LOUISVILLE, Ky. (WAVE) - This week marks one year since the first case of COVID-19 was discovered in the United States. In that one year, so much has happened in WAVE Country and in people’s lives all over the nation.
Nonetheless, one of the hardest lessons the pandemic has taught many has been monetary: Many people have seen their financial lives turned upside down and their lives turned inside out because of the coronavirus outbreak.
The pandemic has done more than take people’s health and interfere with their ability to get together with family and friends. Clever, the nation’s leading real estate education platform for home buyers, sellers and investors, conducted a study that found an average American has almost $42,000 of debt.
Dr. Francesca Ortegren, the data science and research product manager for the platform, explained that the research examined nonmortgage debt.
“A lot of people lost their jobs and as a result they’ve had to take out more debt to help cover expenses,” Ortegren stressed.
The study found 30% of homeowners have less than $1,000 in an emergency fund. Also, 22% of homeowners don’t have enough in savings to cover their mortgage for one month, and 27% are worried about defaulting on their mortgage.
“We’ve seen historically that people are not great at saving in general especially for emergency funds,”Ortegren claimed. “Part of that is just that the cost of living has increased substantially over the last few decades whereas income hasn’t.”
During the pandemic, 37% of respondents said they missed bill payments to feed their families. The survey also revealed that 54% of Americans missed bills or deferred payments this year, including:
- Student loans (45%)
- TV, internet, or phone service (34%)
- Credit cards (30%)
- Medical bills (30%)
- Electric, water, or other utility (27%)
- Mortgage (21%)
- Rent (21%)
“About a third of people have reported missing credit card payments which is particularly problematic because of the fees and the high interest rates,” Ortegren noted. “Use the credit cards. They are there for a reason. Just make sure you’re paying the minimum payment every month so you’re not incurring fees. You can get into a kind of snowball effect where you can’t pay it off because the interest rate is closely 20% on a lot of credit cards and then you get fees on top of that.”
If nothing else has been learned from the coronavirus pandemic, an emergency fund is crucial for emergencies or unplanned expenses, she explained.
”I think the pandemic and previous recent recessions have shown us that having money to fall back on is gonna be important cause you really never know what’s coming,” Ortegren said. “Even if it’s just a few dollars a paycheck. Ten or twenty dollars, it will add up over time.
Here are the study’s key takeaways:
- Preparation is key.
- Start an emergency fund as soon as possible.
- Create a budget and know what is coming in and going out.
- People should live below their means; just because they have it doesn’t mean they have to spend it.