The State of Americans’ Financial Health Prior to COVID-19

May 19, 2020CreditBy toptierfinancial

The events of recent weeks have brought to light new economic data about how the COVID-19 pandemic is affecting Americans financially. There has been some good news—many are saving at record levels, and credit card debt declined significantly in March. Not all segments are strong, though. With record unemployment and salary reductions, many people are struggling to save and pay debts. As the future unfolds, and hopefully the pandemic subsides, many Americans will work to rebuild their finances. To help in this effort, it is important to understand the state of Americans’ financial health prior to COVID-19. This context of “the calm before the storm” helps reveal the challenges many people were already facing so that they can be addressed along with new challenges created by the pandemic.

Survey Overview

In early March, just as the pandemic broke out in America, the NFCC and Discover Financial Services worked with the Harris Poll to conduct the 2020 Financial Literacy Survey. The survey asked respondents about their financial habits, goals, and concerns.

Debt and General Financial Concerns

The survey revealed that 62 percent of U.S. adults have carried credit card debt in the last 12 months, and 27 percent reported not paying all their bills on time. This alarmingly high figure of 27 percent is the highest since the 2012 Financial Literacy Survey. Further, 58 percent reported that they struggle to minimize their debt. Importantly, one of the top reasons respondents struggle to repay debt is “unexpected financial emergencies.” 19 percent of respondents reported this reason.

Despite these challenges, many Americans are saving. 70 percent reported having set aside non-retirement savings, and 70 percent reported saving at least some of their household income for retirement. Some of these savers are putting aside a significant amount, with 11 percent of respondents saving more than 20 percent of their income for retirement.

These savings habits take place against the backdrop of a few major concerns. When asked about their top financial concern, 13 percent of American adults reported worrying about retiring without enough money set aside. 12 percent reported concerns that they do not have sufficient emergency savings. The reporting of these concerns may seem pretty grim. After all, COVID-19 is an emergency, so those who were worried about emergency savings are seeing their fears become reality. It may also be more difficult for consumers to save for retirement when their wages or jobs are cut, and when they may need to increase spending on additional budget categories to make it through the pandemic.

However, the news is not all bad. In the 2017 Financial Literacy Survey, 18 percent reported insufficient retirement savings as their top concern, and 16 percent reported insufficient emergency savings. Therefore, some consumers may be much better prepared to weather this financial storm than they were just three years ago.

Home Ownership

Questions about home ownership make up a particularly interesting category of the survey. Considering the housing market at the time of the survey, 57 percent of respondents reported that they thought buying a home was more affordable than renting, 25 percent thought renting was more affordable, and 18 percent of respondents were unsure. However, many barriers can keep people from buying homes even when they hope to do so. 56 percent of respondents who have tried to buy a home faced barriers. The top barriers reported were rising home prices (19 percent), existing debt (13 percent), and the lack of funding for upfront costs (13 percent).

It is unclear at this point what affect COVID-19 will have on the housing market, particularly in terms of prices. Even experts disagree, with some predicting a drop in sales prices and others expecting stabilization or even an increase in some markets, based on low supply. This will be an important area to watch in the future.

Seeking Help

Many survey respondents feel confident in their knowledge of personal finance, with 57 percent giving themselves a grade of A or B. However, respondents acknowledge they could still benefit from more financial information. More than three-fourths (78 percent) of respondents agreed that they could benefit from financial advice and answers to everyday financial questions. On top of that, 81 percent reported that they would reach out for help if they were having issues with their debt. Many would turn to friends and family first, before potentially turning to a professional.

Recap

The 2020 Financial Literacy Survey provides a rare glimpse into Americans’ personal finances just before the COVID-19 pandemic spread throughout the country. It revealed important weaknesses—specifically concerns about financial emergencies—that are relevant in the wake of the pandemic. It also magnified important questions about managing debt loads, retirement savings, and housing affordability that will be critically important in a post-COVID world. If you would like to learn more, you may review the key findings or download the full survey data.

The post The State of Americans’ Financial Health Prior to COVID-19 appeared first on NFCC.

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The Mental Impact of Financial Stress and Tips for Dealing with COVID-19 Impacts

May 16, 2020CreditBy toptierfinancial

A recent poll from the National Endowment for Financial Education shows that 88 percent of Americans are experiencing financial stress as a result of COVID-19. That does not come as much of a surprise, given the way in which the pandemic has created widespread uncertainty and significant economic fallout in such a short time. Financial stress revolves around money, but it is a form of stress and therefore both a personal finance and mental health issue. If you are experiencing stress and anxiety about your finances and are concerned about the future and making ends meet, consider the following tips and resources to preserve a positive outlook.

Establish a Routine and Consistent Self-Care

Most of our routines have been upended in recent months, which can certainly contribute to stress. However, many have referred to life after COVID-19 as the “new normal,” which means that it provides an opportunity to create a new routine. As the National Alliance on Mental Illness explains, “daily habits and routines can help you feel more in control of your own well-being.” To feel most in control, try to preserve as much of your pre-COVID routine as possible. This means trying to find time for the activities you used to do and trying to keep as much consistency in the timing of those activities as possible.

Make sure that your routine includes time to exercise, ways to eat healthy (i.e. adequate time to plan for grocery shopping and cooking), and a healthy sleep schedule. A routine that includes each of these should help you retain a sense of normalcy and limit stress. In addition to these basic elements of a routine, consider building in time for relaxing activities. These could include yoga and meditation, stretching, extra time with pets or kids, or even just a personal hobby that you enjoy. If you have the capacity and desire to take on a new challenge, consider learning a new skill through one of the many online educational platforms. That, too, could be a positive distraction and provide a benefit to your resume.

Your routine should absolutely include a budget, too. Having a plan for where your money is going can ease your anxiety and provide some sense of predictability. As you plan a daily routine, consult the COVID-19 guide from the National Alliance on Mental Illness, which provides in-depth tips and considerations for handling this difficult time.

Access Available Resources

One of the silver linings of this pandemic has been the rapid response by many individuals, organizations, and governments to provide assistance to others. Make sure that you are aware of these resources and take action when needed, because they may provide the help you need. If you feel overwhelmed by looking for or applying for resources, consider asking a friend, family member, or even a credit counselor for help.

Online Therapy

Talking about your financial stress can make it better, give you peace, and help you develop a plan for moving forward. You can speak with a qualified professional from the comfort of your own home. There are many therapists who offer this service. Consider contacting local professionals in your area. They may be able to work remotely with you now, and then hold face-to-face sessions when restrictions related to COVID-19 are lifted. Alternatively, there are remote-only services available, like Talkspace.

If you are not interested in one-on-one therapy sessions, you might consider joining a group online for people who want to share their experiences of dealing with COVID-19. Talkspace has a free Facebook group; NAMI also has free online community discussion groups. The NAMI Guide also provides a list of several other online communities that may be worth considering.

Lastly, for a completely go-at-your-own-pace option, there is an app called COVID Coach. Though it is being marketed by the Department of Veterans Affairs, it is available to and designed for everyone. The app is a self-care tool designed to provide coping mechanisms during COVID-19, and to allow users to track their progress.

Government Programs

Make sure that you are aware of government programs passed in response to COVID-19. These include the economic impact payments and expanded unemployment benefits. If you need to take action to access these benefits, make a plan to do so. You do not want to miss an opportunity for help when it is available. These programs can also be sources of stress if you are confused about how to apply or if there are delays in processing. Find a friend or family member to help you navigate the programs and to be a sounding board for any questions or frustrations.

Friends, Family, and Community Groups

Connections with friends and family matter now more than ever. Just because you cannot be physically together does not mean you cannot have meaningful conversation and connection virtually. Call, text, or email friends and family to see how they are doing regularly. They will appreciate you thinking about them, and you will get peace of mind and comfort from knowing how they are doing. Now that video calling technology is so easy to use, you can even Zoom, Skype, or FaceTime together, not just to talk but to do a variety of activities (eating dinner, watching a favorite TV show, etc.). In addition to friends and family, be sure to maintain connections with community groups. These could include your church, an organization where you volunteer, or something else. Find ways to stay involved and in conversation with the people at these places. It will help preserve a sense of consistency.

More Help

If COVID-19 has impacted you and caused increased financial stress, know that you are not alone. In fact, you are in the large majority. There is absolutely no shame in asking for help. A few important resources that you might like to have handy are the NAMI Covid-19 Guide, tips from the CDC on Stress and Coping, and a dedicated page on COVID-19 issues from the American Psychological Association. Each of these provides important tips for creating healthy routines and seeking help from professionals if needed. Of course, if you also want specific help with your financial situation, including a plan to manage high-interest debt, we invite you to contact a credit counselor for a one-on-one counseling session.

The post The Mental Impact of Financial Stress and Tips for Dealing with COVID-19 Impacts appeared first on NFCC.

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FTC Says Debt Collectors, Telemarketers Bilked Organizations For Subscriptions, Books Never Ordered

May 15, 2020CreditBy toptierfinancial

The Federal Trade Commission has sued the operators of a Pennsylvania-based telemarketing scheme, alleging that they charged organizations such as businesses, schools, fire and police departments, and non-profits for books and newsletter subscriptions they never ordered. The FTC’s complaint also … Continue reading →

Read more: creditandcollectionnews.com

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