Oct 24, 2017

Why do you keep being in debt and finding it difficult to manage your credit? People are struggling to improve their credit score but to no avail. This is so because they have not been applying certain important financial principles.

Do you know that a poll carried out by the Associated Press NORC Centre for Public Affairs Research showed that two-thirds of Americans would find it hard to provide the money necessary to take care of a $1,000 emergency bill? This finding was supported by NEW YORK (AP). It is unbelievable that after America’s recovery from the Great Recession, our financial situation remains insecure.

This financial difficulty in our country cuts across all income levels. According to the same poll, 75% of the people mostly affected are households that earn below $50,000 per annum. It also showed that the percentage reduces to only 67% when the income rises to the range of $50,000 to $100,000.

Another striking revelation is that 38% of the country’s wealthiest 20% that earns higher than $100,000 per annum indicated that they would have some challenge taking care of a $1,000 unexpected bill.

Caroline Ratcliffe noted that people become victims of financial crises because they do not have savings or didn’t think it wise to do so. Ratcliffe, who is a senior fellow at the Urban Institute that deals with issues of Poverty and Emergency Savings, further lamented that the more the balance sheet of Americans are revealed, the more alarming the reality becomes.

It is an economic mistake to believe things will always remain the same, and then, neglect to save in advance, for a time of need. A 66-year-old Harry Spangle "lived for today," but when he lost his job he found himself borrowing from family and friends to take care of an emergency $1,000 bill, despite the fact that he is on Social Security, and also has a pension. He described the situation as very depressing, and I believe you would not want to find yourself in such a depressing situation.

It is widely recognized that having an emergency fund is very important to our financial health. Strikingly surprising is the findings of the Urban Institute, that families with small non-retirement savings (say between $260 and $759), are less likely in need of public benefits, or in danger of being evicted from their homes.

The AP-NORC research found that majority of Americans would not be able to pay an unexpected $1,000 bill; 13% would have to leave out other bills in order to cover it, about 33% said they would put the bill on their credit card or borrow from friends, family or a bank while 11% said they would not be able to pay for it at all. These alarming findings show that many of our people do not have $1,000 readily available in their savings account, much less in their homes to enable them to take care of unexpected bills.

This trend is not new in our history and people that fall victim the most are people who do not have savings. In the 1990s the New York Times and 3 CBS News found 

the same thing in their research. In 2015, the Federal Reserve study on the issue showed 47% respondents saying they would have to borrow or sell something in order to pay a $400 unexpected bill. This is not far from AP-NORC’s recent findings on retirement. AP-NORC found that 54% of working Americans are not very confident they would have enough savings while only 14% were confident of retiring on time.

The Impact of this Precarious Financial Situation on Politics

AP-NORC’s findings opened our eyes to how the frustration of Americans over the uncertainty in our economy, financial insecurity, and income inequality, has impacted the presidential election season. For example, socialist Senator Bernie Sanders appealed to voters with the promise of placing higher taxes on the rich and bringing down Wall Street. On the other hand, the Republican Donald Trump who is a billionaire businessman amassed followers with the promise of renegotiating free trade and sending out undocumented immigrants who impact the economy negatively.

White House’s Reaction to this Poll

In reaction to the findings of this poll, the White House said more needs to be done to secure Americans in times of financial crisis, and their proposals over the years include creating a system that would make emergency funds readily available to families with low-income during a financial crisis, and a wage insurance program that would protect workers’ pay in the event of losing their job.

Finally, the poll’s findings call for actions on our own part, while waiting for the government to put certain policies in place. We have to plan, we have to strategize, and we have to apply certain financial principles that would help us escape financial crises.

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