Nearly half of households across the U.S. have had their income negatively impacted by the coronavirus pandemic, as the financial struggles being encountered by millions of Americans continue to emerge.
According to a worrying survey from Bankrate, 49% of adults have either been made redundant, furloughed, or seen a reduction in hours or pay since the beginning of the health crisis. Breaking this down, exactly one in five (20%) had either been laid off or furloughed, 19% had taken a cut to their hours, and 10% had continued working as before but for lower wages.
For 17% of those who have experienced COVID-related disruption to their income, the slightly better news is that it has since returned to normal. More worrying, of course, is that the vast majority are still living on less money than they had at their disposal just a few months before. While around two in five (42%) are hopeful their income will return to normal within the next six months, 37% expect it will take longer. About 4% are fearful that it will never recover.
Who is being impacted the most?
As to the groups that are bearing the brunt of the economic fallout, the survey found that those who have experienced a reduction in household income due to the pandemic skews higher among younger generations. More than half of individuals belonging to Generation Z (ages 18-23), millennials (ages 24-39), and Generation X (ages 40-55) reported being negatively affected, compared with 45% of younger baby boomers (56-65) and 28% of older boomers (66-74).
On a regional basis too, disparities are apparent, with 56% of those resident in the Northeast reporting that their income had been disrupted by the pandemic, compared with 48% in the West, and 46% in the Midwest and South.
How have people's finances been impacted?
With the ferocity of the economic slowdown widely considered to be the worst since the Great Depression, many people have been forced to quickly reappraise how they manage their finances.
For those who have seen their incomes affected, most will have turned to their emergency funds in the first instance to cover financial shortfalls. However, with more than three-quarters of lower-income families fearing their rainy day savings wouldn’t last beyond three months, many will have already exhausted their reserves.
Credit card spending fell sharply as people attempted to limit their exposure to debt, while the amount of money being saved soared higher, as those in a position to do so tried to put some valuable financial safety nets in place.
Inevitably, however, the crisis has increasingly been taking its toll, with recent figures revealing that borrowers had skipped more than 100 million loan payments by the end of May, around three times higher than a month before. And while the latest Federal Reserve data revealed that U.S. households had fallen 3.9% deeper into the red in the first three months of the year, the wide-held assumption is that things are actually a lot worse, given the survey only covered the infancy of the COVID-19 outbreak.
What can you do to limit the damage?
Unsurprisingly, the extent of the uncertainty is causing the majority to have sleepless nights over their finances. This latest survey also reports that 76% of adults are worried about the financial harm that would be caused by another outbreak. Such concerns are obviously understandable, but for those who are experiencing money worries, it is important to realize that help is potentially at hand.
Claim for all that you can
If you’ve been made redundant, the first thing you should do is file for unemployment benefits to make sure you receive all the financial support that the Government will provide. As part of the CARES Act introduced specifically in response to the COVID outbreak, more help is currently available to those who have been laid off work than usual.
If you haven’t received your coronavirus stimulus payment that was also introduced as part of the CARES package, and could be worth up to $1,200 per person, then chase this up as well. This is particularly important for the 12 million low-income Americans who, at the last count, were at risk of missing out on their payment. Looking ahead, there is the possibility that a second coronavirus check could soon be on the way to further supplement household finances, although nothing is agreed at this stage.
Taxpayers should also check whether they might be owed a tax refund that could provide a welcome boost to their finances. According to the IRS, the average refund this year is currently $2,762, money that could almost certainly be put to better use in the hands of American families than in state coffers. With the majority of taxpayers due a refund rather than facing a tax bill, the fastest way to claim any money back is to file electronically, using the best tax software - with the tax deadline of July 15 just days away, there is no time to waste, although you can still claim any money you are owed after this date.
A final potential source of unexpected funds could be via an auto insurance refund - with car use plummeting during lockdown, the best auto insurance companies have been reimbursing motorists with refunds of their premiums.
Take mortgage action
For homeowners with concerns over meeting their mortgage payments, help has been widely at hand from the best mortgage lenders throughout the pandemic. A ban on foreclosures and evictions has recently been extended too.
With mortgage rates at or near record lows, Americans are also being urged to approach the best refinance mortgage companies and switch to a new lower rate deal if they can. There is the potential to lower your monthly payments significantly, and save thousands of dollars in interest payments over the lifetime of a mortgage loan, if you refinance your mortgage now.
Credit card and loan concern
Credit card issuers have been providing a similar regime of assistance to borrowers in light of the coronavirus. Anyone who is having trouble paying off their credit card debt is advised to speak to the company that issues their card for help. Those with a personal loan or an auto loan who doubt their ability to meet their payments should also turn to their loan providers for help if they need to.
One thing people who are struggling to repay debt are advised not to do is take out a payday loan as a potential solution, unless they have given it considerable thought. The temptation to arrange a small dollar loan may be strong, but with consumer protections attached to payday loans recently removed, some of the safeguards that were in place are no more. Payday loans are an option of last resort, and should only ever be considered once all alternatives have been ruled out.
Look for debt help
If debt is dragging you down, it is essential not to let the situation get too out of hand. Speak to the people you owe money to and talk to friends and family to see if they can help. Alternatively, the best debt consolidation companies can bring all your debt together into one place and help lower your monthly payments. Failing that, the best debt settlement companies should be seen more as an option of last resort, but could help those in the most trouble move gradually towards a better financial future.