The Truth About Financial Wellness In The US During COVID-19
Before the COVID-19 pandemic, the news and politicians would have us believe that financial wellness was better than ever. The economy was doing wonderfully, after all, and the stock markets were frequently hitting record-breaking numbers.
Unfortunately, the profits of companies and traders do not always reflect the realities of the average American. According to Gallup, 50% of Americans believe that their personal financial situation is getting worse – and this data was collected before the COVID-19 pandemic caused a global economic shutdown.
How Has COVID-19 Changed Finances In The US?
While there are plenty of Americans in dire financial straits due to inaction by their state governments and loss of business – the stimulus packages have, by and large, worked. In fact, the average income of Americans has gone up during the shutdown, as have the average savings account balance.
So, why hasn’t the economy improved? Well, one of the reasons savings are higher in proportion to increased income, is because people are being much more cautious with their spending in case unemployment payments run out before they are allowed to go back to work – or if they will not be able to due to preexisting conditions until there is a vaccine available.
How Are Americans With Their Credit?
Credit scores are tricky business in the US. The average credit score in the US hit a record 703 in late 2019. By and large, it looks like Americans had begun to fully recover from the credit issues associated with the downturn, and have been able to increase their credit scores as a result.
Unfortunately, more savings for the average American can point to lack of payments being made in order to have more liquidity on-hand in case of further shutdowns and emergencies. Thankfully, many loans have been stayed temporarily, so this could account for some numbers. The temporary payment stays will not affect credit scores.
However, if the shutdowns continue, people in certain industries could find that they will not have enough income to make payments once they are due again – which could be detrimental to their credit scores and cause years of issues down the road.
How Do I Keep My Credit Score Safe During COVID-19?
There are quite a few things that you can do right now to ensure that you stay above water and pay your bills on time during COVID-19.
While it may not be ideal, one of the things that you can do is borrow against your 401(k). You are allowed to do this, thanks to some provisions outlined by the CARES act. You need to be able to prove that you are on the edge of financial devastation, but as long as that is true, you can borrow from it penalty-free.
If you do not have a retirement account to borrow against, and find yourself on the edge of financial devastation, you can read more about how COVID-19 can affect your credit score, and some of the steps you can take to keep your score as healthy as possible.