According to report findings, many consumers are not financially prepared for a disruption to their primary source of income, even as unemployment remains low. Nearly 37% of households report that they could not cover expenses for longer than one month, even with accessing savings, borrowing money, selling assets, or seeking help from family and friends. The report also finds that, in 2022, 1 in 8 households also experienced lost income from unemployment or reduced work hours, and roughly one-third of households experienced a significant unexpected expense, including vehicle repair, unexpected medical expense, or a household repair.
When people have a financial emergency and no money to pay for it, they often feel overwhelmed and panicked. They may feel a sense of shame and guilt for not being able to manage their finances better and for not having enough money saved for an emergency. They may also feel embarrassed about having to ask for help or having to take out a loan. In addition, they may feel anxious and stressed about how they will pay for the emergency and how they will manage their finances in the future.
The report discusses how consumers faced frequent income uncertainties as income variability increased sharply from 2021 to 2022. The increase was particularly large for Hispanic consumers and consumers under age 40. Also, while racial and ethnic groups applied for credit at similar rates, Black and Hispanic consumers were more likely to be turned down or not receive as much credit as requested. Black and Hispanic consumers were also much less likely to apply for credit in the first place because they believed they would be turned down.
Among renters, 31% missed at least one rental payment in the previous year, and approximately 8% were not current on their rent as of February 2022. Yet only 6% of renters had received rent payment or flexibility since the pandemic began.
Read the report, Making Ends Meet in 2022.
In a financial emergency, acting quickly to assess the situation and determine the best course of action is essential. Here are some steps you can take:
- Assess the situation: Take a moment to assess the extent of the financial emergency and determine the root cause. This will help you figure out the best way to address the issue.
- Prioritize your expenses: Make a list of necessary expenses, such as rent or mortgage payments, utilities, and food, and prioritize them. Cut back on unnecessary expenses as much as possible.
- Look for sources of immediate financial assistance: If you’re facing a short-term financial emergency, you may be able to get help from friends or family or borrow from a bank or credit union. You might also consider selling assets or taking on a short-term job to generate additional income.
- Create a budget and plan for the future: Once you’ve addressed the immediate financial emergency, creating a budget and planning for the future is crucial. This will help you avoid future financial emergencies and get your finances back on track.
- Seek professional help: If you’re having difficulty managing your finances or addressing a financial emergency, it might be helpful to seek the advice of a financial professional, such as Damon Day.
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