Alejandro Lazo (Los Angeles Times)

On January 30, 2013 Shan Li of the L.A. Times reported:

Nearly 44% of American households are one emergency away from financial ruin.  That means they don’t have enough savings to cover basic living expenses for three months if something unforeseen happens such as losing a job or falling sick, according to a recent study by the Corporation for Enterprise Development.  Almost a third of Americans have no savings account at all. . . .  Many people living precariously have jobs.  About 75% are working full time, and more than 15% are earning middle-class incomes of more than $55,000 a year, according to the report.  But despite steady jobs, many of those surveyed are surviving paycheck to paycheck, trying to cope with the recession’s aftermath; one emergency could tip them over “the edge of financial disaster.”  Possible reasons for their lack of savings?  Experts say many factors could be at play, including stagnating wages, rising prices and high credit card debt.

It’s worth noting that a fairly large number of employed people are underemployed, which gives a partial explanation for the precarious position of many people.

How do folks deal with an income shortfall?  Some tap into their credit cards, and increase their debts.  Then they use other credit cards to pay the new credit card debt, and eventually things spiral out of control.

However, a growing number of people are turning to loan sharks for extra cash.  The breathtakingly high interest rates on Payday loans, Cashcall loans, and loans from Don Corleone guarantee a bleak financial future.  In the April 24, 2013 Los Angeles Times, Alejandro Lazo reported:

Payday loans often trap consumers in a cycle of debt, a new report by the federal government finds.  The Consumer Financial Protection Bureau found that the average consumer took out 11 loans during a 12-month period, paying a total of $574 in fees — not including loan principal. A quarter of borrowers paid $781 or more in fees.
Continue Reading Bankruptcy: What’s In your Wallet? It’s A Loan Shark!