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My Good Financial Decisions Couldn’t Save Me
According to a 2019 Bankrate.com survey, only 40 percent of Americans have enough in their savings accounts to cover a $500 or $1,000 emergency. And that’s pretty bad news, because 36 percent of Americans say their largest unexpected expense last year was more than $5,000. Even worse, about 80 percent of Americans have debt.
There’s definitely overlap among these groups. Countless Americans have no savings and are struggling with debt. And before you quickly dismiss the problem as too much splurging motivated by incessant advertising, only 41 percent of that debt goes to non-essential expenses, and credit card debt is only 25 percent of our total debt.
That’s because a lot of our debt comes from so-called “good debt,” such as mortgages and yes, student loans. These fixed-amount debts can actually be good for your credit, because you pay on time (right?) and show that you’re a responsible borrower.
But credit card debt is “revolving debt,” and that will get you. If you use more than 30 percent of it, your credit score goes down. Financial advice gurus are quick to say that you simply need not spend more: use it on monthly expenses and then pay it off at the end of the month. Simple! They conveniently ignore what happens when you have to charge those emergency expenses — or basic costs of living — and go over 30…
