The survey actually states,
"Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money." https://www.federalreserve.gov/publications/2018-economic-we...
Nevertheless, that doesn't strike me as having wealth.
The key point is that most of the people "borrowing money" have the means to pay cash but choose not to. It is a question of how they could pay, not if they could pay.
I borrow money all the time when I could easily pay cash. Credit is more convenient and doesn't cost me anything. Similarly, I have a car loan even though I could have paid cash for the car. It is sensible finance.
borrowing money right now to buy something is not a bad idea... (i think) If they have just printed a ton of cash (they did) that means at some point it will correct. Meaning you in the long term might beat the interest rate if inflation gets higher than that. just an idea.
a loan (with interest?), on a depreciating "asset", which obligates higher risk-premium (ie:insurance) does not seem sensible to me (and never has when I run the numbers).
It absolutely makes sense as a matter of elementary finance to use a loan when interest rates are low rather than paying cash -- I was buying a car regardless. The interest rate on the loan is far below my average rate of return investing the same amount of cash. The profit on the invested cash exceeds the loss from loan interest; I get to keep the remainder.
Similarly, I put all of my daily expenses on credit. I pay off all of that credit at the end of the month. I am still borrowing money but I am paying no interest on it.
What the survey _actually_ says (and what the politifact fact-check does not dig into) is that if you ask people how they would deal with an unexpected $400 expense, given them a list of possible options, and tell them to select all options that would apply 40% select at least one of the "selling or borrowing" options. Note that if you add up the percentages for all the options in that survey, it adds up to 143%, because you can select more than one option.
The problem is that it's impossible to tell what's actually going on due to this survey design. For example: what is the overlap between the set of people who check "just pay it out of checking/savings" (50%) and the set of people who check "charge it and pay off in full at the end of the month" (36%)? I would rate both answers as "these people have the $400 on hand". The fraction of people who checked at least one of these options is somewhere between 50% and 86%, depending on how much overlap there is. And you can't tell, from this survey, where it lies in that range.
Similarly, you can't actually conclude the "Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money" thing from these numbers, so the executive summary is rather misleading. Politifact takes that summary as an accurate summary of the survey results, but it doesn't seem to be. As far as I can tell, that 40% comes from adding up non-mutually-exclusive percentages. It's the equivalent of claiming that 86% of people would just pay it off based on the above 50% and 36% numbers.
I should also note that the survey included full-time students under "adults", and if I had an unexpected $400 expense at various points as a student I would have absolutely had to borrow money to cover it. Looking around briefly, there are ~20 million full-time college students in the US as of 2020, which is ~6% of adults. While it would obviously better if college students had larger cash cushions, a college student borrowing money from parents to pay $400 is not the mental image most people have when reading the executive summary here...
Now the fact that no matter how you slice these survey results no fewer than 8%, and maybe up to 50% of non-college-student adults don't have $400 on hand if they need it is still a significant problem from my point of view. Especially because I really doubt it's as low as the 8% option. But I am also quite certain it's nowhere close to 40%....
> what is the overlap between the set of people who check "just pay it out of checking/savings" (50%) and the set of people who check "charge it and pay off in full at the end of the month" (36%)?
The report plainly states:
> When faced with a hypothetical expense of only $400, 59 percent of adults in 2017 say they could easily cover it, using entirely cash, savings, or a credit card paid off at the next statement (referred to, altogether, as "cash or its equivalent") https://www.federalreserve.gov/publications/2018-economic-we...
The 4 in 10 comes from the very next paragraph of the report:
From this data, it is reasonable to conclude that "Four in 10 adults would not use 'cash, savings, or a credit card paid off at the next statement' to cover such an expense."
Now it's possible that there is additional data that they have but are not presenting in the appendix but are using to generate their conclusions, including data like how many people marked both "pay with cash" and "pay with credit card now, pay off at next statement". If that's the case, I wish that data were actually available.
For example, given the "could easily cover it, using entirely cash, savings, or a credit card paid off at the next statement" phrasing it's not clear to me how they code someone who checks both "pay cash" and "borrow from family". Are they included in the 41% or the 59%? Or were there just 0 such respondents so this is irrelevant?
I would love to trust that people are drawing the right conclusions from their data, but would really prefer that raw data were published so the conclusions can be indepedently verified...
I think it is interesting that the writer of that article pointed out that the total adds up to 143% because multiple choices were allowed, but then argues that the real number [of people who can actually afford $400] is 86% by adding two of the choices. The entirety of the 36% could potentially be included in the 50%.
What of the nearly 40% of Americans that can't cover a surprise $400 expense, due to having no wealth?