Over the Hill

$400 for an emergency? 47 percent say they struggle with saving

If you had a $400 emergency, how would you pay for it? Could you write a check or use your debit card? If so, congratulations — because 47 percent of Americans who responded to a Federal Reserve Board survey said they didn’t have $400.

Some of them said they’d have to borrow the money. Others said they’d sell something. Still others said they couldn’t raise $400. Just think: Almost half the Americans who responded didn’t have $400. I read that in the May issue of The Atlantic magazine.

And what’s more, the author of the article admitted he was a member of that 47 percent. He is Neal Gabler. You may have heard of him. He’s written five books and hundreds of articles. He also teaches and lectures and writes TV scripts. He seemed truly embarrassed by his money management difficulties.

He said his income was solid middle-class and sometimes upper-middle-class, but he still struggled to make ends meet. He said the Federal Reserve survey and other surveys showed some other middle-class — and even upper-class — professionals were in the same predicament.

His money management woes interested me because, before going into news reporting in 1968, I worked for the Beneficial Finance Co. for 13 years. I managed the Beneficial office in Sunnyvale and then opened and managed its office at 1231 Spring St. in Paso Robles. You now see a city parking lot there.

If I remember right, Beneficial would lend you $50 to $2,500. We’d loan up to $300 on your signature. For more than that, we required some collateral — your furniture or your car or both.

Our interest was 2.5 percent per month on the first $200 of your unpaid balance, 2 percent for the next $300 and 0.83 percent on the remaining unpaid balance. The amount of your interest would decrease each month as your balance went down as long as you didn’t borrow any more money.

We don’t see that sort of finance company anymore. Maybe they faded away when credit cards became popular. But now we find numerous payday lenders in many states. We have three here in Paso Robles.

Payday loans in California may not exceed $300. You write the lender a check for $300. He gives you $255 and keeps a $45 fee. He also doesn’t cash your check until your next payday, but then you’re likely back in a hole, needing to borrow more money. The California Business Oversight Department recommends that you contact a consumer credit counseling service for help in escaping from this vicious circle.

Even if you aren’t yet that deeply in a hole, you should make a detailed budget. Include all expenses and bills and all income. Then spend less than your income and put the difference into a savings account each month.

If there’s something you really must buy, I recommend finding the best one you can afford. But don’t buy it. Buy a cheaper one and put the difference in your savings. Saved money can save you.

Phil Dirkx’s column is special to The Tribune. He has lived in Paso Robles for more than five decades, and his column appears here every week. Reach Dirkx at 238-2372 or phild2008@sbcglobal.net.