Federal Report on Economic Well-Being Highlights Insecurities

Each spring, the Board of Governors of the Federal Reserve System issues a report on economic well-being in U.S. households. Traditionally, this report is based on end-of-year data from the previous year. However, in light of the unusual economic circumstances in the United States in the spring of 2020, this year’s report includes an update based on information gathered in April. 

Overall, most U.S. households reported feeling secure: 75% in December of 2019, and 72% when the question was revisited in April. But, the specifics of the report show some significant weak areas and financial stressors. 

For example, though 75% of adults said they were doing okay or living comfortably financially at the end of 2019: 

• 28% said they would be unable to pay all of their bills for the month if they had an unexpected expense of $400
• 64% of renters said they’d decided to rent at least in part because they couldn’t come up with a down payment or would have difficulty qualifying for a mortgage 
• More than 60% of those not-yet-retired don’t feel their retirement savings are on track

More than half reported that their financial situation had stayed about the same compared with the prior year. Those reporting a change were much more likely to say they were better off in 2019 than to say their financial situation had deteriorated compared with the previous year. 

The disparity between the overall sense of financial well-being and specific issues such as accessibility of homeownership and the ability to pay an emergency expense is disturbing. It raises the possibility that some Americans who struggle to pay bills monthly or are one paycheck removed from serious financial problems have come to think of that instability as normal (thus describing themselves as “doing okay”). 

Financial Stressors by Demographic

Of course, financial stress doesn’t impact all households equally. Some key points of differentiation include: 

Race

79% of white households reported that they were doing at least okay at the end of 2019. But, the rates were much lower for minority populations. Just 66% of hispanic households and 65% of black households expressed that same security. White respondents were also significantly more likely to rate their local economy as good or excellent. 

Sexual Orientation

The disparity between the majority and minority demographics was similar for sexual orientation. While 77% of straight adults said they were doing at least okay financially, just 64% of those identifying as gay, lesbian or bisexual said the same. 

Marital Status

Married couples appear to have a financial advantage over their single peers, with 81% reporting that they were doing at least okay financially. 65% of single adults said the same. 

Educational Level

Unsurprisingly, adults with bachelor’s degrees or higher were more likely to report that they were doing at least okay financially–88% compared with just 63% of those with a high school degree or less. Those with some college or a technical or associate’s degree fell in the middle, at 75%. 

The impact of education didn’t appear to be as significant, though, when participants were asked whether they were better or worse off financially than their parents had been at the same age. While those with bachelor’s degrees and higher were slightly more likely to say they were better off, responses were more consistent across educational levels. 57% overall said they were better off: 62% of those with four-year degrees or more, 56% of those with some college or technical/associate’s degrees, and 54% of those with a high school diploma or less. Those who said they were worse off clustered even closer. 

The Cost of Economic Insecurity

Financial instability that leaves a person unable to meet monthly expenses–as 16% of Americans reported–is a significant problem in itself. And, the knowledge that one unexpected expense could derail a carefully constructed budget can be a source of constant stress. But, these problems often go hand-in-hand with other challenges. 

For example, researchers found that:

• Those with incomes of less than $40,000 annually were more likely to have had a family member in jail or prison and more likely to have been the victim of a crime
• Those with a high school degree or less were more likely to have had a family member in jail or prison
• Black adults were most likely to have had a family member in jail or prison, and hispanics were also significantly more likely than whites to have had a family member incarcerated

We also know from separate research that financial stress can impact many areas of your life, including your work relationships, personal relationships, productivity, and even physical health. 

The bottom line is that many people in Los Angeles and around the country are living with financial stress on a daily basis. Statistically, those issues have a higher impact on non-whites, those with lower annual incomes, and those with lower levels of education. But, financial stress can happen to anyone. And, it’s easy for those who have been struggling financially for a long time to begin to see their situations as normal or “just the way it is.” 

If you’re in a tough financial spot, long-term or as the result of recent disruptions such as job loss, illness, or divorce, it’s important to recognize that you have options. The best answer for you depends on the specifics of your situation and your personal goals and priorities. But, the best first step is always the same: educating yourself about what you can do. 

Borowitz & Clark offers free consultations to help people in debt find the right solution for them. You can schedule yours right now by calling 877-439-9717 or filling out the contact form on this page.