Covid Debt Swallowing Middle Class

The Wall Street Journal ran a great piece yesterday No Job, Loads of Debt: Covid Upends Middle-Class Family Finances.

You might not be able to see it because it requires a subscription.

But the prediction I made in The Coronavirus Might Just Kill Your Finances Before It Kills Anyone You Know looks like it is coming closer to being a reality.

On March 11th I wrote, “And to bring this all back around, as you can see, those of us who are least able to afford the financial hit from a COVID-19 outbreak are the same people who can least afford an income interruption.”

Sadly that is coming true, but not just for lower-income families. And just wait till all the rental eviction and student loan payment holidays end. Shazam.

The pandemic economic pain is creeping up into middle-class families as well.

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Here are some quotes from that Walls Street Jornal article.

“The pandemic is wreaking havoc in loan-laden white-collar workers’ households; ‘I will never claw my way out of this situation’”

“It could get worse. “The pain so far in the economy has largely been at the lower end of the pay scale,” said Discover Financial Services Chief Executive Roger Hochschild, adding that many of “the white-collar layoffs are still to come.”

“By some measures, the outlook for higher-earning workers appears worse than during the 2008 financial crisis. In August, about 3.3 million people age 25 and over with bachelor’s degrees or higher were unemployed, up from 1.2 million in February, according to the Bureau of Labor Statistics. During the last downturn, that number peaked at about 2.2 million.”

“Many people who have jobs are struggling with pay cuts. As of August, 17 million workers were getting paid less due to the pandemic, said Mark Zandi, chief economist at Moody’s Analytics. Some 9.5 million took pay cuts; the remaining 7.5 million are working fewer hours, he said.”

The pandemic is horrible but it is yet another terrible income interruption that can lead to personal financial disaster when your paycheck is soaked up your lifestyle.

I’m not casting blame. Life happens. But the financial pain people are feeling today and will feel is not the first time we’ve faced such trials and it won’t be the last.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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