You might be closer to the brink than you realize

We have a lot to be grateful for. I’m sitting here writing a financial newsletter, and you’re sitting there reading it. That means we both, thank goodness, have enough money to be concerned about investing it. We’re not living paycheck-to-paycheck, as so many others are.

We’re probably not even living in fear of a sudden expense. If the car’s transmission gives out or the basement gets flooded, we have enough saved to cover it or, at worst, we can take out a credit card and float it for a month or two. That means we’re in better shape than almost two-thirds of Americans, according to a Bankrate study.

But are we really as financially bulletproof as we like to believe we are? No less an authority than the Board of Governors of the Federal Reserve System suggests that, no, maybe we aren’t.

One emergency away?

“Four in 10 adults in 2017 would either borrow, sell something, or not be able to pay if faced with a $400 emergency expense,” according to the Fed’s fifth annual Report on the Well Being of U.S. Households. “While still disconcertingly large, the share of families who would struggle with such an expense has decreased over the past five years.”

Of course, $400 is a fairly low threshold. (The Bankrate study’s was $1,000.) The fact remains that many of us are one serious, cash-draining experience away from financial calamity.

“One common measure of financial preparation is whether people have savings sufficient to cover three months of expenses if they lost their job,” according to the Fed. “In total, 7 in 10 adults could tap savings or borrow in a financial setback of this magnitude.”

The assumption that a job hunt will only take three months is rather tenuous. Although a Jobvite survey supports it in most cases, that’s not the whole story. The more senior the position you seek to fill, by all accounts, the longer your journey will tend to be. Some experts say you should budget a month for every $10,000 in annual pay. Can you afford to be without a paycheck for that long?

According to Investopedia, job loss is the No. 2 reason for personal bankruptcies. The top cause is medical expenses. Yes, you have health insurance, and, yes, your coverage is probably better than most. That’s still no guarantee that you’ll be able to meet all your financial obligations should you be seriously injured or fall ill.

“One of the interesting caveats of this study shows that 78% of filers had some form of health insurance,” one financial planner writes, “thus bucking the myth that medical bills affect only the uninsured.”

Credit card overspending, divorce, theft, uninsured disasters – the list of financial challenges continues.

Is retirement guaranteed?

Do you think you’re on track for having enough savings for retirement? Objectively speaking, maybe you do, but that doesn’t seem to be the experience for many of us.

One chart the Fed included in the report is particularly troubling.

Do you believe your retirement savings are on track? Source: Federal Reserve Board

If you’re over 50 and you have more than $500,000 saved for retirement, you should be fine, right? Not according to one in 10 respondents. Similarly, if you’re in your 40s and you already have somewhere between $100,000 and $500,000 socked away, there’s a one-in-three chance you’re still a little nervous about it.

Whether or not this anxiety is rational is another question. Perhaps a discussion with your financial advisor could reassure you.