Is the US facing a crisis: many Americans are already 'living on the brink' financially

Сhaving started more than a decade after the longest in the history of economic growth, almost two fifths said in a new Bankrate poll that their main financial priority was simply to have an income that would be enough to live on, not save money.

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The lack of financial preparedness noted in the survey can cause problems for many families, regardless of whether there is concern about the global economic downturn or not. Financial advisors say that people without savings are often less prepared to cope with financial situations in their lives.

“Every family that does not have sufficient savings will live on the brink when a recession occurs, in a sense, it lives on the brink even before it occurs,” says Mark Hamrick, senior economic analyst at Bankrate.

Economists increasingly believe that over the next year and a half the United States will face a recession.

A recession may mean that many companies will cut jobs, as lenders are increasingly reluctant to take out loans and new lines of credit. This situation can lead unprepared families to make ends meet when income disruptions begin.

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But Hamrick notes that families who are not financially prepared can live in poverty even in good economic times because they are not prepared to deal with emergencies, such as unexpected medical bills or major home repairs.

Bankrate conducted a survey from 3 to 8 on September among a sample of 1 017 respondents.

Фото: Depositphotos

38% of them said their main financial priority was “just keep track of living expenses.” Nearly 3 of the 10 respondents (29%) stated that their main priority was “saving more money”, and 19% indicated that they mainly worked on debt repayment.

“For people who feel they have current accounts, the logical next step is to save more money,” says Hamrick. - Some people spend a lot on things. Others are essentially trapped because their income is low or their living expenses are high. ”

The percentage of those who consider their main priority to save money is growing steadily as income levels increase. For example, 19% of people who earn less than 30 000 dollars believe that their main priority is saving, and 39% of those who earn 75 000 dollars and more say the same thing.

“Those with really low incomes or limited resources don't have many options,” says Sarah Kroimans, a family sustainability educator at the University of Minnesota.

She offers those who need help with budgeting or understanding how to get out of the “pay-to-pay” cycle to seek financial assistance through their professional development program in their area, to their financial institutions, government agencies or certified specialists.

“Each person’s position is truly unique,” ​​says Kroymans. “We ask what their priorities are, what is most important to them and what they are willing to sacrifice to get the most important.”

Millennials (young people born in 1981 - 2003 years. - Ed.) may more than others need basic financial planning assistance. According to a Bankrate survey, more than half (51%) of them, who are now from 23 to 38 years old, said they did not use the budget.

Paradoxically, millennials also more often than others say that their main priority is saving money.

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As of 2016, only 17 states required students to take a personal finance course in high school. And only 20 states need an economic class, according to the Council on Economic Education.

“I’m concerned about the lack of economic knowledge and financial literacy that puts people at a disadvantage even without a recession,” says Anna Lusardi, professor at the Department of Business School, George Washington University.

Lusardi's study shows that inequalities in well-being between people are partly due to different levels of financial awareness. According to her, knowing how to create and maintain a budget is the starting point. But people need much more skills and information to successfully manage their money in everyday life and in the long run.

“If we don’t teach these concepts, people should teach them themselves,” says Lusardi. “You are at a disadvantage if you do not have this knowledge because you make financial decisions every day.”

You can create a budget yourself by analyzing where your money goes every month. It’s best to look at expenses from six months to a year. This process can help you see areas where it is possible to cut costs, and also plan how much money you will need each month for your needs. It is imperative to develop a plan to live below your means and not above them. Otherwise, it creates a constant cycle of borrowing and spending, where there is not enough money for savings.

If you manage to find a reserve, many experts suggest automatically transferring part of your salary to a high-yield savings account using direct deposits. This stock of money, which will accumulate over time and produce interest, will become your emergency fund. Experts recommend putting aside from six months to a year in this fund.

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