If an emergency arrived in your life, could you come up with $2,000 in cash to cover that emergency?
Believe it or not, if you’re an American, it’s a coin flip as to whether or not you could pull this off. According to this study from the National Bureau of Economic Research, “approximately one quarter of Americans report that they would certainly not be able to come up with such funds, and an additional 19% would do so by relying at least in part on pawning or selling possessions or taking payday loans.”
At some point in our lives, almost all of us are going to face some sort of financial shock that’s going to require us to come up with $2,000 (or more) very quickly. Half of us are going to be unable to do that, which puts that group in an extremely precarious position.
Could you do it? Are you in the “safer” half of that question? Or are you in the more dangerous half?
I look at situations like these as “financial stress tests.” The $2,000 question points to a challenge that I’m likely going to face at some point in my life – in fact, I’ve already faced it a time or two.
Can my finances survive that kind of “stress test”? What would things look like if I suddenly had to start caring for an ailing parent or if I got sued for something unexpectedly? Would I be ruined? Would I be selling off valued possessions?
Or could I survive such an event with little stress beyond shifting money from one account to another?
What about other stress tests? What if we suddenly found out that Sarah was pregnant – with triplets? We’re currently the designated guardians of four children, meaning that we’d have to adopt them if something happened to their parents – what would we do in that situation? What if several things went wrong with my SUV tomorrow and we had to replace it relatively quickly?
What if Sarah got sick and lost her job? What if I got sick and lost mine? What if one of our children started facing serious medical problems that our insurance wasn’t adequately covering?
All of these things could potentially derail my life. It would also have an impact on the lives of the people around me – my wife and my children, especially.
I often use those scenarios as a “stress test” for my financial, personal, and career situations. Would I be able to come up with the money to handle the financial needs? Is my career – and my resume – stable enough to deal with what might be necessary in some of those scenarios? What would happen if multiple additional children (or other adults) suddenly needed to live with us and be cared for by us?
For many people, those situations are nightmarish, of course. Some of them are rather nightmarish for me.
However, I’m constantly taking steps to ensure that we could get through these $2,000 questions without too much disruption. I focus on saving money, building income streams, building up a resume, and having a stable marriage as a protection against the unknown.
Could you handle the $2,000 question? What about these more difficult questions?
If you can’t handle them, you have some financial work to do, my friend.