- Global Study: People Trust Robots More Than Themselves with Money
- COVID-19 has created financial anxiety, sadness, and fear
- People see robots as a better way to manage finances
- The role of finance teams and financial advisors will never be the same
- Our relationship with money has changed, it’s time to embrace AI to manage finance
- Supporting Quotes
- Worried about your finances during the coronavirus pandemic? Here are some tips
- File for unemployment
- Call your creditors
- If you’re still getting a paycheck, re-prioritize your spending
- Treat your long-term investments as you usually would
- Look into your student loan payments
- Take it easy on yourself
- 3 ways the coronavirus pandemic may impact your money a year from now, according to financial planners
- 1. It will push the younger generation to be more conservative
- 2. It will force people to re-think their future savings habits
- 3. It will change people's ability to work from home, and in turn, their living expenses
- Managing your personal finances during the COVID-19 crisis
- There seems to be a disconnect in the U.S. between business closures and high unemployment on one hand, and the robust stock market on the other. Could you explain why Wall Street can be doing so well while Main Street is floundering?
- Should we take comfort from the way the stock market is performing, or is there something a little puzzling, if not disturbing, about its strong performance in the face of so much financial hardship across the nation?
- What, if anything, would cause the numbers from Wall Street to start reflecting the misery in the rest of the economy?
- A focus of your work is providing financial guidance to doctors and other medical professionals. What does that guidance generally entail?
- Before COVID-19, the last major financial crisis was the Great Recession of 2007-2009. Is your advice to investors the same now as it was during that previous downturn? Is there a financial playbook an investor would be wise to follow whenever the economy is badly shaken?
- The effects of the 1918 influenza pandemic are generally considered to have lasted two years. Suppose we're still dealing with the impact of COVID-19 well into 2022—are the U.S. economy and the stock market prepared to withstand such a long period of upheaval?
- How President Joe Biden Will Impact Your Personal Finances
- Passing a Third Stimulus Package
- Tackling the Housing Shortage
- Encouraging Retirement Savings
- Reforming Capital Gains Taxes and Estate Planning
- Making College Cheaper and Tackling Student Loan Debt
- Defending and Reforming the Affordable Care Act
- Protect yourself financially from the impact of the coronavirus | Consumer Financial Protection Bureau
- Steps to take if you have trouble paying your bills or meeting other financial obligations
- Contact your lenders, loan servicers, and other creditors
- Work with housing and credit counselors to understand your options
- Trouble paying your mortgage?
- Trouble paying your student loans?
- Trouble paying your credit cards?
- Trouble paying your auto loan?
- How to work with your bank or credit union
Global Study: People Trust Robots More Than Themselves with Money
2020 has changed our relationship with money and people now trust robots more than themselves to manage their finances, according to a new study by Oracle and personal finance expert Farnoosh Torabi.
The study of more than 9,000 consumers and business leaders in 14 countries found that the COVID-19 pandemic has increased financial anxiety, sadness, and fear among people around the world and has changed who and what we trust to manage our finances. In addition, people are rethinking the role and focus of corporate finance teams and personal financial advisors, according to the research.
COVID-19 has created financial anxiety, sadness, and fear
The global pandemic has damaged people’s relationship with money at home and at work.
- Among business leaders, financial anxiety and stress increased by 186 percent and sadness grew by 116 percent; consumer financial anxiety and stress doubled and sadness increased by 70 percent.
- 90 percent of business leaders worry about the impact of COVID-19 on their organization, with the most common concerns centering on a slow economic recovery or recession (51 percent); budget cuts (38 percent); and bankruptcy (27 percent).
- 87 percent of consumers are experiencing financial fears, including job loss (39 percent); losing savings (38 percent); and never getting debt (26 percent).
- These concerns are keeping people up at night: 41 percent of consumers reported losing sleep due to their personal finances.
People see robots as a better way to manage finances
The financial uncertainty created by COVID-19 has changed who and what we trust to manage our finances. To help navigate financial complexity, consumers and business leaders increasingly trust technology over people to help.
- 67 percent of consumers and business leaders trust a robot more than a human to manage finances.
- 73 percent of business leaders trust a robot more than themselves to manage finances; 77 percent trust robots over their own finance teams.
- 89 percent of business leaders believe that robots can improve their work by detecting fraud (34 percent); creating invoices (25 percent); and conducting cost/benefit analysis (23 percent).
- 53 percent of consumers trust a robot more than themselves to manage finances; 63 percent trust robots over personal financial advisors.
- 66 percent of consumers believe robots can help detect fraud (33 percent); reduce spending (22 percent); and make stock market investments (15 percent).
The role of finance teams and financial advisors will never be the same
To adapt to the growing influence and role of technology, corporate finance professionals and personal finance advisors a must embrace change and develop new skills.
- 56 percent of business leaders believe robots will replace corporate finance professionals in the next five years.
- 85 percent of business leaders want help from robots for finance tasks, including finance approvals (43 percent); budgeting and forecasting (39 percent); reporting (38 percent); and compliance and risk management (38 percent).
- Business leaders want corporate finance professionals to focus on communicating with customers (40 percent); negotiating discounts (37 percent); and approving transactions (31 percent).
- 42 percent of consumers believe robots will replace personal financial advisors in the next five years.
- 76 percent of consumers want robots to help manage their finances by freeing up time (33 percent); reducing unnecessary spending (31 percent); and increasing on-time payments (25 percent).
- Consumers want personal financial advisors to provide guidance on major purchasing decisions such as buying a house (45 percent); buying a car (41 percent); and planning for retirement (38 percent).
Our relationship with money has changed, it’s time to embrace AI to manage finance
The events of 2020 have changed the way consumers think about money and have increased the need for organizations to rethink how they use AI and other new technologies to manage financial processes.
- 60 percent of consumers say the pandemic has changed the way they buy goods and services.
- 72 percent of consumers say the events of 2020 have changed how they feel about handling cash, with people feeling anxious (26 percent); fearful (23 percent); and dirty (19 percent). More than a quarter (29 percent) of consumers now say that cash-only is a deal-breaker for doing business.
- Businesses have been quick to respond as 69 percent of business leaders have invested in digital payment capabilities and 64 percent have created new forms of customer engagement or changed their business models in response to COVID-19.
- 51 percent of organizations are already using AI to manage financial processes, compared with 27 percent of consumers.
- 87 percent of business leaders say organizations that don’t rethink financial processes face risks, including falling behind competitors (44 percent); more stressed workers (36 percent); inaccurate reporting (36 percent); and reduced employee productivity (35 percent).
“Managing finances is tough at the best of times, and the financial uncertainty of the global pandemic has exacerbated financial challenges at home and at work,” said Farnoosh Torabi, personal finance expert and host of the So Money podcast.
“Robots are well-positioned to assist—they are great with numbers and don’t have the same emotional connection with money.
This doesn’t mean finance professionals are going away or being replaced entirely, but the research suggests they should focus on developing additional soft skills as their role evolves.”
“Financial processes in our personal and professional worlds have become increasingly digital for many years and the events of 2020 have accelerated that trend,” said Juergen Lindner, senior vice president, global marketing, Oracle.
“Digital is the new normal and technologies such as artificial intelligence and chatbots play a vital role in managing finance.
Our research indicates that consumers trust these technologies to accelerate their financial well-being over personal financial advisors and business leaders see this trend reshaping the role of corporate finance professionals.
Organizations that don’t embrace these changes risk falling behind their peers and competitors; hurting employee productivity, morale and well-being; and struggling to attract the next generation of AI-empowered finance talent.”
For more information go to: https://www.oracle.com/erp/ai-financials/money-and-machines/
Farnoosh Torabi is a celebrated financial expert, host of the award-winning podcast So Money, and bestselling author of multiple books, including her latest: When She Makes More.
She appears frequently on the NBC Today Show and is a columnist for O, The Oprah Magazine, Bloomberg and NextAdvisor, a financial news site powered by Time Magazine. Farnoosh studied finance at Penn State and holds a master’s from The Columbia Graduate School of Journalism.
Learn more about Farnoosh at www.farnoosh.tv and follow her on Instagram @farnooshtorabi.
Research findings are a survey conducted by Savanta, Inc.
between November 10 – December 8, 2020 with 9,001 global respondents from 14 countries (United States, United Kingdom, Germany, Netherlands, France, China, India, Australia, Brazil, Japan, United Arab Emirates, Singapore, Mexico and Saudi Arabia).
The survey explored attitudes and behaviors of consumers and business leaders towards money, finances, budgets, and the role and expectations of artificial intelligence (AI) and robots in financial tasks and management.
Oracle offers suites of integrated applications plus secure, autonomous infrastructure in the Oracle Cloud. For more information about Oracle (NYSE: ORCL), please visit us at www.oracle.com.
Oracle and Java are registered trademarks of Oracle Corporation.
Worried about your finances during the coronavirus pandemic? Here are some tips
The economic downturn spurred by shutdowns meant to slow the spread of the novel coronavirus has been swift. The U.S. economy shrank at a 4.8% annual rate last quarter amid the spread of the virus, and the Congressional Budget Office has estimated that GDP will drop at a 40% annual rate this upcoming quarter.
The Labor Department announced Thursday that nearly 3.2 million Americans applied for unemployment last week, bringing the total number of jobless claims filed in the last six weeks to roughly 33 million. And in the latest poll PBS NewsHour/NPR/Marist poll, 50 percent of American adults said they or someone else in their household had been let go or lost work hours due to the coronavirus.
Facing a recession that the International Monetary Fund said will be far worse than the 2008 economic collapse, many Americans are feeling overwhelmed by the stress of managing their everyday expenses and considering any future investments.
A Kaiser Family Foundation poll conducted in the last week of March found that more than half of Americans were worried they would be laid off or lose their job, and 59 percent were worried that their investments would be negatively affected for a long time.
54 percent of Americans who had already lost their job or income said that worry or stress related to the virus had a negative impact on their mental health.
“It’s so stressful for so many people,” NerdWallet personal finance expert Kimberly Palmer said of the current moment in a recent live Q&A with the NewsHour’s Amna Nawaz. “Across the board people have a lot of anxiety.”
President Donald Trump at the end of March signed into law a $2 trillion economic stimulus bill that aimed to provide some relief for Americans who have lost their jobs or are experiencing financial distress due to the virus outbreak. But this money only went so far: The Paycheck Protection Program, which was created to provide loans to small businesses, ran money in just 13 days after congressional Democrats refused to allow a general extension of the funding.
Lawmakers delivered an additional $500 billion in coronavirus relief aid, including $335 billion for the Paycheck Protection Program, and another $60 billion for small business disaster loans, at the end of April.
Despite the high number of jobless claims filed during the coronavirus outbreak, 71 percent of unemployed Americans did not receive those benefits during the month of March, according to a recent study by the Pew Research Center.
And while a number of Americans received a $1200 check thanks to the initial stimulus bill there were several issues with the roll- payments to some individuals.
This limbo period has caused stress and uncertainty for many Americans. But there are other measures people can take now to manage their personal finances during this difficult time.
File for unemployment
The coronavirus stimulus bill expands unemployment insurance to more workers and offers an additional $600 a week to individuals who qualify, in addition to any available state benefits, through July.
With so many Americans work, though, many state websites have been overwhelmed by the number of unemployment applications, leading them to crash or freeze. That’s why if you do lose your job, it’s best to start the process of applying for unemployment right away.
Erin Lowry, who runs the blog Broke Millennial and is the author of the book “Broke Millennial Takes on Investing,” didn’t sugarcoat the situation: It may take hours to get your application through the system, and weeks for a check to come through.
“Make sure you file ASAP so you start that process for yourself,” Lowry said, who added that this money, combined with the $1,200 one-time payment from the government, could provide some temporary relief for those worried about paying their bills in the coming months.
“If you lost income, file for unemployment right away even if you think you couldn’t qualify for it,” said Matt Frankel, a certified financial planner with The Ascent, a Motley Fool company.
He noted that the stimulus bill has extended benefits to apply to gig, freelance and contract workers — so while you may not have previously qualified for unemployment as, say, an Uber driver, that could change with this new legislation.
“Our unemployment system is not meant to handle 6 million claims a week,” Frankel added of the backlog. “It’s a unique time and the sooner you get in, the better.”
Call your creditors
If you’re worried about paying your bills on time, the best thing you can do is call your creditors, said Bankrate chief financial analyst Greg McBride.
“For those who have been laid off, furloughed or expect to be, contact your creditors first and explain your situation,” McBride said, citing mortgage lenders, credit card companies and the institutions that handle your car loan as examples of those you should contact first. “There are a variety of programs around forbearance and payment flexibility.”
“If you can get payment relief on a mortgage or car loan, those are two of the biggest items you have in your budget to begin with,” McBride said, adding that holding off on these payments will allow you to focus on day-to-day essentials such as groceries.
Lowry cautioned against assuming that creditors will automatically waive late fees at this time. “This is not a situation in which it’s better to ask for forgiveness than permission. It’s quite the opposite,” she said. “You need to be proactive about reaching out first and having that conversation before that missed bill happens.”
When it comes to paying rent, Lowry suggested being proactive about talking to your landlord, as well as knowing your rights as a tenant — a number of cities, for example, have temporarily halted evictions in light of the crisis.
“Go to the landlord with a solution,” Lowry said, adding that it helps to have an idea of what you could pay, even if it’s just 25 percent of the rent right now. “Even if you can pay a little bit, and that kind of [creates] a good faith experience between you and your landlord, that’s just something to consider.”
While there are certainly exceptions, “most landlords are more than willing to work with you when it comes to paying,” Matt Frankel said.
If you’re still getting a paycheck, re-prioritize your spending
Lowry suggested making a “bare essentials” budget detailing what you won’t be able to go without, which may include: shelter, food, utilities, medicine, or transportation, if you’re an essential worker.
With many businesses shut down or having their employees work from home, it’s ly that you can redirect some of your usual expenses to a savings account, if you are still receiving your usual paycheck.
Consider putting money that you would have otherwise spent on public transportation, ride shares, entertainment or restaurants into padding your savings as much as possible to prepare for an emergency.
“You need to be proactive about reaching out first and having that conversation before that missed bill happens.”
“Because everything is closed, a lot of that discretionary spending that we would normally do has been forced our budget,” McBride said. “Take a close look at your monthly budget. Identify the items that you can cut back or eliminate now, or at the point after your last paycheck has arrived.”
A Bankrate survey conducted in January, before the downturn, found that only 41 percent of Americans would be able to cover an unplanned expense of $1,000 if it came up. McBride said if there is any way you can save enough to cover yourself in a situation that, you should. In unprecedented times these, though, that may not always be possible.
Treat your long-term investments as you usually would
While you may be tempted to transfer money from your 401K elsewhere given the state of the stock market right now, financial experts say you should avoid doing so unless you need to, to cover short-term expenses.
“The best course is to stay the course,” McBride said of retirement funds and other long-term investments. “Continue to make the contributions, do not change your investment allocation, provided it was appropriate to begin with.”
If you have very lean emergency funds, you might consider dialing back your 401K contributions in order to boost those savings. “I almost never advocate for that — it’s driving around without a seatbelt on. But at this point in time, you can’t be careful enough about emergency savings,” McBride added.
Frankel also cautioned, “Don’t take any money your 401K unless you absolutely have to, and whatever you do, don’t move your account to cash.”
“Historically, that’s been a very bad move,” said Frankel of moving investments a 401K to cash, noting that the stock market can tank quickly, but tends to correct itself in the long term. “Your retirement savings are meant to be a long-term investment. Keep that in mind.”
Look into your student loan payments
If you have federal student loans, be aware that the stimulus bill has suspended payments on them through September 30, meaning borrowers won’t be penalized for missing payments between now and then.
“You need to be proactive about reaching out to servicers,” Lowry said of speaking with representatives of companies handling your student loans. “Don’t assume that everybody you get on the phone with knows all the details.”
But the deferral in the stimulus bill does not apply to private loans, said Lowry, so if possible, you should prioritize paying those if you have a mix of the two.
She also added that if you have job stability and a healthy emergency savings fund during this time, there’s no reason you can’t continue to make payments on your student loans: “If you are that unicorn of a person, make your payments, because if you can get interest waived for a period of time, more money is going to your principal balance. That could work out as a great positive for you.”
Take it easy on yourself
You may feel pressure to take advantage of the time at home by learning a new skill or going into productivity overdrive, Lowry said. This is especially true in the U.S.
, where the arrival of the gig economy has made it easier for many Americans to work any time, anywhere. “It’s also okay to feel anxious and overwhelmed,” she said.
“It is okay to be processing those feelings, and you don’t have to be at the peak of your productivity. Check in on your mood right now.”
READ MORE: Why your mental health may be suffering in the COVID-19 pandemic
If you’re seeking to let off steam amid all the stress, many boutique fitness studios are now live-streaming classes online for free.
“It’s not going to be forever,” said Frankel, who noted that this economic crisis is different than previous ones in that nothing happened to destroy consumer demand. “Take a deep breath and take care of your family is the most important thing.”
3 ways the coronavirus pandemic may impact your money a year from now, according to financial planners
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, American Express, but our reporting and recommendations are always independent and objective.
The coronavirus has continued to take a toll on the economy, and is expected to continue throughout the summer. It's caused major waves in the stock market, an unemployment rate not seen since the Great Depression, and even earned the title of a recession.
It's changed every aspect of American life, and it very well may change the way people spend, save, and invest their money for good.
Two financial planners weighed in on the ways they expect people to see the impact of the coronavirus and its resulting recession in several years. Here are the changes they've already seen in the way people are investing, spending, and saving, and how they expect to see the changes to continue in the future.
1. It will push the younger generation to be more conservative
Big stock market drops and times of market volatility always make investors feel they should be more conservative. But for a generation that has come of age with more than one “once-in-a-lifetime” financial event between the 2008 recession and the coronavirus recession, they may not want to be associated with as much risk.
“I think the Great Recession, plus this pandemic, has really pushed people to be more conservative than the traditional financial planning models would have them be,” financial planner Anna N'Jie-Konte, founder of Dare To Dream Financial Planning, tells Business Insider.
Younger people, who have lots of time to let investments grow and typically can take on more risk, may not want to do it. “I think that some people, even though they have the capacity for risk, meaning they're long-term investors, may feel they don't have the tolerance for risk,” says Margeurita Cheng, a financial planner and founder of Blue Ocean Global Wealth.
For a generation that's dealt with now two major economic crises, cash might seem a more valuable asset than investments.
2. It will force people to re-think their future savings habits
According to a 2018 survey of 12,000 households by the Federal Reserve , four in 10 American households said they couldn't afford a $400 expense without borrowing money. After the coronavirus pandemic, these two financial planners expect to see people make saving more of a priority.
Both N'Jie-Konte and Cheng say they've heard clients re-think their six-month emergency fund strategy for even bigger savings that could span 12 months worth of expenses.
“There's going to be a whole lot more people searching for security and certainty versus flexibility,” N'Jie-Konte says. “I think, unfortunately it's also going to lead to people holding a lot more cash.
I had a client of mine recently tell me that she now wants to have a year's worth of expenses in cash. I was , 'A year is a lot!'”
Cheng also has seen clients begin to talk about a 12-month emergency fund. She cites a female client in her 30s who approached her about increasing her emergency fund to 12 months. “While her job is very secure, she's , 'I would feel more comfortable having closer to 12,'” Cheng says.
3. It will change people's ability to work from home, and in turn, their living expenses
“If people have been productive from home, it's going to be a tough sell to force everyone to come to the office,” Cheng says. And, she says, working from home as a permanent way of life could have a big impact on where people choose to live, and the money they spend to be there.
According to Apartment List data, the average rent in New York City for a one-bedroom apartment is over $2,500 as of May 2020.
But, if remote work allows city dwellers to find lower living costs elsewhere, they could save money by moving.
Average rent for the same amount of space in Albany, New York is $870, while nearby Stamford, Connecticut has an average rent of $1,540 per month for a one-bedroom apartment.
“I don't think that it means people won't big cities, but I think that the time at home reflecting has allowed people to think about their quality of life,” Cheng says. Things where people live, how comfortable they are, their proximity to family members, and having enough space have become top of mind after months of stay-at-home orders.
“If I've been able to work from home and get my job done, why should my boss care whether I'm in a big city or Wyoming?” Cheng says.
Managing your personal finances during the COVID-19 crisis
Why is Wall Street thriving during the COVID-19 pandemic while Main Street shudders? What is the long-term U.S. economic outlook if the pandemic and its impact drag on for another year or more? Is a period of economic uncertainty a good time for investors to fiddle around with their stock portfolios?
For answers to these and other questions about both the broader economy and Americans' personal finances, we spoke with Yuval Bar-Or, an associate professor at the Johns Hopkins Carey Business School with expertise in finance and wealth management. His advice for most investors? Stay the course.
There seems to be a disconnect in the U.S. between business closures and high unemployment on one hand, and the robust stock market on the other. Could you explain why Wall Street can be doing so well while Main Street is floundering?
You can look at a number of factors. The main one is that many stock market participants view COVID-19 as a temporary disruption and assume the massive job losses resulting from lockdowns will soon be reversed.
Additionally, the Federal Reserve has signaled that it will do “whatever it takes” to support financial markets.
Investors interpret this as the Fed stating that it will bail out entire industries, if necessary, thereby reducing their perceived investing risk and encouraging stock price increases.
“Ultimately, the stock market cannot be decoupled from Main Street for an extended period”
Associate professor Johns Hopkins Carey Business School
Investors traditionally allocate some of their money to stocks and some to bonds. Record-low interest rates make bond investments unappealing. Many investors are investing money in stocks instead of bonds because bond yields are close to zero.
We still have massive amounts of money flowing into stocks from automated retirement-plan contributions. These inflows help to prop up prices, and government policies are making borrowing very cheap. This easy money is finding its way to stock investments.
It is also buoying other asset values, such as real estate.
Should we take comfort from the way the stock market is performing, or is there something a little puzzling, if not disturbing, about its strong performance in the face of so much financial hardship across the nation?
It is premature to take comfort from recent market performance. Ultimately, the stock market cannot be decoupled from Main Street for an extended period.
If economic activity and the employment picture worsen, that will translate into much higher personal and corporate bankruptcy rates. Demand for goods and services will plummet, and investors will be forced to revise longer-term corporate growth assumptions downward.
Recent stock market performance is only justified if the worst of the COVID-19 economic impact is behind us and if employment picks up steadily.
What, if anything, would cause the numbers from Wall Street to start reflecting the misery in the rest of the economy?
Strong evidence that massive job losses are becoming permanent could cause the stock market to swoon. In addition, signs that key industries may suffer long-term damage could also contribute to market declines.
The dining, hotel, live entertainment, and travel industries are all highly susceptible to prolonged COVID-related slowdowns.
Significant economic damage to these industries, which have historically been relied upon to provide employment for millions of people, could drag down financial markets.
A focus of your work is providing financial guidance to doctors and other medical professionals. What does that guidance generally entail?
I provide financial literacy education to medical and other professional households.
My guidance spans all the major areas of personal financial planning, from debt management and asset accumulation, to budgeting and insurance coverage, to investing and retirement planning.
I also provide guidance on how to work with financial advisors, as well as how to reduce or even end reliance on them. My initiative focuses only on education. No financial products are sold. This helps to avoid potential conflicts of interest.
Before COVID-19, the last major financial crisis was the Great Recession of 2007-2009. Is your advice to investors the same now as it was during that previous downturn? Is there a financial playbook an investor would be wise to follow whenever the economy is badly shaken?
If you're committed to a long-term passive investing strategy, as most of us should be, my advice remains the same: Stay the course! Don't chase speculative investments.
Continue to make your regular monthly contributions to retirement plans and maintain a focus on well-diversified, low-cost indexed funds. This is the worst time to succumb to emotions and resort to impulsive actions. The key with passive strategies is to avoid trying to time the markets.
You need to be invested, and your horizon is not next month or next year or even three years down the road, but 20 and 30 years in the future.
Remember that those friends who loudly announce all their “brilliant” trading decisions are self-censoring. They're neglecting to tell you about all their failed trades. Financial planning basics are not changing.
You still need to have a strategic long-term plan, to make steady contributions to retirement accounts, to get employer matches into those accounts, to secure appropriate insurance coverage, to fund children's college savings plans, to avoid biased or conflicted advice-givers, and generally to accumulate diversified assets.
This is a good time to take a close look at your household budget and slash unnecessary costs, freeing up more cash for shoring up cash reserves, paying down debt, or investing.
It is also a good time to take a closer look at your emergency cash fund and make sure it is sufficiently robust to cover your household needs, especially if you lose your job or suffer income reductions. A rule of thumb is to maintain cash holdings equivalent to six months' salary. If you feel especially anxious, you can gradually set aside more cash.
The simplest way to do this is to curtail some spending. This should be happening naturally as most travel and vacation plans are now impractical anyway, and traditional dining out is less appealing.
If your plans called for a purchase of real estate, especially if it's for a primary home, you can benefit from very low interest rates. The challenge could be selling your existing home.
You should only take on major investments if you feel that your finances are stable and that you have job security.
Taking on a large financial obligation—for example, a mortgage loan—and losing your job soon thereafter could be very difficult to overcome.
The effects of the 1918 influenza pandemic are generally considered to have lasted two years. Suppose we're still dealing with the impact of COVID-19 well into 2022—are the U.S. economy and the stock market prepared to withstand such a long period of upheaval?
Five months into the crisis, we're already seeing fracturing in some safety nets, with food pantries becoming overwhelmed and unemployment benefits decreasing.
An additional two years of COVID-19 would mean far deeper misery, along with potentially millions of personal and corporate bankruptcies, with the latter concentrated among small and mid-sized companies. This will negatively impact employment and dampen demand for goods and services.
Recovery from such a prolonged downturn will depend on government policies and the presence of safety nets that promote the survival of households as economic units and the corporate fabric of our economy.
Each of us can play a role as well. Many households are already experiencing difficulties with food and shelter. A prolonged downturn will be even more devastating for those less fortunate, who have few buffers of wealth to insulate them.
Those of us who have jobs and the means should consider opening our hearts and wallets and supporting those less fortunate by contributing to nonprofits that provide food, shelter, and education.
Even small contributions combine to make a huge difference.
Our donations won't just help others. They will help us. The more we allow the economic fabric to unravel, the more ly it is that matters will get even worse and eventually drag us down as well.
When economic circumstances deteriorate significantly, even “safe” jobs can be lost. The best outcome for everyone comes from collaborating to shore up safety nets, government and nongovernment.
A united stand allows us to preserve more of our economic and social fabric and infrastructure, making an eventual recovery faster and easier for everyone.
Posted in Politics+Society
How President Joe Biden Will Impact Your Personal Finances
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President Joe Biden took office this week, promising change for the millions of Americans who are work or facing other financial shocks due to the ongoing pandemic.
Getting the pandemic under control is a huge focus for Biden’s first 100 days in the White House. But many of his policy priorities could have an impact on your bottom line longer term, including health care, student loans, housing and saving for retirement.
Here are the key issues to watch that could impact your finances as Biden takes office.
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Passing a Third Stimulus Package
Biden has an ambitious plan for the next stimulus package. His proposal, the American Rescue Plan, is a $1.
9 trillion package that with aid for Americans including another round of stimulus checks, extended unemployment aid, rental assistance, changes to both the Child Tax Credit and the Earned Income Tax Credit and more.
It also includes more permanent changes, raising the federal minimum wage from $7.25 an hour to $15, and expanding access to affordable child care. He has already extended the national eviction moratorium through March 31.
Since Biden’s plan is still a proposal, it will need to be negotiated, voted on and passed by both the House and Senate before it’s signed into law. Though he’s signaled that he wants the bill to pass with bipartisan agreement, Democrats—who now control both chambers of Congress—could use budget reconciliation to avoid a Senate filibuster and pass the plan with only Democratic votes.
The timeline on the next stimulus package is unclear. However, Democrats have indicated it could take until early March to draft and send a relief bill to Biden.
Calculator: How Much Might You Receive In A Third Stimulus Check?
Tackling the Housing Shortage
Although Biden did not propose changes to housing policy in his American Rescue Plan, he intends to tackle the affordable housing shortage during his tenure.
Biden plans to provide incentives to develop and rehabilitate low-cost housing in areas with housing shortages. He also proposed expanding the Section 8 housing choice voucher program to ensure that everyone who is eligible for housing assistance can get it.
The president also wants to increase housing affordability by providing a refundable tax credit for people who spend 30% or more of their income on rent. He’d make sure developers set aside a portion of units to be rented or sold at reduced prices to reduce race- and income-based housing discrimination.
At this point, it’s still unclear how Biden plans to pay for his housing policies. It’s ly that his plans to tax the wealthy could generate revenue to help fund housing programs.
Read more: With Democrats In Control, How Far Will Biden Get With His Housing Plan?
Encouraging Retirement Savings
Biden plans to raise taxes for people earning $400,000 or more per year and use it to increase Social Security benefits, expand the age group eligible for Medicare, and offer a tax credit to caregivers of spouses or parents.
That focus on Social Security benefits is notable, as funds are currently expected to be exhausted by 2035. In 2021, about 70 million Americans receiving Social Security benefits will receive just a 1.3% cost-of-living increase in their benefits—the smallest increase since 2017.
Biden’s plan would increase the minimum benefit retirees can get, along with providing increases to benefits amounts for seniors between ages 78 and 82.
Read more: How Would A Biden Presidency Aid Your Retirement?
Biden has proposed making changes to retirement savings to benefit low- and middle-income workers.
Currently, if you’re in a higher tax bracket, you get a bigger tax deduction than someone at a lower tax bracket who puts the same exact amount of money into a company-sponsored 401(k) plan.
Policy experts anticipate that the Biden administration will try to replace the current tax-deduction structure with a flat tax credit.
Doing so could simplify deduction calculations and also encourage more people to save: Only about 60% of people who make between $50,000 and $75,000 a year contribute to a retirement plan, according to the Tax Foundation.
Read more: No, Joe Biden Won’t Kill Your 401(k)
Reforming Capital Gains Taxes and Estate Planning
Biden has proposed adjusting or eliminating what’s called “step-up in basis,” a provision that can come in handy for people planning to pass their portfolios down to their children.
Rather than basing capital gains taxes on the original cost of your assets, the basis gets reset to the new value.
That reset can eliminate or drastically reduce the amount of capital gains taxes your heir pays if they sell your assets.
By eliminating or changing the provision, high-level investors and their families could be faced with considerable capital gains taxes (taxes on the profits when you sell an asset). That’s in addition to Biden calling for taxing long-term capital gains regular income, which would raise the top rate from 20% to nearly 40% for the highest earners.
But Biden’s tax plans are ambitious, and with a closely divided Senate, it may be harder for tax legislation to find support in the Senate. Plus, experts say that eliminating the step-up in basis provision would be a paperwork nightmare.
Read more: What A Biden Win Means For Tax Policy
Making College Cheaper and Tackling Student Loan Debt
Biden and Harris have been vocal about their plans to make college more affordable by making two years of post-secondary education free, whether it be community college, trade school or other job training programs. Biden has also proposed making public colleges and universities free for families earning less than $125,000 per year.
But before the Biden administration can get to those policy plans, he’ll have to handle the ongoing Covid-19 crisis and its impact on student loan borrowers.
Biden has already directed the Department of Education to extend the federal student loan repayment forbearance period until Sep. 30, 2021. But it’s unclear what will happen to borrowers when those forbearance plans expire. And private loan borrowers have had to work with their lenders to adjust their repayment plans, as private lenders haven’t been required to provide relief.
Before Biden’s inauguration, there was chatter in Washington about student loan debt cancellation. And while Biden’s aides insist he is still in support of canceling $10,000 in student loan debt for Americans, such a provision was left Biden’s stimulus plan.
Biden wants to simplify the many repayment options for federal student loans. Implementing those new provisions, which include capping monthly payments at 5% of discretionary income and loan forgiveness after 20 years of qualifying payments, could be on his priority list for student loan reform once the pandemic is under control.
Read more: What Joe Biden’s Presidency Could Mean for Your Student Loans
Defending and Reforming the Affordable Care Act
The Supreme Court will begin to consider this month whether the Affordable Care Act is unconstitutional. That argument stems from Trump’s elimination of the individual mandate—the penalty you had to pay if you didn’t sign up for a health care plan.
But Biden is ready for that challenge, with a new version of the ACA he’s calling “Bidencare” (the sequel to Obamacare). The new version would have an individual mandate but would also include new options for people seeking insurance, including an affordable plan similar to Medicare.
Plus, Biden has enlisted Xavier Becerra, a previous California Representative and current Attorney General of California, to serve as Secretary of Health and Human Services.
Becerra has long supported expanding health care in the U.S., and played a pivotal role in drafting the ACA.
Becerra will ly welcome improvements to the existing ACA plan, and has already voiced approval for a single-payer health care system in the U.S.
But providing health care subsidies is expensive, and Biden will need to woo the Senate in order to make headway reforming health care plans.
Read more: Is Medicare For All A Possibility Under Xavier Becerra?
Protect yourself financially from the impact of the coronavirus | Consumer Financial Protection Bureau
This blog was originally posted on March 13, 2020 and has been updated on April 3, 2020 to reflect new information.
You can take steps to help protect yourself or a loved one from the financial impact of the coronavirus.
For the latest updates visit the CFPB’s Coronavirus landing page.
Steps to take if you have trouble paying your bills or meeting other financial obligations
If you have trouble paying your bills, or loans, or paying on time, there may be a number of options to help, especially if you reach out early to your lenders or creditors.
Contact your lenders, loan servicers, and other creditors
If you’re not able to pay your bills on time check their websites, to see if they have information that can help you.
The CFPB and other financial regulators have encouraged financial institutions to work with their customers to meet their community needs.
If you can’t make a payment now, need more time, or want to discuss payment options, contact your lenders and servicers to let them know about your situation. Being behind on your payments can have a lasting impact on your credit.
Credit card companies and lenders may be able to offer you a number of options to help you. This could include waiving certain fees ATM, overdrafts, and late fees, as well as allowing you to delay, adjust, or skip some payments.
When contacting your lenders, be prepared to explain:
- Your financial and employment situation
- How much you can afford to pay
- When you’re ly to be able to restart regular payments
- Be prepared to discuss your income, expenses and assets
Work with housing and credit counselors to understand your options
These trained professionals provide advice for little or no cost, and they will work with you to discuss your situation, evaluate options, and even help you negotiate with your lenders and servicers.
Warning: If you’re considering working with adebt settlement company to address your debts, be skeptical of any company that promises to do it for an upfront fee.
Trouble paying your mortgage?
If you can’t pay your mortgage, or can only pay a portion, contact your mortgage servicer.
It may take a while to get a loan servicer on the phone. Loan servicers are experiencing a high call volume and may also be impacted by the pandemic.
Visit our blog on mortgage relief options for in-depth content to help you understand your forbearance options and avoid foreclosure in light of the coronavirus and the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act.
If you are renting from an owner who has a federally backed mortgage, the CARES Act provides for a suspension or moratorium on evictions. Read more in our renter section of the mortgage relief blog.
Trouble paying your student loans?
If you have student loans, you have options.
If your loan is held by the federal government, your loan payments are postponed with no interest until September 30, 2020.
For other kinds of student loans (such as a federal student loan held by a commercial lender or the institution you attend, or a private student loan held by a bank, credit union, school, or other private entity) contact your student loan servicer to find out more about your options.
Read our FAQs to learn more about what you can do.
Trouble paying your credit cards?
If you’re unable to pay your credit cards , talk with your credit card company and let them know that you cannot make a payment. You may get relief.
You may also want to work with a credit counselor. Reputable credit counseling organizations are generally non-profit organizations that can advise you on your money and debts, and help you with a budget. Some may also help you negotiate with creditors. There are specific questions to ask to help you find a credit counseling organization to work with.
Trouble paying your auto loan?
Your lender may have options that will help. Our tips include changing the date of your payment, requesting a payment plan, and asking for a payment extension.
How to work with your bank or credit union
With many of us staying home to help flatten the coronavirus curve, online banking allows you to handle your finances from the comfort of home. Here are some tips for people who are new to online or mobile banking.
Generally, all bank deposits up to $250,000 are insured by the Federal Deposit Insurance Corporation . Deposits at all federal credit unions, and the vast majority of state-chartered credit unions, are also insured up to $250,000 by the National Credit Union Share Insurance Fund (NCUSIF). Here is more from the FDIC Chairman Jelena McWilliams.