When we first started blogging, I thought that I would write a fair amount about personal finances and financial independence. I haven’t done that as much as I expected, and this post isn’t much of an exception. It is, however, directly related to financial independence as it underscores the inexplicable lack of financial planning that goes on in our country.
Like most people, I have friends and acquaintances who make decent money yet live paycheck-to-paycheck. However, until recently I didn’t know as much about the overall financial fragility of households in the United States. The National Bureau of Economic Research recently published a paper which looked at the ability of households to come up with $2,000 in 30 days. (Borrowing money from family, taking a loan from a bank or pawning items at a shop would all count toward coming up with the $2k.) Their conclusion:
Nearly half of Americans definitely or probably could not come up with $2,000 in 30 days.
Annamaria Lusardi of The George Washington School of Business is a researcher who focuses on financial literacy. She co-authored the paper referenced above and has reached similarly depressing conclusions in other of her research.
- “The majority of Americans do not plan for predictable events, such as retirement or children’s college education.”
- “Nearly one quarter of individuals with checking accounts reported overdrawing those accounts on occasion.”
- More than half of individuals report not paying their credit card bills in full and being charged interest.
In case you were curious, if you’re an aspiring mini- or early- retiree, these are things to avoid.
posted by yair