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Years back, during the debate over the right to die via assisted suicide, I clipped from a newspaper an editorial cartoon I particularly admired. Drawn by Jack Ohman of the Oregonian, it is still tacked above my desk today, more than a decade after first glimpsed.
In the cartoon, a man and woman walk through the downtown of a big city. High above them are billboards. On one billboard, the giant headline reads: “Eat junk food.”
Another billboard shows a bottle. “Drink booze, ” it exhorts.
Still another billboard depicts a pack animal with a long cigarette dangling from its mouth. “Smoke, ” the billboard prods all who see it.
The words “drugs” and “gangs” are splashed in graffiti across one of the buildings, which is identified with giant letters above its entrance: “Poverty.”
The man on the street is speaking to the woman next to him. “What’s the big deal?” he asks. “This country has allowed assisted suicide for years.”
I couldn’t help but recall the cartoon as I’ve contemplated all the talk recently about the looming “fiscal cliff” at year’s end. It begs this question. “What’s the big deal? Folks in this country have faced a fiscal cliff for years.”
No emergency funds
In a different cartoon format, animated cartoons, characters regularly step off cliffs, are suspended in mid-air, look down, register horror, and frantically windmill their arms before plunging earthward. It’s funny when seen in a cartoon, but how many people want to go through the same thing in their financial lives?
Yet a financial precipice is precisely what many blithely stroll toward all the time. It’s generally considered wise to maintain at least six months of funds in case of emergencies, from sudden joblessness to medical crises. The recent recession has had many financial gurus arguing for 12 months or more.
But in fact, if a recent survey is any indication, between a quarter and a third of Americans face going over a fiscal cliff all the time in that they have no money saved for emergencies. Let me repeat that. None.
As reported widely in June, the most recent Bankrate Financial Security Index found 28% of folks had not a bit of savings stashed for emergencies, up from the 24 percent reported a year earlier.
About 20 percent of respondents were more prepared, having enough cash in an emergency fund to pay for less than three months of expenses, and 42 percent had at least three months of cash saved for personal catastrophes.
The lack of a rainy-day fund was influenced by how much a respondent earned per year. Just nine percent of people earing $75, 000 or more, but more than half those making $30, 000 or less, had no emergency fund. But as a group, even the higher earners weren’t particularly distinguished in reaching the six-month mark. Only about 45 percent of those comparatively flush people had managed to save a half year or more worth of emergency money.
It’s not hard to figure out why. As Sheyna Steiner reported, “Consumers are constantly barraged by marketing, none of which espouse living below your means and managing money responsibly.”
If there was ever a dead-on accurate comment on the ills delivered by America’s mad, mammoth marketing machine, that is surely it.
Saving for emergencies
If you’re to start building an emergency fund, you must start ignoring the marketing machine. I mean, c’mon. Do you really need to take two cruises a year? Is $27, 000 in annual restaurant bills an absolute necessity? Won’t a big-screen TV smaller than a full-size Buick suffice for your family? Do you have to replace your iPhone or tablet with updated versions every 22 weeks? Can’t you get as good a caffeine jolt from a regular cup of joe as the $6.99 latte?
Some of the steps that have worked for many people include the following:
- Get yourself into a payroll deduction program whereby money is deducted from your paycheck before you ever get a gander at the greenbacks.
- Pay yourself first by adding your name to the list of entities you pay every month, such as your mortgage, credit card and cable TV providers.
- Take the change you bring home each day and drop it into a jar. At the end of the week or month, deposit the coins in your savings account. Over 365 days, that little bit of daily change can be a nice start on a rainy-day fund.
Back to reality
Okay, I know the fiscal cliff we as a nation face is serious, and requires the attention of Congressional lawmakers who this year at least have seemed more intent on savoring lengthy vacations picking fights with each other than forestalling a walk off the cliff.
There’s not a lot you and I may be able to do about their inaction. But we can work to ensure we have funds to see us through in the event of unforeseen disasters impacting our own lives. Such an emergency fund can give us an edge.
An edge that should help us avoid the ledge.