Sense & Centsibility Blog

The $400 Problem of Many Americans

The Federal Reserve just released a study that found that nearly half of Americans would not have the financial means to solve the problem of a $400 unexpected expense. The $400 problem isn’t just for those who live near or below the poverty line, it cuts across various income levels, education, class, and gender. No one is immune to it. How can we be the wealthiest nation in the world with a $400 problem? There are a lot of opinions out there about how we got here, but the truth is life happens. Let’s talk about how to prevent the $400 problem in your life.

Be prepared for medical costs even with insurance

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It would be wonderful if the amount we pay out monthly in premiums for medical insurance prevented us from ever seeing a medical bill but that just isn’t the case. So here is a tip, set aside (in a separate medical savings account) the amount of your deductible. For example if you have a $1200 deductible put $100/month away. If you don’t use it… great, you have it for next year. If you do, then just keep up the payments until you’re back up to the $1200.  You will feel better just knowing that it is there if you need it.

It isn’t a matter of “if”; it’s a matter of “when”

When you are homeowner or car owner, you know that unexpected repairs will come up; there is just no way around it.  So when a repair is needed, tackle it right away. Don’t let deferred maintenance create an even larger and preventable cost. And if you have children or pets, it's likely that even more unexpected expenses will come up. If you can start setting aside a little bit each month to prepare, those surprise costs won't negatively affect you as much.

Something is better than nothing

You hear financial experts say that you should have six months of earnings set aside for emergencies. For most people that seems virtually impossible… myself included. But here is the good news, it doesn’t have to be all or nothing.

Even $2000 in an emergency savings account can prevent financial stress from turning into financial chaos.

Think back on some of your financial hiccups, how would it have been different with $2000 of emergency savings?  Don’t know where to start? Check out Got Savings? How to go from $0 to $2000 in one year and 4 Tips to Save Like a Pro.

If the unthinkable happens…act fast

In the last decade we have seen our job security ravaged by a financial disaster. We may not have control over what happens in the economy or even with our own employer, but we can take action if we experience a sudden loss of employment. If you experience job loss or a sudden reduction in income act fast! Drop down to your bare bones budget and do whatever you can to prevent replacing income with debt during your job search. Contact your mortgage company and creditors/loan holders to let them know your situation and to discuss options. If you can keep the debt to a minimum your financial recovery will be much quicker. 

Ask for help

If you feel like you’re juggling too many monthly payments or you struggle sticking to a budget, ask a certified financial counselor for help. Our counselors will help you set up a realistic budget and provide an action plan to help you achieve your financial goals. If you have credit cards, they can offer a faster repayment option - via a Debt Management Plan - that will save you money. Click here to GET STARTED ONLINE or call us at 888.577.2227 for your free and confidential session.

Author Ashley Hagelin is a Certified Financial Counselor with LSS Financial Counseling. She specializes in Foreclosure Prevention and Reverse Mortgage counseling.