Tips & advice on getting your finances back on track.
On May 5th 2020, the Federal Reserve Bank of New York released their 1st quarter report on household debt and credit. This report was comprised of January, February and March of 2020 spending. The stunning results showed that household debt increased by $155 billion dollars, bringing household debt to $14.30 trillion dollars. The third quarter of 2008, during our recession, the United States saw a peak debt of $12.68 trillion dollars. This latest report shows that consumer debt has increased by a staggering $1.6 trillion dollars since the recession.
The question becomes, why such an incredible increase in debt? Some reports indicate that the economy was at its strongest place in many years. People were working, making the economy appear strong, however, according to Forbes Magazine, 39 million adults were making less than $15.00 per hour and had children to support. Costs continue to rise, such as childcare and food. These families may have been using credit cards to fill in the gaps.
There is another possible answer to this question. When people believe the economy is strong, and that joblessness is at an all-time low, they may feel more confident in spending. Many thought their jobs were secure and income was increasing, so taking vacations, making home improvements, and large purchases may have seemed logical.
Read More: Financially Surviving The COVID-19 Pandemic
Then came March 19th 2020. California announced its ‘shelter in place’ order, followed by New York on March 20th 2020 in an effort to fight the Covid- 19 Pandemic. Most states followed with the same order, essentially shutting down the country. Small businesses and restaurants closed, large companies furloughed employees, and the unemployment numbers are currently higher than during the Great Depression.
Many of us have seen the statistics. Four in ten adults could not cover an emergency expense of $400 without carrying a balance on a credit card or borrowing from friends or family prior to the pandemic. Today is a different story. According to the Labor Department, 22 million Americans are out of work. Unemployment claims are delayed due to the overwhelming volume of applications. Many of us received stimulus checks, but for most, it didn’t even cover a mortgage payment.
Read More: Are You Ready To Purchase A Home?
Once we begin to return to normal over the next several months, this country will see many people who were living on credit cards to help them get through these unprecedented times. We anticipate the debt to reach yet another all-time high. How will we dig ourselves out? I firmly believe a solution is financial education, credit counseling and housing counseling. Most people are concerned with self-preservation right now, but we will need to deal with the financial consequences of the pandemic. It is important to know that there is help available.
Navicore Solutions has established a Covid-19 financial recovery helpline. This helpline is comprised of certified counselors that can provide a wide array of financial counseling, including credit counseling, foreclosure and rental counseling and financial education, along with a connection to resources. Please call our hotline number at 800-992-4557 to speak with one of our caring and compassionate certified counselors.
Kim Cole is the Community Engagement Manager for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month’s edition. All identifying information will be kept anonymous.
Please send your questions via email to DearKim@navicoresolutions.org