I am afraid this number is only going to get worse as the recession slogs on. Unemployment is continuing to rise as companies rush to downsize in an attempt to survive. The unfortunate reason for many of these bankruptcies is that these families where carrying too much debt and living paycheck to paycheck. When they have a hiccup in their income situation, they are left with no wiggle room.
Everyone needs to create a proactive plan for paying down their debts now. Don’t wait until you have your income cut or you are laid off. By then it is too late to do anything about your debt. You have the most options available to you while you still have cashflow comming in.
By getting out of the debt and saving your monthly interest payments you can build an emergency reserve fund. I can’t remember where I saw this, but someone suggested that a good rule of thumb is that your reserve fund should be equal to the unemployment rate. Meaning that if unemployment in your area is at 9% then you should have 9 months of reserves in the bank. 10% = 10 months of reserves and so on. The idea being that the higher the unemployment rate, the more competition for jobs and the longer it is likely to take to find a new one.
Many people may be able to find a job but at much less than they were making before. Well if you have to take a pay cut, it is sure nice to have reserves in the bank to allow a cushion period to adjust your lifestyle and supplement your income while you ride out the economy. I know this is all basic finance 101, yet most of us live for today and put this off.
Make the changes in your lifestyle now, before your lifestyle forces those changes upon you!