Poll: How Big Is Your Emergency Fund?

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Below is a chart of the median duration of unemployment from July 1967 to December 2010, based on data supplied by the US Department of Labor. Things are bad out there, and remember, this is just the median!

According to this December 2010 report from the Bureau of Labor Statistics, out of the 9.4% unemployment rate, 44.3% of them are considered long-term unemployed (those jobless for 27 weeks or more). That means over 4% of the total US workforce – 6.4 million people – has been unemployed for over 6 months.

Which leads to the poll question of the week. How prepared are you for an extended period without a paycheck? In this case, by emergency fund I am talking about a cash (or similar) cushion that is accessible, not lines of credit.

How Big Is Your Emergency Fund?

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  1. That looks like a very gloomy outlook, suggesting that a lot of unqualified people who even possibly immigrated into the U.S. had jobs supported by the credit-overheated economy and can’t find anything now, when companies are reluctant to hire workforce with lower education when their sales aren’t rising.

    “Things are bad out there, and remember, this is just the median!”

    I think that this particular median is one of the best statistical markers for the measurement of the shape of today’s labour market. The peaks which distort means and other indicators can be pretty monstrous…

  2. Why would you work hard to find a job if the government will continue to extend umployment benefits?

  3. So many people are paying down debt in lieu of saving for emergencies. It’s scary that so many live from paycheck to paycheck.

  4. To Elli: I doubt illegal immigrants are counted in the stats. If they are you have a point. Otherwise my personal impression is that legal immigrants often are well-educated and have a lower employment rate than the general public…

  5. Eric – have you ever been on unemployment? In most states, the amount is minor, not enough to carry on well. I think very few people would be content to stay on unemployment benefits to the point of not looking hard for work.

  6. @ttfitz, my friend is a recruiter, people tell her that they don’t want a job because they make more on unemployment.

  7. My company is hiring and we are having a difficult time finding people. We have people that apply and never show up for interviews or disappear afterword. We are offering entry level professional positions that pay more than unemployment in our state and the person would have medical benefits and 401k and we cannot get people to take the positions. Sad.

    Unemployment should be tightly structured as it is necessary in certain industries like construction and trade jobs that are really hard hit in our area, but my industry is hiring and people don’t want the jobs.

  8. TJ – Really? Wow – those must be either really crappy jobs, or your state has really great benefits. My wife drew unemployment benefits for a couple weeks in 2008, and she was getting the maximum amount and it was less than $400/week. The minimum amount was less than $75/week. Hard to imagine many people turning down a job in order to collect that amount.

  9. I’ve been on unemployment (in 2008 from July – September). It didn’t pay enough to turn down a job. Anyone willing to turn down a job to remain on unemployment deserves what happens to them when Congress gets some balls and quits extending it.

  10. Elli: To suggest that the unemployed are unskilled & immigrants is ignorant and prejudiced. Did you know that the average time it takes a senior-level executive to find a new job is 18-24 months? Even in the best of times, that number was 12 months.

    I can also tell you that, for the vast majority, unemployment benefits do not adequately replace income. Do not make such assumptions!

  11. Newlyfrugal says:

    My brother was on unemployment in FL in 2009. He got $275 a week, barely enough to pay rent. I truly doubt that good, honest, hardworking people will turn down a job that pays more than $275 a week. The people who turn down employment are those who are lazy to begin with.

  12. i know that my sister makes almost as much on unemployment as she made in her job which she held for an entire 6 months, its pathetic.

    she will not take another job, because she gets paid almost the same amount to sleep. Unless someone wows her with an offer (and they won’t, cause shes not smart), she won’t take a job.

    People are taking advantage of the system.

    I also know another guy, hes employed, but his wife was collecting unemployment for over 2 years … if you have 2 incomes in a household and 1 of them is collecting at 80% for doing absolutely nothing, theres no reason to go back to work.. i hate it.

  13. what they really need to do is have unemployement in tiers..

    like first 3 months u get 90% … 2nd 3 months u get 70% .. after 6 months u get 40% .. after 2 years u get 0%

    that would solve the problem

  14. As my emergency fund, I have more than I take home after taxes and retirement contributions each year in I-bonds, which are more than five years old so no penalty.

    Of course, taxes must be paid on the interest when I redeem, so it’s probably a little less than a years worth of after-tax money. But if I found myself unemployed, I bet I could stretch it out to last at least a year. Hope I don’t have to find out. gulp…

  15. It is valuable to consider – as I have so recently found out – that whatever the size of your emergency fund, expenses can skyrocket during an emergency, especially if it is of a medical nature. To wit: my 6-month emergency fund, so carefully and diligently contributed to, evaporated within 2.5 months of my wife becoming very ill. She is (thankfully) recovering and our money hemorrhage has stemmed to a mere 200% of our take home pay, but it has highlighted the dangers of assuming that costs can so easily be controlled.

  16. Andrea P. says:

    Unemployment compensation is insurance, not welfare. It is designed to help you out between jobs. I would not feel comfortable collecting it for any length of time. In the state of New Jersey there is a max amount you can receive regardless of what your salary was. It would never be enough to cover all living expenses. Also, eventually your benefits run out. Six months later you will be unemployed with no income. Go Figure!

  17. I think some people, depending on what they’re used to making, can survive well on unemployment. I think I could, but its not a long-term solution. Especially if you have dependents or medical bills – most people that enjoy unemployment are usually without those particular problems.

    Keeping an emergency fund important to me, so I have a little over a year’s expenses at the moment in fairly liquid accounts. When employment rates rise again eventually I can always scale back to keeping 6 or 9 months. Let’s hope it turns around soon.

  18. Some people go into a funk when they lose a job and they accept a lower standard of living in exchange for simply not having to do anything. Call it it laziness, depression, whatever, but I see it a lot. I also know personally of several professionals that decided to take unemployment for an extended period of time because they figured after 30 years in the workforce they were due a sabbatical. They had no problem letting people know that was what they were doing.

    I had a patient that told me how desperate she was to find a job after 9 months unemployed. I set her up with a friend who offered her a job. It paid $9/hr, but she turned it down because it was 32/hr a week. I just don’t understand that.

    Unemployment is a necessary evil. To call it insurance is disingenuine since the employer (not the recipient) paid the premiums, and the “insurance company” is the state.

  19. I HAVE been on unemployment, and I’ll say that what Eric
    says is true. If you are a family man (or woman) and care about
    your family, you will regard unemployment as a temporary
    measure till you can find any suitable employment. But if you are
    a typical single, and don’t think you need health insurance (and
    especially if you live with your parents), you will tend to regard
    unemployment as a low-rent vacation. Sorry, and I know that
    there ARE many exceptions, but it’s true. Human nature.

  20. I believe that some people earn more with unemployment checks than working, especially when you consider gas prices, car costs, taxes, personal care, etc. Don’t forget that they collect unemployment + food stamps + section 8 or stop paying upside-down mortgages, living renting free for a long time until getting evicted by banks and moving back to parent’s home. Plus the majority of 50-year who were earning 150k / year + goodies, just because they liked playing golf and looked American, will never get that type of income back. Folks, there are almost 44 million Americans on food stamps and only 20% of the populace holds a bachelor degree.

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