Skip to content


Suze Orman speaks during AOL’s BUILD Speaker Series at AOL Studios in New York City.

Jenny Anderson |: WireImage |: Getty Images:

An unexpected bill is never convenient.

But now there are even more reasons why an unforeseen event, such as a car repair or medical expense, can put Americans on shaky financial footing.

Blame record high inflation, which has reached a 40-year high and driven up prices for everything, including grocery store staples like butter, lettuce and dairy.

Going into 2023, recession risks are also emerging. The question is whether the downturn will be mild or long-lasting, with top tech employers like Amazon and Google already starting to cut jobs.

More than personal finance.
Congress can make it easier to save for emergencies
Inflation increases costs for US households by $433 per month
How to save on groceries amid rising food prices

Meanwhile, the federal government has reached its debt ceiling. Now it’s up to lawmakers to find a solution so the US government can keep paying its bills.

“We have a financial epidemic right now, so to speak,” personal finance expert Suze Orman told CNBC.com.

“It’s a more dangerous scenario now than it was during the pandemic,” Orman said of the current financial risks facing Americans.

Many Americans were able to set aside more money than usual during the Covid-19 pandemic, as government aid meant additional unemployment benefits for unemployed Americans for longer, while millions of individuals and families received stimulus checks.

Those federal funds are now dwindling, Orman said, as bills, including rents that have tripled in some cases and mortgage rates that have climbed higher than before the pandemic, begin to pay.

The environment may be the wake-up call many Americans need, he said.

“You should have an emergency savings account whether you’re in a recession or not,” Orman said.

Americans live paycheck to paycheck

There’s never been a better time to put aside emergency cash.

Still, spending a significant amount of money remains a challenge for many Americans.

New research shows that 74% of Americans are now living paycheck to paycheck, according to SecureSave, a financial technology company that aims to help workers put aside emergency savings through their employers.

As inflation has risen, more than half of respondents, 54%, have reduced their savings in the past year, according to SecureSave’s November online survey of more than 1,000 US adults.

About 67% of workers cannot afford $400 in emergency expenses.

Among the things Americans regret most about their personal finances is failing to save for emergencies.

Mark Hamrick

Senior Economic Analyst at Bankrate.com

Orman co-founded SecureSave during the pandemic after 40 years of telling people they should have a savings account, he said.

“Our goal was very simple. let’s see if we can change the savings rate in America for those who have never saved a dime before,” Orman said.

Most people often fall short of that goal. A new survey from Bankrate.com shows that most adults, 57%, cannot afford $1,000 in emergency expenses.

“People just can’t do it on their own,” Orman said. “The main thing is not to see it in your paycheck.”

With SecureSave, employees can have savings like $25 automatically taken out of their paychecks and can also get a $3 or $5 match from their employers.

At the end of the year, people are often surprised by how much they’ve saved, whether it’s $600 or $1,000, Orman said.

“They love it,” he noted. “And many times they will increase their payroll.

“When you start to see how easy it is to save, the more you like to save,” Orman said.

By building cash on hand, you can avoid turning to credit cards as interest rates rise.

As of now, 25% of consumers surveyed by Bankrate.com said they would incur an unexpected expense of $1,000 or more and pay it off over time.

That strategy will cost even more now that new credit card offers are charging nearly 20% interest even for those with the best qualifications, said Mark Hamrick, senior economic analyst at Bankrate.com.

How savings can help other financial goals

Guido Miet |: DigitalVision |: Getty Images:

Building emergency savings with an employer is only the first hurdle to financial wellness, according to Orman.

The next goal is to save eight to 12 months’ worth of expenses in a separate savings account, Orman said.

Even workers who are cash-strapped must contribute enough to their retirement accounts before the employer matches, if any.

“You can’t hand out money freely,” Orman said.

As employees reduce their financial stress, it can also help employers. Nearly 30% of workers say they spend one to two hours a day worrying about money, according to SecureSave.

According to Bankrate.com’s Hamrick, it can also help avoid regrets later.

“We’ve historically found that the biggest regret Americans have about their personal finances is failing to save for emergencies,” Hamrick said. “The other is failure to save for retirement.”

.

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *