USA TODAY International Edition
1. Your income fluctuates a lot You might be financially vulnerable
You probably don't live in poverty, you probably have a job, maybe a savings account and even a 401(k) retirement plan at work.
But could you survive a shock such as going four weeks without a paycheck, as many federal workers did during the recent government shutdown? How would you fare in case of a job loss or large unexpected expense?
Below are 10 ways to assess your level of affluence, including some unconventional ones. Many were evaluated as part of a new report on financial vulnerability from Prosperity Now, a progressive group in Washington, D.C., that aims to improve opportunities for struggling Americans.
Roughly 10 years into the economic recovery, unemployment rates have fallen across the board. Yet holding a job by itself doesn't tell the whole story: Many positions pay poorly, and unstable income can put workers at financial risk. One in five households faces moderate-to-significant income fluctuations from month to month, according to the Prosperity Now report. People with income fluctuations said they were twice as likely as the general population to be falling behind on bills. They also often must rely on costly payday-type loans to make ends meet.
2. Your credit score isn’t great
Late payments, delinquent accounts and other borrowing-related problems show up in credit reports, and this information goes into credit scores. Nearly half the nation, 48 percent of Americans, have mediocre or poor scores, according to Prosperity Now.
People in this category face higher interest rates or other poor terms, if they can get loans. They also might need to pay more for utilities and other services.
Definitions of prime credit scores vary, and there are different scoring models. But anything above 720 on the popular FICO range of 300 to 850 is considered excellent.
3. You don’t even have a credit score
Roughly one in six Americans doesn't have a score because they can't be scored, according to a new report by the company behind another model called VantageScore. An estimated 40 million adults can't be scored because they don't use credit much, if at all, and often don't have any relevant accounts.
4. You’re feeling priced out of a home
The nation's homeownership rate has inched up to 64.4 percent yet remains far below the high near 69 percent reached in 2005. Housing costs are rising faster than incomes, keeping the homeownership rate down, Prosperity Now said. You don't need to own a home to prosper, but this is the largest asset for many Americans and a good source of tax savings. Mortgage interest and property taxes are deductible, and most homeowners avoid taxes on housing profits when they sell
If you don't own a home, you're also vulnerable to rising rents. Roughly half of all renters spend more than 30 percent of their monthly income on rent and utilities – a threshold that Prosperity Now considers important.
5. You lack even modest savings
Everyone should strive to accumulate long-term investments, but the first step is stockpiling enough cash to meet big expenses or patch over a period of income volatility.
“When households have a financial cushion, even a modest one, it can make them more resilient to these financial shocks,” said the Prosperity Now report.
Financial planners typically suggest building up enough liquid assets to meet three to six months of expenses. But even households with as little as $250 to $750 are more likely to keep up with key payments and avoid shocks, said Prosperity Now.
6. You’re dependent on dollar stores
Stores featuring especially lowpriced items, often without a lot of fresh fruit and vegetables, are concentrated in moderate-income urban areas, African-American neighborhoods and rural communities, according to Prosperity Now. The prevalence of these stores can be an indicator that a neighborhood has a high proportion of lower-income residents. If you depend on these outlets, it could mean your shopping dollars don't stretch as far as you think.
7. You put off medical care due to money
If you have skipped doctor visits or failed to buy medications on schedule, it could be a symptom of financial stress. Nearly one in seven Americans skipped doctor visits because they couldn't afford them, according to the Prosperity Now report.
The high cost of health care, including inadequate insurance, can take a toll on families in many ways and can quickly mushroom into unpaid bills, delinquent accounts and bankruptcies – assuming people seek treatment.
Avoiding or reducing medical attention also can be risky and can worsen your finances.
8. You depend on your tax refund
For many families, income-tax refunds represent a once-a-year opportunity to pay down debts, purchase a bigticket item or save money. But if this is your single largest source of funds, that could be an indication that you're living on the edge.
9. You’re a member of a racial minority
Prosperity Now changed its assessment from previous years. Previously, the focus was on measuring household financial health overall, across the nation and in the various states.
But a new format incorporates race in a significant way, by gauging how well or poorly blacks, Latinos, Native Americans and Pacific Islanders achieve affluence. As an example, for every $1 in wealth accumulated by white households, Latino households have 13 cents and African-American households a mere 6 cents.
“Financial vulnerability is all too common in the United States, particularly for people of color who were by and large left out of the economic recovery,” wrote the report's authors. “Race and ethnicity have an outsized impact on economic well-being.”
10. You’re out of the stock market
The last couple of months have provided a bumpy ride for investors who own stocks individually or through mutual funds and the like.
But despite providing occasional bouts of unease, if not terror, stocks have been a great way to build wealth over time. Stock-market participation, or the lack thereof, is one of the main reasons the wealth divide has widened. Rich people typically own stocks; poor people don't.