Entry #7: Most People Only 11 Days From Financial Ruin

Last modified on July 26th, 2008

I read this interesting article today that basically said that most people in the United States were only 11 days away from financial ruin. That is, if they were to lose their jobs tomorrow, they only have enough money to last for about 11 days:

More than a third of adults could survive financially for only 11 days if they were to lose their job or be too ill to work, according to a survey.

The finding gives a worrying insight into the lives of millions who are living on a financial tightrope.

Researchers looked at how much people spend every month and how much they have in savings.

It found a massive gap between the two, which means most would be crippled by a sudden change in their circumstances.

I’m actually not surprised about that statistic, and in fact, my financial situation isn’t that much better. In terms of liquid assets, I really don’t have a pile of money in the bank at any one time. I could liquidate some of my RRSPs and what-not, but that’s obviously not a route I’d want to take. Given that I left school with approximately $40,000 worth of debt, and that I spend a good deal of my salary each month on servicing that debt, I really don’t have a ton left over to build up a big safety buffer.

That being said, I’m curious how much of a buffer most people have. Do most people here live paycheck to paycheck, or are you all more financially responsible than I am?

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4 responses to “Entry #7: Most People Only 11 Days From Financial Ruin”

  1. Jenn says:

    I’m in the same situation as you. I have about 35k worth of debt from university, leaving me with not much in the way of savings. My parents would be my only safety net…not the ideal situation

  2. Sadly I think this is all too common. 🙁

  3. Andrea says:

    Yeah, I think it’s pretty common. I don’t always think it’s just debt though. While most people have a lot of debt, they carry a lot of necessary debt because of trying to live beyond their means.

    We’ve tried really hard to limit what we buy, making sure it’s a need where possible, and really thinking about how much money comes in every month.

    So far, we’re almost in a position where my hubby can quit his day job and work with me at freelancing. We have a cheap house to pay for (and renovate),a small line of credit, and one credit card we pay off each month.

    Other people at our age & family status have double the amount of debt, but also things like two cars, expensive cable on more than one tv, boy toys like ATVs, snowmobiles, boats, kids in every expensive lesson available, and eat out frequently.

    Which there’s nothing wrong with – as long as you can pay for it. Most people don’t sit down and run the numbers.

  4. John says:

    We were definitely in the same boat as many people before we bought our place. In order for us to make the leap and actually buy instead of paying someone else’s mortgage, we trimmed as much excess stuff as possible, consolidated a few things and generally setup a reasonable budget – both of us even have some spending money in there each week (I jokingly refer to it as my allowance). This spending money is for anything outside of normal household expenses…including dinners out, movies, clothes, etc.

    This allowed us to stay within our means each month, pay off the credit card monthly and occasionally treat ourselves. Any extra money from the budget or elsewhere (thanks Gordo!) goes into the house fund which is then eventually used for upgrades/renovation/repairs type things…which lately it’s been put towards a new bedroom tv.

    All my ‘boy toys’ are paid for out of my consulting fees (I don’t do a ton of it but enough for an iPhone here and there) which are separate from my day job income. If I want something, I’m actually starting to save for it first instead of just dropping the plastic down…it’s been a tough thing to learn to do after many years of not doing it that way.

    Weird thing is that we’ve been on this budget since last summer and it’s been actually pretty good. My wife uses Quicken to track stuff so it’s relatively easy to see what money is going where.

    I don’t think the moral of my comment is to buy a house and all will be fine but it’s something that we did that really forced us to focus on the financials and put everything in perspective…it took us a couple of years to get things in financial order to be able to buy as well so it didn’t happen overnight.

    Simply setting a goal like wanting to be able to buy your own place (most likely in the burbs like we did since Vancouver is too expensive for most people) might be good enough motivation for you to look at your own situation differently.

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