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Unexpected expenses hurt our finances bigly

2 minute read

There is a new “middle class” in town, and their less-than-stellar credit scores are hurting their emergency savings.

Elevate, a company that focuses on consumers with low-to-moderate credit, says nonprime Americans — or those with credit scores below 700 — can’t afford an unexpected expense.

Those nonprime Americans have it worse than their good-credit peers. Half of nonprime Americans have month-to-month incomes that aren’t steady, and their income is significantly less than their prime friends.

And credit score is just the beginning. The value of a dollar is vastly different across the country. $100 in Tulsa is worth just $69 in Honolulu. It’s also $131 in Kansas City. This means that where you live can have a significant impact on how you can weather a financial emergency.

According to Elevate, Americans with low credit scores can afford about a $1,400 expense, which equates to more than the cost of replacing a water heater ($950) but way less than the cost of a typical transmission for a car ($2,800). Americans with higher credit scores can afford up to a $2,900 expense.

Good credit matters more than ever

Elevate says nonprime Americans get hit with unexpected expenses more often. More than half — 53 percent — have three or more financial surprises a year. Only 28 percent of prime Americans have the same amount of financial surprises.

“The financial fragility of nonprime Americans is not a simple problem,” says Jonathan Walker, executive director of Elevate’s Center for the New Middle Class. “Deep understanding is required to find solutions that will be constructive and sustainable.”

Most of us, regardless of credit score, aren’t ready for an emergency. Nearly 40 percent of us would turn to credit cards in the event of an accident, layoff, car repair, or another emergency. And those credit card transactions matter. The lower your credit score, the higher your APR, which means the monthly fee on top of your regular credit card payment is even higher.

How to build an emergency fund

Regardless of credit score, having some extra cash stashed away is the best thing you can do for your future self and your family. If you’re having trouble finding anything to put away, it’s time to assess (or re-assess) your weekly, monthly, and annual bills. Go over every place a dollar goes, including credit spending, to see how you can cut costs and save money.

If you don’t have one yet, create a budget right now. Whether it’s with a spreadsheet, an app, or just old-fashioned pencil and paper, track every dollar coming in and every dollar going out. Categorize your transactions, like home supplies, utilities, groceries, and others. Some things will fluctuate cost, like food, while others can be a fixed amount, like mortgage.

There’s no getting around necessities, like monthly rent or the electric bill, but take a hard look over everything that can change. Can you call your car insurance company and negotiate a lower rate. What about your cellphone bill? Can you look around to other companies who have special offers right now? Little changes to your recurring bills can go a long way.

Cut spending when and where you can: Give yourself a set amount to spend on food, gas, and even budget in savings. Once you pay yourself by making it a requirement, you’ll be less inclined to skip it.

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About the Author

Dori Zinn

Dori Zinn

Zinn is a freelance journalist based in Fort Lauderdale, Florida.

Published by, LLC Mobile users may also access the AMP Version: Having Bad Credit Makes Saving for Emergencies Nearly Impossible - AMP.