Here’s How Poor Americans Really Are
Last year when 100,000+ children came pouring over the Mexican border to the US, when conservatives and progressives argued about what to do about them, I heard progressives say over and over again, “We are the richest country in the world. We can afford to take in these children. We can take in anyone.”
It’s true that America used to be the richest country in the world. During the 50s and 60s we Americans were far beyond any other country on the planet, by orders of magnitude, using just about every economic measurement you can think of.
Today, it looks as if America has a lot of money, but what we really have is debt. The debt of the government and of the populace is historic and staggering, regardless of the number of nice cars, houses, or Starbucks customers you see all over the place.
If you want some real numbers that demonstrate how “rich” we Americans are, 38% of Americans who make more than $100,000 a year would have trouble coming up with just $1000 to deal with an emergency. Just 1000 bucks!
Read that again. Everyone thinks $100,000 a year is a lot of money. When I was in high school back in the 1980s, it was. But then came Bush-Obamaisim and the massive money printing of the Federal Reserve. Now $100,000 is simply a higher level of poverty which looks and feels a little nicer.
What about people making less than $100,000 annually? Here’s some more data:
– 75% of people making under $50,000 annually would have trouble coming up with $1000.
– 67% of people making between $50K-$100K annually would have trouble coming up with $1000.
Everyone thinks Americans are rich, yet most of them, even the “rich” ones, don’t even have $1000 to access in case of an emergency.
Do you have $1000 cash socked away somewhere you can use for an emergency? Man, if you don’t, you have very severe life problems. You seriously need to look at yourself in the mirror and ask yourself some tough questions about what the hell you’re doing with your life.
As I teach in my membership program, having $1000 set aside for emergencies is the very first financial goal you should have, before any other goal.
The order goes like this:
1. Save $1000 cash somewhere if you don’t already have it.
2. Start paying down all of your debts, in order of loan balance, starting with the smallest one. (It makes more mathematical sense to pay them off in order of interest rate, but when dealing with emotional, irrational human beings, your odds of success are much higher if you pay down off starting with your smallest one and working your way upwards.) If you encounter any emergencies, use your $1000 emergency savings instead of going into more debt. If/when you use it, stop paying off your debts until you rebuild that $1000 again.
3. Once all your debts are paid (except your home mortgage if you have one) work to turn that $1000 emergency fund into a savings account that is equivalent to 6-12 months of living expenses. Do not use a bank for this account (ask Cyprus and Greece all about that). Use an investment firm or cash instead.
4. Once you’ve got 6-12 months of living expenses saved (I think 12 is better than 6, but that’s just an opinion), start investing for the long-term.
Most Americans, even “rich” ones, can’t even do step one.
This is appalling. Even when I was young and disorganized in my early 20s, I still always had about $800 set aside for just-in-case money.
Americans are not rich; they’re in debt. Americans are cash poor.