AL­MOST 40% OF AMER­I­CANS STILL CAN’T AF­FORD BA­SIC NEEDS AMID STRONG ECON­OMY

The Gulf Today - Business - - SPECIAL REPORT -

By most broad mea­sures, the econ­omy is boom­ing. Eco­nomic growth is up, un­em­ploy­ment is back to pre-re­ces­sion lev­els, jobs are abun­dant and the cur­rent bull mar­ket is al­most a decade old.

But a closer look sug­gests things might not be so rosy.

A re­cent pa­per re­leased by the Ur­ban In­sti­tute re­ports that nearly 40 per­cent of Amer­i­cans faced dif­fi­culty meeting at least one ba­sic need for food, health care, hous­ing or util­i­ties in 2017.

It isn’t just those be­low the poverty line who can’t af­ford ba­sic needs — col­lege-ed­u­cated, healthy, mid­dle-class work­ers are strug­gling, too.

Un­ex­pected in­come drops and ex­penses are hurt­ing Amer­i­cans

The three most com­mon hard­ships fam­i­lies re­ported in the study were:

1. Food in­se­cu­rity: De­fined by fac­tors in­clud­ing cut­ting or skip­ping meals due to af­ford­abil­ity, eat­ing less be­cause there was not enough money for food and not be­ing able to af­ford bal­anced and healthy meals.

2. For­go­ing med­i­cal care be­cause of high cost: Un­met med­i­cal care in­cludes: gen­eral doc­tor care, spe­cial­ist care, pre­scrip­tions, skip­ping fol­lowup care, and not be­ing able to af­ford den­tal care, men­tal health care and sub­stance use treat­ment or coun­sel­ing.

3. Prob­lems pay­ing for fam­ily med­i­cal bills: When fam­i­lies can’t af­ford med­i­cal bills, they might charge them on credit cards and fall be­hind on their pay­ments. Hav­ing a chronic con­di­tion in­creases the like­li­hood of this hard­ship.

When Tay­lor Lynch had her first cer­vi­cal can­cer scare with an ir­reg­u­lar pap smear, she was 20 years old and still on her par­ent’s health in­sur­ance. When her doc­tors rec­om­mended she have rou­tine, four-month check­ups, she didn’t think twice.

When she en­rolled in her own health in­sur­ance pol­icy at 21, her pre­mi­ums were $200 a month; a visit to the gyne­col­o­gist cost her $80 out of pocket. As a nanny in Jack­sonville, Florida, Lynch makes around $30,000 a year and is just on the cusp of the mid­dle class of her area. But the pre­mi­ums and out-of-pocket costs were too much and she dropped the pol­icy.

“Even with health in­sur­ance, it was still a lot be­cause I was go­ing ev­ery few months,” Lynch says. “And with­out health in­sur­ance, it was roughly $300 to $400 per visit.”

So, she had to choose: af­ford her rent, or pay for health in­sur­ance? “Yeah, hav­ing health in­sur­ance is im­por­tant, but hav­ing a roof over my head is im­por­tant, too,” Lynch says. “I crossed my fin­gers and hoped for the best when I de­cided to forgo my in­sur­ance, but at that point I just couldn’t af­ford both.”

With the econ­omy boom­ing, why are many Amer­i­cans strug­gling? Stag­nant wages are one fac­tor, but weak sav­ings habits are an­other.

Caro­line Rat­cliffe, se­nior fel­low at Ur­ban In­sti­tute, says most peo­ple start fac­ing hard­ship be­cause they ex­pe­ri­ence an in­come drop, like a job loss, and then an un­ex­pected ex­pense they can’t cover.

Rat­cliffe says about a third of peo­ple don’t have $250 in sav­ings, and about 2 in 10 mid­dle-in­come fam­i­lies don’t have any emer­gency sav­ings at all. Sim­i­larly, a re­cent Bankrate sur­vey found 23 per­cent of Amer­i­cans have no emer­gency sav­ings.

“When these in­come drops hap­pen, or un­ex­pected ex­penses hap­pen, peo­ple don’t have that fi­nan­cial cush­ion to help them,” Rat­cliffe says. “Then they have dif­fi­culty bounc­ing back from it.”

An­other Bankrate sur­vey re­vealed sim­i­lar find­ings: 39 per­cent of re­spon­dents said they wouldn’t be able to cover a $1,000 blow with sav­ings.

Hard­ships don’t dis­crim­i­nate by de­mo­graphic

The de­mo­graph­ics of those who are suf­fer­ing with hard­ships vary across the board. Fe­males faced hard­ships more than males, with 42.7 per­cent and 35.9 per­cent not be­ing able to af­ford a ba­sic need, re­spec­tively. For mi­nori­ties, black and His­panic Amer­i­cans both ac­counted for more than 50 per­cent of each ex­pe­ri­enc­ing hard­ships.

Rat­cliffe says the Ur­ban In­sti­tute has seen a spike of dis­ad­van­tage in the South, where there is more debt and delin­quent debt.

And for younger adults, like Lynch, the like­li­ness of fac­ing hard­ship in­creases. Amer­i­cans ages 18 to 34, like Lynch, were al­most 9 per­cent more likely to re­port hard­ship than adults ages 50 to 64, as re­ported in the study.

LOANS

Typ­i­cally, get­ting a col­lege de­gree in­creases an­nual earn­ings by about $32,000 more than some­one with only a high school diploma, ac­cord­ing to the Lu­mina Foun­da­tion. But the Ur­ban In­sti­tute re­port found that more than two-fifths of adults with some col­lege ed­u­ca­tion strug­gled to meet a ba­sic need, and al­most one-fifth had col­lege de­grees or more. “Pay­ing back stu­dent loans is one fac­tor,” Rat­cliffe says. “But younger peo­ple are also fac­ing the costs of not hav­ing health in­sur­ance, and also that of get­ting on their feet and be­ing on their own. It can be a lot to han­dle.”

Lynch was in school, but jug­gling a full-time course load with work­ing full-time caused her grades to suf­fer. She de­cided to take a step back un­til she has a bet­ter reign on her fi­nances and can wind down her work­ing hours — but she’s still not there yet.

And what about fam­i­lies with chil­dren? The cost of be­ing a par­ent has soared in re­cent years. Ac­cord­ing to The Con­sumer Ex­pen­di­tures Sur­vey, a mid­dle-in­come, two-child, mar­ried cou­ple fam­ily will spend $12,980 an­nu­ally per child.

Cou­ples with chil­dren were only a lit­tle more likely (37.3 per­cent) to face hard­ship than those with­out chil­dren (31.8 per­cent.)

“These are is­sues af­fect­ing peo­ple all across the board and all over the coun­try,” Rad­cliffe says. “It isn’t con­cen­trated to one spe­cific group.”

Ac­cord­ing to the Pew Re­search Cen­ter, around 52 per­cent of Amer­i­can adults in 2016 fell into the mid­dle class. This in­come group used to be de­fined by com­fort. But to­day, that def­i­ni­tion is chang­ing — and Lynch wants peo­ple to un­der­stand why.

“My grand­par­ents can’t wrap their head around why I’m not in school,” Lynch says. “They ask me why I’m not back in school, and they can’t wrap their heads around the fact that I lit­er­ally can’t af­ford to. Times are just so dif­fer­ent.” While the sta­tis­tics are grim, there are ways the mid­dle class can pre­pare and pre­vent them­selves from hit­ting an eco­nomic wall. It all goes back to one ma­jor per­sonal fi­nance prin­ci­ple: build­ing an emer­gency sav­ings ac­count.

“As lit­tle as start­ing with $250 can re­ally help fam­i­lies weather these ups and downs,” Rat­cliffe says. “The im­por­tant thing is for these fam­i­lies to re­ally get started with sav­ings and to not give up just be­cause they may think the bar is too high.”

An­other study by the Ur­ban In­sti­tute found that hav­ing as lit­tle as $250 in sav­ings makes it less likely for a fam­ily to be evicted or miss a hous­ing or util­ity payment.

The key to build­ing an emer­gency fund is con­sis­tency. Set up a re­cur­ring trans­fer from your check­ing ac­count weekly or monthly to help build a cush­ion — even if you’re trans­fer­ring small amounts at a time.

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