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I was the one that said half of Americans have 1 year of rainy day fund. Most people in my extended family can survive a year or more with no income. May be I have this perspective because I am 1st generation Asian American but a majority of the people in my family and my friends save a lot. I work in Engineering so many of my colleagues are good savers with many $1 mil plus 401k accounts for those over 55. I personally save a total of 30%, 12% in 401k (max allowed) and 6% in college funds and 12% cash or stocks.
I'm going with the fact you are an engineer and work with other engineers that you are blinded by how much the average person has saved for an emergency fund. Now I'm going to 'stereotype' and say since engineers are generally good with numbers they rarely tend to be broke. It seemed any time I read a FIRE column it was always engineers who made the bulk of FIRE.
People and organizations--at every income level--don't give themselves enough financial breathing room. It's the human condition. Too many think a higher income means more financial security. It does, if you actually save a good chunk of it. A lot of people don't. Same goes for a lot of businesses.
People who say these things don't realize that it's in the best interest of organizations to not hold liquid cash. Most of the corporations you're referring to are publicly traded. That means they have an obligation to return that liquidity to their investors through buybacks or dividends. It's pretty standard in the business world.
I would say there are a lot of corporations that are reckless, but not in how little cash they have on hand rather I am referring to the amount of liabilities they carry.
No cash & Little/No Debt = Good
No cash & Large Amounts of Debt = Bad
No cash & Little/No Debt = Good
No cash & Large Amounts of Debt = Bad
I trade stocks. Debt, cash, or no cash often have little to do with the stock price. Almost all companies went through periods when they had large amount of debt.
We have about 3 months of cash available, but even with the drop in the market we have ~4 years of expenses in brokerage accounts and we have 2 incomes. If we both worked in the same industry, or for the same company I'd be much more likely to go towards 6-9 month cash/savings, but I just think the probability of us both losing our jobs within a few months of each other is extremely low. Plus roughly 30% of our yearly expenses are daycare, so worst case scenario we could pull the kids out and pullback on some niceties like eating out, alcohol/happy hours, and clothing/biking, etc. and drop our monthly expenses to ~ $2.6k/month.
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Originally Posted by skaternum
Financial education isn't going to solve the problem. Most Americans know they need to save money for a rainy day but simply lack the willpower to do what must be done to make that happen. They prefer to live beyond their means, and they choose instant gratification every time. It's too deeply ingrained in the culture to just educate our way out of it.
I heard a quote the other day that went something like this.
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A lot of people want to be millionaires, but what they really want is to spend a million dollars.
There’s no chance half of Americans have a 1 year rainy day fund.
Right.
From what I'm reading, nearly 30% of Americans have no emergency fund whatsoever. 25% have a rainy day fund, but not enough to cover 3 months worth of living expenses. Just 18% say they could live off their savings for 6 months or more. Source: https://www.bankrate.com/banking/sav...ity-june-2019/
Given the Covid-19 economy, I imagine that these percentages are much lower and that many have to rebuild their emergency funds.
My emergency fund covers a year's worth of expenses, specifically mortgage, condo fees, and taxes for my Hawaii property; and rent for where I currently live on the mainland.
If crap really hit the fan, I'd work to sell my Hawaii property, so wouldn't likely need the entire year's worth of savings for that place. But I do plan to move back to Hawaii in 2022, so that calculus would change then.
What does 6 months of emergency savings mean. THat you just have enough to pay all your bills and enough to put food on the table? OR that you can live like you normally do for 6 months?
That because it commonly/typically take sup to six months to find another GOOD job...
people need to prepare their finances to make it through the period.
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THat you just have enough to pay all your bills and enough to put food on the table?
OR that you can live like you normally do for 6 months?
Less than normally but still hit most of the major notes.
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