Coronavirus reveals Americans’ financial irresponsibility

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How long could you support your household if you stopped earning an income? If you are like most Americans, the answer is not long. Only 40 percent of Americans can afford an unexpected expense of $ 1,000 with their savings. In fact, almost 80 percent of workers live paycheck to paycheck. It is no surprise that the likelihood of an economic recession triggered by the coronavirus pandemic has raised many concerns.

In major cities such as Boston, New York, Los Angeles and San Francisco, restaurants and businesses have been ordered to close. For many hourly workers, that means no paychecks in the weeks to come. Almost one in five Americans has ever lost their job or reduced hours. At the same time, workers are worried about job security, as massive layoffs are looming in many companies. While the situation is understandably stressful for everyone affected, it is a belittled reminder that Americans must learn to live within their means and regularly save money.

The need for all Americans to be able to support themselves for at least a few months with their savings is heightened in times of crisis. It means planning ahead when times are right. Financial planners suggest saving at least 20 percent of net income, while spending at most 30 percent on discretionary items. Yet too many workers still don’t think twice before spending entire paychecks on things they want but don’t need.

The last decades have given us relative luxury. More … than 80 percent of Americans own smartphones. The same proportion of households own a high-definition flat-screen television, while more than half of households have more than one. More than 60 percent of Americans dine out at least once a week, while nearly 20% dine out three or more times a week.

The current panic is refocusing us on what is important. We are now storing the things necessary for our health. Smartphones, fancy televisions, and dining out are generally luxuries rather than necessities. Living within our means is not just rhetoric. It’s a way to protect yourself in times like these. We have so much to learn from those who came before us. How many of our grandparents went through the austerity of the World Wars and the Great Depression, finding out how to save, mend, and mend?

The availability of credit gave us an opportunity with a big hangover. He made beautiful homes, flashy cars and expensive consumer goods within the reach of working people of all income levels. But installment buying is often a trap and a major contributor to our $ 14 trillion consumer debt. Funding items as diverse as furniture, laptops, clothing and more with readily available credits has opened the door to tax recklessness. Consider the average Americans spending $ 800 per month on car payments.

It’s not just low- and middle-income earners who spend their wages every month. Many high-income earners are also living beyond their means. In fact, at least a quarter of households make $ 150,000 and above live paycheck. Our fiscal irresponsibility means that when an unexpected crisis like today’s strikes, Americans are unable to support their own families, even for a short time.

Politicians from both parties are therefore urging the federal government to step in and distribute checks to everyone across the country. Treasury Secretary Steven Mnuchin announced that the administration wanted to send checks to citizens totaling $ 1,200 per adult and $ 500 per child, with another round of help to follow if the pandemic continues.

While our leaders must act decisively in the event of a disaster, our own mistakes have made this situation untenable in the long term. In addition to consumer debt, our government has $ 23 trillion in national debt. A combination of stimulus checks, a potential recession, and new bureaucracies to oversee a recovery will further accelerate our date with the next generation financial default. The money will eventually come in the form of taxes, deferred payments for benefit programs, or outright inflation.

We each have a civic responsibility to our families and our country. The more tax audits we show at the kitchen table, the better our ability to handle the next crisis will be. A good balance between tax government and personal finance courses at the high school level is a start. For most young people, however, true financial literacy is taught at home. We have the chance to show the next generation that saving is winning in another way.

I have hope during this crisis. It’s a reminder, just like other traumatic events in history, of what really matters. The survival and prosperity of our families is the key to our success. As the pandemic unfolds, the ability to budget, prioritize, and teach is our chance to make things better. Our grandparents suffered tremendously during the Great Depression. With the right attitude, we can teach our children how to avoid one.

Kristin Tate is a libertarian writer and analyst for Young Americans for Liberty. She is an author whose latest book is How Can I Tax You? A field guide to the great American scam. Follow her on Twitter @KristinBTate.




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