Even as the economy steadily improves and unemployment rates fall, many Americans still find themselves in fragile financial situations.
A new Federal Reserve survey reveals that 74% of respondents reported living comfortably or at least doing OK — an improvement of more than 10 percentage points from 2013.
Despite the overall positive trend though, the report found that some Americans may not be feeling as financially stable.
For example, of the 12,000 individuals surveyed, 4 out of 10 adults claimed they would have trouble covering an unforeseen expense of $400. For some, economic vulnerability may even be taking a toll on their health, as 27% of those surveyed skipped medical treatment due to cost in 2017.
What’s more, the upward economic shift might be masking some of the financial inequities that persist across racial and ethnic groups in the U.S. and between people who have attained different levels of education.
What does this mean?
Those who reported doing at least doing OK financially were more likely to be white and have a higher level of education.
Only 65% of black adults and 66% of Hispanic adults surveyed said they were doing OK financially, compared to 77% of white adults who felt that way.
People with more education were also more likely to be doing OK financially, according to the survey. Those with at least a bachelor’s degree were less likely to face material financial hardships, such as the inability to buy food. Two-thirds of those with a bachelor’s degree felt that the investment in their education had paid off. But less than one-third of those who started a degree but didn’t complete their studies felt that way.
Race and ethnicity also enter the picture when it comes to education level. According to the study, white adults with a high school degree or less were more likely to report that they were doing OK financially versus blacks or Hispanics who had some college education or an associate degree.
Why should you care?
Since the Great Recession in 2008, debt and financial struggles have affected people across racial, educational and income divides — even affecting groups you might least expect.
Most notably, the Federal Reserve study brought to light that many adults struggle with unforeseen expenses. A recent analysis of Credit Karma data found that even people who earn $100,000 or more a year may need to borrow money due to an unforeseen expense.
Age comes into play, too. There are many young adults who are also financially strapped, according to the Federal Reserve survey.
Among young adults with incomes under $40,000, more than one-third receive some sort of financial support — usually from parents. And a recent Credit Karma/Qualtrics study found nearly 40% of millennials have gone into debt to keep up with their friends.
What can you do?
If you feel that you’re still struggling financially even though the economy seems to be on the rise, you’re not alone. There are steps you can take to help get back on track.
Here are a few things you might try to help get your expenses in order.
- Don’t rely too much on credit cards. If possible, try to avoid using a credit card to pay for an unforeseen expense if you know you’ll end up carrying a balance. Instead, consider other options, such as a personal loan, which could cost you less in interest than carrying a balance on your credit card.
- Build an emergency fund. A great way to deal with an emergency expense is to have the cash you need already saved in an emergency fund. If possible, try and set aside enough savings to cover several months of expenses. (Only half of the people recently surveyed by the Federal Reserve have enough emergency savings to cover three months of expenses if they were to lose their job.)
Remember, if you’re experiencing financial instability, you’re not alone. It’s important to treat your recovery like a long journey and not a short race. Stay patient, develop good habits, ask for help and plan ahead.