Do You Have $400? : The Indicator from Planet Money The U.S. economy has been humming along in the last few years, but that momentum can mask the financial fragility of millions of people who are just one emergency away from financial disaster.

Do You Have $400?

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If you were hit with an emergency expense and needed to come up with $400 right away, right now, could you do it? If you don't have the money in savings, is there someone you could borrow that money from, or is there something you could sell to get it? This is THE INDICATOR, where every day we tell you a short story about the economy. I'm Stacey Vanek Smith.


And I'm Cardiff Garcia. There's been a decent amount of good news about the economy in the last few years - and actually, more than a decent amount.


UNIDENTIFIED REPORTER #1: Just as wages climbed 2.7 percent, the unemployment rate matched the 50-year low.

UNIDENTIFIED REPORTER #2: The S&P seeing its strongest start to a year since 1987.

UNIDENTIFIED REPORTER #3: First quarter GDP - holy cow, better than expected, up 2.3 percent.

VANEK SMITH: Americans are feeling better and better about their job opportunities and their overall finances. But if you take a closer look at those finances, you'll see that a surprising number of people are not prepared for a sudden shock.

GARCIA: And this matters not just because it's obviously bad if people can't pay to fix their car when they get in a crash or if they can't pay a hospital bill when they get really sick. It also matters because it means that a lot of Americans are just a single missed paycheck away from being in serious financial trouble. They depend on the economy staying healthy to pay their bills. So if the economy takes a bad turn and they maybe lose their job, they'll be the first ones to suffer.

VANEK SMITH: Today on the show, three indicators that show us how prepared or unprepared Americans are to deal with unexpected expenses.


GARCIA: Once a year, the Federal Reserve publishes the results of something called the SHED. That stands for the Survey of Household Economics and Decisionmaking.

VANEK SMITH: It's a survey of thousands of American adults.

GARCIA: And there's a category of questions in the survey that's all about how well Americans can deal with unexpected expenses. One of the questions is about how to deal with an unexpected $400 expense. And just for context, the average car repair bill is between $500 and $600, and the median cost of a major unexpected medical bill is about $1,200. So it's not like $400 is an unusual amount of money for people to need in an emergency.

VANEK SMITH: And indicator number one is 40 percent. Last year, roughly 4 out of 10 American adults could not have paid for a $400 expense with their cash savings. And of course savings is not the only option for getting your hands on money if you need it. There are other ways to pay for a sudden expense. You could borrow money from friends or a family member. You can sell something. You can use a credit card, then pay that down over time. But even those options aren't enough for everyone. About 11 percent of American adults simply could not come up with the $400 at all, not with family, not with credit cards - nothing - unless they used money that they were already using to pay other bills like rent.

GARCIA: And by the way, 11 percent actually represents a huge number. That'd be about 27 million American adults. So that's emergency-ready indicator number one. Indicator number two is 27 percent, or about a quarter of American adults. That's how many people last year would've skipped paying for some kind of medical care because they could not afford it. The most common types of care that people skipped were dental work, visiting the doctor and even prescription drugs. And, yes, this actually applies even to some people with health insurance, though as you'd expect, the number is much higher for people without health insurance.

VANEK SMITH: And indicator number three isn't about a new emergency. It's about people's ability to pay for this month's bills. Indicator number three is 22 percent. That is how many Americans were not able to make a full payment on some of their bills in the month that they took the survey. About half of these people were not able to make their credit card payments. About a third of them were not able to pay a bill related to their home. So that could be either a mortgage or a rental payment or their energy bill.

GARCIA: And for all of these indicators, the people who are the least prepared to weather a sudden financial storm tend to be lower income, and they tend to not have college degrees. So to give just one example here, of people who make less than $40,000 a year, about 4 out of 10 of them skipped getting some kind of medical care last year. For people who made more than a hundred thousand dollars a year, it was less than 1 out of 10. So what are these indicators telling us? They're telling us that an awful lot of Americans - maybe you or maybe your friends or your neighbors or your family - are in a precarious position, more than you'd expect given the momentum the economy has had lately.

VANEK SMITH: There is some good news here, which is that these numbers have been gradually getting better. Since five years ago, when the first survey was started, there are fewer people who would struggle to come up with this $400 and fewer people who've been skipping health care expenses.

GARCIA: But as the survey also shows, even with that improvement, there's a troubling number of adults who are still vulnerable to the ups and downs of the economy. And the economy's been in the up phase for about eight years now, but eventually the down phase will arrive. And if it arrives too soon, it's going to hurt a lot of people who are just one car accident or a missed paycheck away from serious financial hardship. You know, Stacey, I want to talk about this just a little bit more.


GARCIA: I don't think a lot has to happen for somebody to face a $400 emergency bill. I mean, weren't you surprised by any of this?

VANEK SMITH: Yeah. Yeah. I mean, the $400 thing surprises me a lot because - I don't know. Our economy's been doing really well, and the unemployment number's really low. And I did not think we were here.

GARCIA: I guess I'm surprised most by the sheer numbers here, right?


GARCIA: Like, more - like, 1 out of 5 or 1 out of 4 American adults facing this kind of a problem if something unexpected comes their way. You know, that to me is I think the most surprising thing.

VANEK SMITH: And the economy cycles, right? I mean, we've been in an up phase for a long time. And the idea that, like, a down phase could happen and all of these people are so close to the line - I mean, that makes it seem like the economy is in a very precarious position to me.

GARCIA: It's important, I think, not to confuse the momentum of the economy with, like, the fragility of all these adults and all these households and where they are. Like, they are super reliant on the economy continuing to improve. And if it stops improving, yeah, they're in a lot of trouble.


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