Financial straits How to make moneyQuick, without thinking too hard, answer this yes-or-no question: If you were faced with an unexpected $2,000 emergency expense in the next 30 days -- a car or home repair or a medical bill -- could you come up with the money to cover it?

According to the findings of a recent survey by the National Bureau of Economic Research, about half of you answered no.

In fact, the results led the study's authors to state, "We find that nearly half of Americans are financially fragile." How fragile? One quarter of respondents said they certainly could not come up with that amount of cash in 30 days; 19% said they would be able to cope, but only by selling or pawning some possessions or relying on payday loans.

If you're a glass-half-full person, maybe you like your odds and think it's unlikely that you'll be caught off-guard by a big emergency expense. Well, here's another way to think about it: What if a weatherperson said there was a chance of rain today and delivered that information alongside a computer graphic of a violent downpour? You'd probably grab your umbrella before you leave for work.

Financial emergencies are kind of like bad weather -- you don't always have a lot of warning before they strike. But if you have no savings umbrella, it's easy enough to forecast what would happen if a financial hurricane rolled through town. Here are potential scenarios:

Scenario No. 1: Replacing Your 20-Year-Old Transmission

As the owner of a 1997 Toyota 4Runner with 170,000 miles on it, this scenario is near and dear to my heart. So far, I've dodged this bullet. But let's say your trusty mechanic delivers the bad news.

A new transmission costs roughly $3,000. If you don't have cash on hand, it would cost you an extra $266 if you put it on a credit card, or $272.19 per month, assuming you take 12 months to pay the charge off a 16% APR credit card.

Don't have that line of credit available? Add an extra $1,286 to your $3,000 tab (for a total of $4,286) if you have to liquidate some of your retirement savings to cover the cost. The extra money would go toward paying Uncle Sam taxes on that $3,000, along with a possible early withdrawal penalty if you're under the age of 59½.

Scenario No. 2: Replacing your HVAC system

Due to Murphy's Law, heating and cooling systems always seem to die either on the hottest, steamiest August day or the most bone-chillingly frigid winter evening. In other words, there's no getting by for long while you wait to come up with the money to replace it.

Let's say a new HVAC system runs you roughly $5,000. If you didn't have the funds available, putting it on plastic pads your tab by $443 -- and that's assuming you can afford to pay $453.65 per month for the next 12 months to pay it off. The bill can easily double -- especially at 16% interest! -- if you extend your payoff period. As for dipping into your retirement savings, that brings the cost of replacing your HVAC to a whopping $7,143.

Scenario No. 3: Breaking your ankle

This one actually happened to me.

  • Emergency room co-pay: $100
  • Deductible: $1,500
  • Multiple physician co-pays and physical therapy sessions: $400
  • The story of how I broke my ankle: Priceless (If you have to know, playing tennis against a concrete wall and being clumsy.)
This little adventure cost me $2,000 out-of-pocket. Had I 2swiped plastic and not had the funds to pay when the bill arrived, it would have cost me $181.46 per month assuming it took me 12 months to pay off. If I had to liquidate some of my retirement savings, we'd be talking about shelling out $2,857.

Beat the Odds One Dollar at a Time

How does your emergency savings umbrella look? A bit torn? Disheveled? Completely nonexistent?

If scraping together a pile of cash sounds daunting, just start small. Take a close look at your budget, determine how much money you can afford to stash away each month, and commit to saving the money in a rainy-day checking, savings, or money market account.

Think of it this way: If you start socking away just $170 each month, one year from now you'll be better off than half of your American counterparts. An even better reason: You'll sleep well at night knowing that if an unexpected storm blows your way, you'll stay nice and dry.

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Your $2,000 ER bill would've been a lot higher if you were uninsured, or if your insurer decided not to pay for treatment.

June 18 2012 at 9:07 PM Report abuse rate up rate down Reply

At bare minimum, at least 50% of the families in this country are living close to the poverty line. The ones in the upper percentile of this 50% pretty much live paycheck to paycheck. The lower percentile of this group spend a lot of time down at the payday loan store. These folks do not have an umbrella or even a rain hat. The next 25% are a tad better off, but even the upper percentile of this 25% have little in the way of reserves. The top 25% have umbrella's of various sizes. We have turned in to a nation of have's and have nots. The blame game is useless. This has evolved over a few decades and both parties have been on hand steering at various times.

June 13 2012 at 10:50 AM Report abuse rate up rate down Reply
Trudy Marie

I have a Dollar Tree umbrella---does that count???

June 11 2012 at 6:52 PM Report abuse +1 rate up rate down Reply

If you voted NO you better not vote for the republicans. They also want to take your social security and medicare away...........

June 11 2012 at 2:40 PM Report abuse -3 rate up rate down Reply
2 replies to toosmart4u's comment

The GOP wants to eliminate SS and medicare to pay for tax cuts for the 1%.

June 11 2012 at 4:36 PM Report abuse rate up rate down Reply

diMs remain diMs and type away faster and faster trying to bail out obummer's sinking ship.
war on women's bettter and what was that fraud's name ?????--ooh yeah--flucks--where'd she go ? LM@O.

June 11 2012 at 10:18 PM Report abuse rate up rate down Reply

The same people who answered no are stilling running out and buying the newest I phone or gadget. Hand to mouth.

June 11 2012 at 12:49 PM Report abuse +2 rate up rate down Reply

Aneyone who takes govt handouts can't possibly have anything left over. They were taught to live hand to mouth. If they had a small savings they would lose their govt check. The govt teaches poverty and nothing more.

June 11 2012 at 10:58 AM Report abuse +3 rate up rate down Reply

afterm ive bought my booze and cigarettes and pot and and made my harley payments and paid for my season chief tickets theres not alot left for financial umbrellas......

June 11 2012 at 8:17 AM Report abuse +3 rate up rate down Reply

So how do I stash $170/mo on unemployment? My weekly payments cover one tank of gas and one week's groceries. Pffft, Stupid article and not in keeping with the times.

June 11 2012 at 7:46 AM Report abuse +6 rate up rate down Reply

Yeah I've got a financial umbrella and I'm sick to death being taxed to death because of it. Especially when an ungodly amount of my tax dollars go to support the filthy animals on welfare who sit around all day doing nothing.

June 11 2012 at 7:20 AM Report abuse +5 rate up rate down Reply

ragtop ? ENSURE that every single hisssssspandering_whore of a politician gets VOTED OUT.
their "report cards" on illegals among other things ARE out here online.
even if people ONLY SPENT A BUCK making 20 copies of this and handed them out,it would make a difference.
apparently and IT IS APPARENT,way too many haven't A CLUE on the billions WASTED on illegals and never even QUESTION WHY OUR ELECTED harlots are MORE CONCERNED about ILLEGALS than the AMERICAN taxpayers WHO ARE PAYING THEIR BLEEEEEEEEEEEEEDIN SALARIES.

wake 'em UP !

June 11 2012 at 1:42 AM Report abuse +1 rate up rate down Reply