Guides

The $400 problem (and the first $1,000)

The surprise that turns a tight month into an expensive one.

The Federal Reserve still asks whether you could cover a $400 emergency with cash or the equivalent. In the 2025 household survey, 63% of adults said yes. That means 37% said no. The share has barely moved for years.

That gap is how a tire or a copay becomes a card balance, a skipped bill, or an overdraft. The original $400 does not stay $400.

First job: contain the current bill. Ask the biller for a no-interest split. Do not take a payday or title loan to “clear” it. You are buying a second due date.

Second job: a separate bucket named shock. Automate $10 or $25 on payday. Target $400, then $1,000. Until $400 exists, extra debt payments above minimums can wait unless a payday-type balance is costing more than the buffer helps. That is a general rule, not advice about your accounts.

Source: Board of Governors of the Federal Reserve System, Report on the Economic Well-Being of U.S. Households in 2025 (SHED).