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What The Hell is Wrong With Some People? Emergency Funds vs. The Smart Phone

I choose not to discuss them often but the basics of personal finance are the same whether you are making $46,000 or $460,000.  I feel like most people are smart enough to understand if you are spending more than you are making that is is unlikely that you’ll get out of the situation you are in (the exception of course is taking calculated risk that works out).

I Can’t Begin to Understand Some People’s Decisions

It is either that people generally don’t understand the basics of personal finance or they are dumb.  I tend to believe it is the former rather than the latter but studies like the two below may prove that I am wrong.  CNNMoney just outlined a study from bankrate that really upset me:

  • 49% of Americans do not have enough money saved to cover 3 months of expenses
  • 28% of Americans do not have any emergency savings

Granted the study was only based on a 1,000 “adults” but that meant 280 of these people didn’t have any emergency savings?!

Evan, it is hard times out there.  I get it and I would sympathize but the above linked articled came out only a couple months after CNN outlined a study by Pew that indicated that:

  • 46% of Americans have a smartphone

Read those stats again.  Nearly a third of Americans do not have any emergency savings but almost half has a smart phone?

What is wrong with people. 

Lest you think I am on my high horse here, but in terms of the personal finance blogging world I am not frugal (real life friends may say otherwise).  The Wife drives a leased car, we both have smart phones, my cable package has every single movie channel, I often tweet pictures of overpriced food and drinks, and I will eventually be paying for a very expensive home instead of moving to a cheaper part of the Country, but there is a difference…I have an emergency savings account!



  1. Not to play devil’s advocate but a smart phone isn’t that expensive. I don’t know about you but $100 in my EF wouldnt’ go far. Plus, lots of people (me!) get free smart phones with their plans.. etc. SO I don’t think that’s indicative of a problem. I think the vacations, TVs, etc is much more problematic.

    • Its not the $100 for the phone (although mine was $200) – it is the reoccurring charge. You can get a prepaid plan or a very low no data plan for what $30 a month vs $100+ a month.

      That $70 a month is $840 a year.

      I am not a “kill the latte” guy but to be spending $840 more a year and not have an EF is lunacy.

      • Nah, everyone is going to have a cell phone and pay about $40/mo for it. Really all they would save without a smart phone is the $30/mo data plan. That comes out to a $360 savings per year.

        Better than nothing, but not much of an emergency fund.

    • “Isn’t that expensive”? Seriously?

      A hundred bucks a month is half my grocery budget. It’s way more than I can afford, if I hope to stay in the black (not an easy trick in the present economy and the present gross underemployment occasioned by said present economy). Maybe 46% of Americans are not affected by the recession-that-is-not-a-depression and the widespread under- and unemployment.

  2. I love my smart phone. That being said I have an emergency fund and know that if push came to shove the smart phone would go. I would feel a little odd not being connected to the world all the time, but that’s the way it would be. Thankfully I have an emergency fund to cover me.

    I think most people don’t have an emergency fund because they use the “ostrich” strategy. It is better to pretend nothing is wrong or going to be wrong than to address the problem.

  3. I do not have a smartphone, but I have savings. It came in handy because my refrigerator died! Although I am using the no interest payments for a year. I could pay it in cash. I am happily accepting the $115 utility rebate as well. I will lower my utility bill too.

    • There are a lot of things wrong with both studies. In reality how can one even be called a study with only 1,000 people answering. But I can see what you are saying – that the 28% with no savings make up the 54% of those without a smartphone? I really really doubt it is that cut and dry though.

      I guess one can look at the Fed’s release of savings rate and then just compare that to the Smartphone ownership rate? Since the savings rate is likely to be more inclusive of everyone? Just a guess though

  4. I think your entire premise of there being no difference in personal finance between $46k and $460k is ill informed. It is possible for a single person in some parts of the country to have a “difficult” time living on an income of $46k. Someone earning $460k a year is guaranteed their basic needs and many wants are met.

    I do get your point about prioritizing emergency fund (EF) over a mobile phone plan. It is arguable as many people forego landlines, their mobile phone is their one line of communication to distant friends, etc. I would categorize a mobile phone very close to a need like that of food, clothing, and shelter.

    Maybe research stats on how many people carry a balance on a credit card that charges interest. Perhaps there is some correlation between people not having emergency funds and those that have debt. I think many people are inclined to want to pay their debts off (besides mortgage) before sacking away for an emergency fund.

    • If you would categorize a mobile phone as equal to food and shelter then I am guessing you are pretty young.

      • Well. If you have no land line, then the cell phone becomes exponentially more important. In our culture, especially in a big city where few of the neighbors know each other or pay any attention to each others’ welfare, some kind of communication device is absolutely crucial, if for no other reason than to be able to call for help.

  5. I have to agree with nickel that we do not know the overlap. However I do know many people with smartphones and no refunds. My generation has entitlement disorder and it’ll catch up with them one day.

  6. I’m pretty sure MUCH MORE than 49% of Americans have enough to cover more than 3 months worth of expenses.

    This is media schadenfreude at its best. Don’t you have more than 3 months? I know you do, and so do I, and so does everybody who will comment.


      • Sam,

        I just think you and I differ on the state of some people’s finances. For once, I am going to go with C lol

        • Yeah, “lol.” Because me having no money is a wonderful source of amusement.

          I wonder how funny it would be if you got fired and couldn’t feed your child. Ha ha?

          • I was laughing at the fact that I actually agreed with you not your situation.

            I can get fired at any time. Any time. That is what drives me to build other streams of income.

    • Its also 46,000 times more than some people make a year. I think about $50K is the average household. Yes, some people aren’t households and some people that read the blog make a couple hundred grand.

  7. “Lest you think I am on my high horse here, but in terms of the personal finance blogging world I am not frugal (real life friends may say otherwise). The Wife drives a leased car, we both have smart phones, my cable package has every single movie channel, I often tweet pictures of overpriced food and drinks, and I will eventually be paying for a very expensive home instead of moving to a cheaper part of the Country, but there is a difference…I have an emergency savings account!”

    In other words, it’s all okay as long as it’s you doing it. Or, do as I say, not as I do. Or, I’m a hypocrite. Or…

    • No. I am positive leasing a car is the wrong mathematical choice but I do it anyway because I am not struggling without an emergency fund. I just find it shocking someone could rock the ostrich move that deep.

      • Implicit in his statement is that a person with more money is allowed to make foolish financial decisions while someone who makes less is to be scorned for the same action. If the basics of personal finance is the same regardless of income, then I would think financial decision should be made wisely regardless of income.

        • “Implicit in his statement is that a person with more money is allowed to make foolish financial decisions while someone who makes less is to be scorned for the same action.”

          Very interesting. Really made me think and write and rewrite my reply a couple times. I think it comes down to discretionary funds and how they choose to use those funds.


  8. well evan – everyone knows if you do (Or do not) have a smart phone – you dont walk around with the size of your emergency fund stapled to your sweater. People just assume you have one (or these days, assume you dont)

  9. I have to laugh at this post. When I was in a bank, I would constantly have conversations with people that were overdrawing their account. The first thing they do? Put their smart phone on the table.

  10. I agree with these statistics. Being financially prepared is mostly a lost art. Everyone in my family takes vacations, have new cars, and are constantly buying everything with no care for tomorrow. Yeah and all have smart phones. They are late on their rent and paying their bills. It’s like an epidemic.

    Are they dumb or do they even realize the economy could tank tomorrow and they could all lose their homes. I am nervous about my own situation of having only two weeks emergency money. It’s scary.

  11. I actually think you are dead right. People don’t seem to have their priorities sorted as well. It always annoys me in the UK to hear of some people struggling to pay their bills when they have sky (digital) TV that they are forking out up to £60 a month for. Ridiculous! I’m going to join you on that horse.

  12. After 16 years in the trenches getting to look “behind the curtain” at hundreds of people’s financial pictures, I’ll confirm: lots of people out there who have zero savings and expensive toys. For many, looking rich beats building wealth.

    • I am with you in the trenches…I was working on a case the other day and the person had a mil in earned income ($1,000,000) paid $360 in taxes and only 2mil in assets! It was like where the hell did the money go lol

  13. Fire Burns = Fire is Bad type of logic is not logical to me. It is not what you have but how you use it.

    That being said, I personally heard a person saying that he does not mind working two jobs to drive his luxury car!

  14. Building up an emergency fund was just about the only smart financial decision I made in college. I still have the funds ten years later and its come in handy. I highly recommend it!

    I also managed to save up my emergency fund while being $10k in credit card debt and attending college full-time. I don’t think it matters if you have a smart phone, you have to want an emergency fund. If you do, you’d find a way to have one. What this really shows is that people think there is more value in a smart phone than an emergency fund.

    • You built an emergency fund WHILE in college? That is a very amazing accomplishment. 21 Year old Evan was wayyyy too dumb for that.

  15. I teach in a junior college–the fount of my current underemployment. Many of my students are living on student loans; many others work as wait-staff, care workers in nursing homes, minimum-wage retail clerks, tattoo artists, pole dancers (well..the pole dancer did pretty well for herself, come to think of it…let’s leave her out of this calculation). Well over half of them carry smartphones around.

    You can’t pass judgment on people for their choices, I suppose (what if the kid were killed in a car wreck tomorrow? At least she’s enjoyed her expensive toys for a little while, and the only piper she had to pay was the cosmic one). But you sure can gaze at them in awed amazement.

  16. Thanks for sharing the numbers Evan. I do know many people who have the latest gadgets, but don’t have savings.

    It is kind of funny how easy and relatively cheap it is to buy a smart phone. Signing up for a 2 year contract can snag you a ‘free’ smartphone, but the added fees with the data plans that come with the phone could’ve help with funding a savings account.

    When I was in college I too went through that phase. It was so easy to get a credit card and to buy stuff. It seemed too hard to build some real savings.

    I finally realized I need to take a break from getting stuff and actually take the time to build some foundation on my finances.

      • I started changing my finances during my senior year. Besides getting ready to graduate I was also a newlywed. Making our budget work meant learning to prioritize.

        Note: I have no idea how I missed you follow-up question before. Oh, well – better late than never.

  17. Well, I agree that an emergency fund (or other easy to liquidate investment) is important for at least 4 months, when I was doing very very poorly I kept my cell phone so I could get calls about work and from my clients. You see I have been a freelancer since about 2 years before the great recession started. My partner at the time didn’t help at all so I was a single earner household that went from about 6 months in cash savings to negative 2 months, by the time work started to pick up a year and two months ago. I’ve always been frugal according to American standards.

    My cell phone at the time was PREPAID, so I basically used it for getting calls since where I live the person who makes the call pays the call. I spent about 100 pesos per month on average since prepaid expires after 30 days and I didn’t have a home phone. Since I also sell my designs online I paid for internet at home. Again it is a work expense.
    Although you can be stunned with the cell phone vs. emergency fund, it is important to understand that many people NEED a cell phone and internet for their work because they are freelancers and/or consultants.

    I’m back to 4 month’s emergency fund and now have a 300 mx peso a month plan that includes the phone. It is cheaper than what I’d spend prepaid for my current level of clients.

    • Things can take a turn for the worse which is why it is so important, to have it all set up in place. Glad everything is picking up for you.

  18. Not sure what to say that hasn’t been said. On one hand, it’s not really a good sign when nearly half of the country has insufficient emergency savings, and more than a quarter have nothing, particularly if nearly of the country also has smart phones. (Note: While I can understand the arguments being made that cell phones are sometimes needed for business or similar things, I don’t think most people need phones of sufficient power and abilities to be called ‘smart’ for those goals). On the other hand, without knowing how much of an overlap there is (or for that matter, how well these two surveys represent the country at large), it’s hard to draw any true conclusions. Still, definitely some food for thought.


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