cash
The way to build up a fund is to set priorities and track where your money is going. It takes diligence, Golden says, and it is best done over several months, not just one.
"That gives you a sense of where you can find gaps, impulse spending to find money to put in that emergency account," Golden says.
Diamond strongly discourages borrowing from a retirement account in an emergency situation.
"You're compromising your future," she cautions.
Diamond advises you to pay yourself first.
"Every month, you put money in your 401(k), you pay off debt. Putting month in an emergency fund each month is just another monthly expense," she says.
If you're a homeowner, she recommends using a home equity line of credit.
"Have that as an emergency fund," Diamond says.
While you're paying it off, the interest is tax-deductible.
The lesson is to expect the unexpected.
"It's not a matter of if but when an unexpected expense will pop up," Golden says. "It's only a matter of time."
Methodology: Bankrate's poll was conducted by Princeton Survey Research Associates International, which obtained the data via telephone interviews with a nationally representative sample of 1,003 adults living in the continental U.S. Telephone interviews were conducted by landline (503) and cellphone (500, including 317 without a landline phone) in English and Spanish from Jan. 5-8, 2017.
Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error is plus or minus 3.7 percentage points.