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Friday, September 23rd, 2011

Saving Money in a Time of Higher Prices, Higher Poverty Rate

A report released by the Census Bureau shows that income dropped for U.S. families and more families were living at or below the poverty line in 2010 than in previous years. In fact, 2010 marked the third consecutive year that the poverty rate increased; since 2007, the total has crept up by 2.6 percent.

The Census Bureau further reported that:

  • Between 2009 and 2010, the poverty rate increased from 14.3 percent to 15.1 percent.
  • Last year, 46.2 million Americans were living in poverty.
  • 2010’s numbers mark the highest poverty rate the country has seen since 1993.
  • About 16.7 percent of Americans are now either unemployed or “marginally attached to the workforce” (i.e. underemployed).

One interesting side note about these numbers is that the unemployment rate has not changed significantly in the last year, even though the number of people living in poverty has. This suggests, according to sources, that the high unemployment rate has pushed wages down.

Higher Prices

Perhaps contributing to the nation’s rising poverty rate is a steady upward movement of consumer prices. Last month’s numbers from the Bureau of Labor Statistics show that the energy index rose 1.2 percent and the food index increased by 0.5 percent, its largest jump since March.

Even without the volatile energy and food price changes, other prices rose 0.2 percent, largely driven by apparel and housing costs.

Saving Money in the Thick of It

So what can a cash-strapped consumer do when times get tough? Spend more carefully, for one thing. Here’s a look at some tips for keeping bills lower, even as prices creep up and income falls.

  • Use the freezer. While you might forget leftovers in the fridge, you can store them in all their first-night freshness in the freezer. Bonus: freezing food for later saves time when you defrost it.
  • Learn sneaky food-saving recipes. Stale bread can be a real bummer – nobody wants to spend money on something and throw it out. But recipes for bread pudding and homemade croutons are both super-easy ways to rescue stale bread. Soup stocks are a great way to rescue vegetables past their prime.
  • Buy in season. Summer’s bounty means prices on produce are often at their lowest in the hot months. To take advantage, stock up and either freeze, dehydrate, or can the extras.
  • Check your bills carefully. Small mistakes may end up costing you over the long run. Make sure you’re paying only what you truly owe on bills. And vigilance can help you detect any suspicious activity (like possible identity theft) before it becomes a major problem.
  • Downgrade. Cable and Internet services can be pretty costly. If you aren’t watching all your channels or using your Internet for work, consider trimming the extras to save every month.
  • Go green. Three small steps can help you save serious money on electric bills. First, unplug electronics when you’re not using them. To make this easier, install surge protectors that you can switch off or unplug easily. Next, replace incandescent bulbs with compact fluorescents, which use less energy and last about ten times longer. Finally, opt for natural light and air whenever possible.

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Wednesday, September 21st, 2011

Falling SAT Scores & The Future of the Economy

The College Board announced this week that SAT scores among U.S. high school students dropped from last year. While the decrease may not seem significant (the average reading score fell three points, writing fell two points, and math dropped by one), analysts are worried that the dip could be part of a larger trend.

Unfortunately, that trend could have significant long-term impact on the future of the U.S. economy and jobs market.

The Test Score-Employment Link

Here’s a look at why faltering SAT scores are raising some concern among those worried about the long-term recovery of the U.S. economy.

  • SAT Benchmark: The College Board, which administers the SAT, has determined that a score of 1550 out of 2400 indicates that a student has a 65 percent chance of earning at least B-minus grades in college and thus of earning a degree.
  • Less than half of seniors meeting the benchmark: In 2011, only 43 percent of seniors planning to attend college achieved the benchmark score. This suggests that the majority of those entering college this fall have a less than 65 percent chance of completing school (according to the College Board’s research).
  • Unemployment by degree earned: The failure to complete college is troubling considered in the context of current unemployment rates. While the national average hovers around nine percent, that number varies significantly when total education is considered. In 2010, the Bureau of Labor Statistics released numbers indicating that, when the nation’s unemployment rate was at 8.2 percent, the rate for those with a doctoral degree was a mere 1.9 percent; professional degree earners had a 2.4 percent rate; those with masters degrees, 4.0 percent; those with bachelor’s degrees, 5.4 percent; associate degrees, 7.0 percent; some college, 9.2 percent; high school diploma, 10.3 percent; and no high school, 14.9 percent.
  • The future of U.S. jobs: Those numbers reflect a trend in the U.S. that involves available jobs becoming more and more skilled. The Secretary of Education has gone on the record saying that most jobs available in the U.S. in the future will be skilled and that education and training are becoming more and more essential to obtaining and keeping employment.

Those who start college and don’t finish may still have to contend with student loans, which are not dischargeable in bankruptcy. Student debt can be especially difficult without the increased earning potential that typically accompanies a completed degree.

Economic Recovery and Employment

Naturally, nobody will insist that the economy has recovered until the unemployment rate has fallen closer to normal levels. Though many analysts say that recovery must start in the housing market, most citizens and politicians pay more attention to employment numbers, because these have a more observably direct impact on citizens.

Part of the worry that the College Board’s numbers spurred comes from overseas: students in China and elsewhere are improving on standardized tests as U.S. students fall behind. This has led some people to worry that, if American workers, students, and schools don’t improve, the country might have to start outsourcing jobs for the highly trained.

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Wednesday, August 31st, 2011

Statistics Show Decrease in Small Business Bankruptcies

The latest numbers from Equifax, a credit rating organization based in Atlanta, Georgia, show that small business bankruptcy filings decreased in the first quarter of 2011 compared to the same period in 2010. Down 15 percent from last year, the first-quarter small business filings were still higher than those in the first quarter of 2008, before the recession hit.

For the purposes of its statistics, Equifax considers a small business any corporation with 100 employees or fewer. Here’s a look at what these numbers might mean for the larger economy.

Small-Business Bankruptcy & Economic Recovery

Small business bankruptcy filings might affect the economy in a number of ways:

  • Jobs: When small businesses file for Chapter 7 bankruptcy, they liquidate and cease to exist. That means that any employees of that business become unemployed and enter the job market. A Chapter 11 bankruptcy means reorganization for a small business, but some employees could still be made redundant, especially in smaller operations where salaries are among the largest expenses business owners have. While it might not seem like a small business could have a big impact on the unemployment rate, consider this: about 38 million Americans work for companies with fewer than 100 employees.
  • Local economies: In many parts of the country, small businesses give a town its individual “flavor.” Liquidation bankruptcy by these businesses might hurt a local economy by removing a draw for tourists or out-of-towners; however, a successful reorganization could mean more-booming business in the future.
  • Real estate: In an admittedly less direct way, small-business bankruptcies could affect a place’s real estate market. Empty storefronts drive down real estate prices. This can be good if other businesses fill in right away, but could be bad if multiple businesses close down in the same area. Similarly, if an area’s businesses are failing and its residents are losing work, they may move to greener pastures, leaving their houses empty and potentially driving down residential real estate prices, as well. If few businesses exist to attract potential buyers, the problem could persist.

The Cycle of Small-Business Bankruptcy

One of the most difficult parts of a slow economy is its potential to lead to unhealthy economic cycles: when people are worried about jobs and money, they tend to save more and spend less (and, in fact, numbers have shown that the U.S. savings rate is much higher now than it was pre-recession).

When people aren’t spending money, though, the economy has a hard time getting started (as much as two-thirds of the U.S. GDP is made up of consumer spending). Small businesses, which have shallower reserves of cash, may not be able to attract the customers they need to stay afloat.

When local businesses fail, more people lose jobs and fight to save money, knowing they’ll need it if they cannot find work right away.

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Posted in Economic News: How Are We Doing? | 5 Comments »

Wednesday, February 9th, 2011

The Latest on the Foreclosure Crisis

Since the housing boom of the early 2000s, the housing picture in the U.S. has changed dramatically, as anyone struggling to make mortgage payments each month already knows. But exactly what is the state of mortgages and foreclosures right now in the country? Here’s a look at some indicators that say a lot.

Lowest Homeownership Rate In More than a Decade

Recent data released by the Census Bureau show that home ownership in the United States has dipped to its lowest level since 1998:

  • In the fourth quarter of 2010, 66.5 percent of Americans reported owning their own home.
  • In 2009, 67.2 percent of the nation claimed homeowner status; the drop reflects the continued effects of the recession on income and ability to make mortgage payments.
  • At its peak in 2004, as many as 69.2 percent of Americans reported owning a home.

Just as subprime loans were found to disproportionately affect non-white home buyers, it seems that foreclosure rates are currently higher among that segment of the population: in 2007, the number of African Americans that owned a home was reported at 48 percent; a year later, the number had already fallen to 44.8 percent. Similarly, among Hispanic families, 50 percent reported homeownership in 2007, but only 46.8 percent did in the last quarter of 2010.

Perhaps the most troubling aspect of these numbers is their apparent explanation: while the first wave of foreclosures resulted largely from the resetting of subprime loans, this wave seems to be more a result of long-term job loss hindering homeowners’ ability to make their (otherwise affordable) mortgage payments.

Homeowners on their Own to Fight Foreclosure?

In a related story, The New York Times recently reported that, more and more, Americans are having to fight the foreclosure of their homes without legal representation or outside help. According to the article, areas of the country with high foreclosure rates are holding how-to workshops for individuals and couples interested in contesting foreclosure in the courts.

New reports apparently show that foreclosure is shifting its face in the court system: what was once a process that involved mostly paperwork now, it seems, involves more and more people actually visiting the court to make their case for keeping their homes.

How Can I Fight Foreclosure?

Whether you’re struggling from job loss, job reduction or an unaffordable mortgage loan, you may be able to fight foreclosure with the help of a Chapter 13 bankruptcy filing. Thanks to its three- to five-year repayment plan, Chapter 13 helps many homeowners catch up on their mortgage payments by rearranging the amount and type of debt they’re responsible for paying each month.

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Thursday, December 30th, 2010

Lawsuit Challenges Legality of Pre-Employment Credit Checks

The U.S. Equal Employment Opportunity Commission (EEOC) has filed a lawsuit alleging that the practice of conducting pre-hiring credit checks by Kaplan Higher Education Corporation, a company that provides test-preparation and post-secondary services, discriminates against certain classes of Americans and is therefore unlawful.

And, in case that’s a little too much legal information for your comfort level, here’s what that means and why it’s good news if you’re struggling with debt and/or recovering from bankruptcy.

So What’s the Deal with Pre-Hiring Credit Checks?

Here’s a look at the basics of employer-conducted credit checks.

  • What they are: As part of the hiring process, many employers (as many as 60 percent, according to some polls) have begun running credit checks on job applicants (in addition to conducting criminal background checks). In theory, these credit checks are valuable to employers because they divulge information about an applicant’s overall capabilities.
  • Why they’re controversial: While few people oppose the practice of running credit checks for applicants to positions that involve finance, many consumer advocates have spoken out against credit checks for applicants in non-financial fields. After all, if the current recession has taught us anything, it’s that poor credit can have little to do with a person’s responsibility, intelligence and job worthiness. Further, a few states have already made pre-employment credit checks illegal for non-finance jobs.
  • The current lawsuit: The EEOC’s charges against Kaplan include allegations that Kaplan’s practice of conducting credit checks before making hiring decisions constitutes to discrimination, because black and Latino Americans reportedly have statistically lower credit scores than white Americans.
  • The legal reasoning: According to a Credit.com piece on the issue, the case has teeth because it applies legal reasoning the EEOC used to show that criminal background checks also disproportionately affected black job applicants because blacks are more likely to be arrested than whites.
  • The reason it’s important: If the court rules that pre-employment credit checks lead to discriminatory hiring decisions, such credit checks could be outlawed in more states, potentially making employment easier to find for people who have struggled with debt problems.

Potential Outcomes of the Case

While the lawsuit is still in its early stages at this juncture, it has the potential to change the current state of pre-employment credit checks in the U.S. The court could, depending on the evidence presented, rule that pre-employment credit checks amount to discrimination in the hiring process.

This could be good news for people recovering from a bankruptcy filing or otherwise fighting debt burdens, because being denied employment for credit-related reasons can lead to a frustrating and debilitating debt cycle.

In the mean time, you may want to consult with a bankruptcy lawyer if you have been denied employment because of something in your credit report.

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Posted in The Law and Your Money, Your Credit Score | No Comments »

Wednesday, September 22nd, 2010

Poverty Rate Rose in U.S. Last Year

Recent reports from the Census Bureau show that the number of American families living at or below the poverty line increased in 2009 to a fifteen-year high of about 44 million, or one in seven Americans. So what does that mean for individual finances, including foreclosure , eviction, bankruptcy filings and more?

Here’s a look at what the rising poverty rate in the U.S. might look like.

Poverty and Bankruptcy

Many insiders have estimated that as many as 1.6 million Americans will file for bankruptcy by the end of 2010, up from even 2009’s 1.3 million. Even though that number represents an increase from prior years, some economists conjecture that more Americans would be in need of bankruptcy protection if not for:

  • Shared housing: More and more extended families, it seems, are opting to live in single residencies in order to save money on bills. For some people, living with loved ones may have been the result of losing a home to foreclosure or a landlord’s loss of property to foreclosure.
  • Extended unemployment benefits: Congress has extended traditional unemployment benefits more than once since the Great Recession began, and many individual states, too, are offering their out-of-work residents more support than usual.
  • Food banks and soup kitchens: Various charity-funded food organizations have apparently seen a significant increase in needy Americans. Reports suggest that more and more U.S. citizens are being forced to choose between paying the rent and buying food supplies.
  • Food stamp distribution: Sources note that the number of Americans receiving food stamps has risen to 41 million, from 39 million at the beginning of the year.

Unemployment and Bankruptcy

According to the New York Times, one likely culprit of the rising poverty rate is the unemployment rate, which has been stuck at just below 10 percent for months now and shows no signs of dipping.

Some analysts have reportedly noted that it generally takes some time for poverty rates to decrease once unemployment numbers begin to normalize, and the experts are still not saying when that’s likely to happen.

Here’s a look at who, according to sources, has been hit hardest by decreasing wealth levels:

  • 9.4 percent of white Americans are now in poverty;
  • 25.8 percent of black Americans live at or below the poverty line;
  • 25.3 percent of Hispanic Americans find themselves in poverty; and
  • 12.5 percent of Asians are in poverty.

All of the above groups except Asians have seen increases in poverty in the last two years. Additionally, sources note that young adults without college educations are especially hard hit across racial lines. Many predict that poverty will continue to rise for the duration of 2010.

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Friday, August 20th, 2010

Jobless Numbers Rise Unexpectedly in Early August

The Department of Labor reported last week that initial unemployment claims for the week ending August 7 rose 2,000 from the previous week, to 484,000. This rise was apparently unexpected, and marks the highest rate since February of this year.

The news sent stock markets tumbling earlier this week as job growth remains frigid.

Here’s a closer look at the latest numbers from the Labor Department and what they mean:

  • Initial claims rose to 484,000 from 482,000, meaning the unemployment rate will likely hold steady at 9.5 percent.
  • The four-week floating average, which includes more data and so offers a check for highly volatile fluctuations, also rose to 473,500 – an increase of 14,250.
  • The average year-to-date number of insured unemployed people in the United States was 5.018 million.

And, while extended unemployment benefits were available to people in many states, some analysts are reportedly growing nervous about the implications of such persistently high job loss numbers. In fact, some seem to be worried that the country is locked into a self-perpetuating cycle of unemployment and a weak economy:

  • Many business owners and those responsible for hiring new employees are reluctant to do so because of fears that the recession isn’t over yet: They’re reluctant to commit to increased spending because they’re worried that they won’t be able to pull in enough revenue to justify long-term hires.
  • Many individuals, worried about losing their jobs or dealing with reduced hours, are also “hunkering down” by spending less money, taking out fewer loans and focusing on saving more.
  • Without adequate consumer purchases, some retailers are struggling to pull in enough income to stay afloat or grow. This means that they’re refraining from expanding or making new hires.

The problem is complex and involves all sectors of the economy and now, some analysts are suggesting that the recession will either end up having a “double dip” - meaning we’ll plunge back into recession after a brief period of economic growth - or that the first period of recession never actually ended.

So what can you expect in the coming months? It doesn’t look like any significant changes are on their way in the near future, which could mean:

  • Housing market struggles: Many people are still facing foreclosure, underwater mortgages and bankruptcy. So anyone looking to sell, build or buy a house may face difficulties.
  • Credit remains tight: Unless you have a squeaky-clean credit report history, you may not qualify for attractive loan terms while the recession slogs on.
  • Income options are limited: While jobless numbers remain high, you may have trouble finding additional income, which can be frustrating if you’re trying to pay down debt.
  • Saving matters: Whether you’re just beginning to save or working on a hefty nest-egg, now is not the time to blow it – you might need it for tough times ahead.

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Wednesday, August 11th, 2010

Social Security at Its Tipping Point

Social Security is at a critical tipping point—the system is paying out more dollars than it’s taking in, a recent article from CNN.com indicates. Obviously, that’s not good news for the long-term health of Social Security, or those depending on it.

The State of Social Security

The Social Security system, designed as a state-run support fund for working Americans as part of the New Deal, works on a fairly simple principle: people pay a certain amount of money into the Social Security coffers whenever they’re employed, and if and when they need more money than they’re making (based on government standards), they can collect money from those coffers.

Currently, Social Security benefits include:

  • Payments to the retired and disabled;
  • Payments to the unemployed;
  • Funds for medical care for the aged and poor;
  • Financial assistance for needy families; and
  • Funds for children in need.

But, according to sources, both 2010 and 2011 will see the Social Security system pay more in benefit to needy Americans than it collects in taxes, meaning that the fund will diminish. That trend should reverse itself for a few years, but most experts apparently expect that the fund will be exhausted (that is, able to pay out only 76 percent of benefits) by 2037.

Blame the Economy

So what pushed the Social Security fund into the red? Sources note that the rough economy has played a significant role:

  • High unemployment: The steady 9.5 percent jobless rate means that fewer Americans than usual are paying into the Social Security fund, which translates to less money coming into the system. Meanwhile, more people than usual are drawing unemployment benefits, which strains the system.
  • Early retirement: With work difficult to find, many older Americans are opting for early retirement. This means they’re pulling money from the Social Security fund earlier than they would have normally. While early retirees are eligible for smaller payments than those who wait until their full retirement age, this still means that the system is paying out more money and taking less in.
  • Government borrowing: Since the Social Security system was reformed in the early 1980s, the federal government has reportedly borrowed significant amounts of money from the trust with promises of repayment—which has yet to materialize.

So what does this mean for you? For many years now, experts have emphasized that the average American should not depend on Social Security alone to finance their retirement years. The dire state of the nation’s retirement fund reinforces that point and underlines the importance of having a personal retirement savings and/or investment fund.

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Thursday, July 29th, 2010

Latest Unemployment News: More of the Same

The Department of Labor’s latest report on the unemployment situation in the U.S. shows little change from a week earlier, indicating that significant recovery in the jobs market has not yet taken hold. Here’s a look at some of the latest numbers (for the week ending July 17, published at the end of last week):

  • Seasonally adjusted initial unemployment claims increased 37,000 from the previous week, to 464,000, bringing the four-week floating average up 1,250 to 456,000.
  • The advance seasonally adjusted insured unemployment rate was 3.5 percent, down slightly from the previous week’s 3.7 percent.
  • The seasonally adjusted insured unemployment number was 4,487,000 for the week ending July 10, down from the previous week’s 4,710,000.

Week to week, the changes often aren’t very significant and don’t always reflect larger trends; however, last week’s numbers provide a somewhat hopeful picture when compared with figures gathered a year ago:

  • Initial unemployment claims under state programs (unadjusted) totaled 498,022 for the week ending July 17; in 2009, the same week saw 585,575 claims.
  • The number of people claiming insured unemployment benefits in state programs came to 4,581,351 in the most recent week, which marked a 186,572 person increase from the week prior, but was down from 6,256,960 during the same period in 2009.

These data, like many of the job loss information collected this year, show that recovery in the jobs market continues to be slow and inconsistent. While the national unemployment rate is down slightly from its 10+ percent high, it’s still well above where it needs to be and bankruptcy filing rates continue to remain high.

Unemployment Benefit Extension

Some more-or-less good news for unemployed Americans is that Congress and the White House have reportedly passed legislation that will extend unemployment benefits through November of this year.

The measure, which had difficulty getting through Congress because of Republican opposition, means that those whose benefits have expired or are about to will receive a few more weeks of government support.

While the nation’s unemployment rate clearly indicates that jobless citizens need help, many GOP legislators were apparently hesitant to pass the bill because of the affect it will have on the nation’s deficit.

So how will the extended benefits work? It seems that distribution of the funds will vary by state, so check out local resources to see what steps you need to take if you’re eligible for funding from the extended benefits.

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Monday, June 28th, 2010

Congressional Disputes Hamper Unemployment Extensions

Despite some signs of economic recovery across the United States, the nation's unemployment level remains near 10 percent and, according to recent reports, concerns in the Senate over the country’s budget deficit and expansive recovery spending could prevent unemployed Americans from seeing extensions to their benefits.

So how large are the ramifications of Congress’s failure to act? Sources indicate that:

  • As many as 900,000 people have already seen some decrease in the unemployment benefits they receive
  • If no congressional action is taken, an estimated 1.2 million people will lose some or all of their unemployment benefits by the end of June
  • If Congress doesn’t act by the end of July, more than 2 million could be affected

The lack of action —or rather, lack of productive action—:on this matter in Congress will likely mean only temporary halts to unemployment support, but those affected could see their finances take a serious hit, particularly because so many Americans are in financial situations that mean they’re only a few late bills away from default, foreclosure or filing for bankruptcy.

Unemployment Benefits and Extensions

Because of the country’s unusually high unemployment rate and difficult job market, the federal government has extended the 26-week state- and employer-sponsored unemployment insurance programs with three other forms of assistance, all of which could expire without Congressionally approved extensions. The forms of unemployment insurance in jeopardy include:

  • Extension of benefits: This program allows those on unemployment to receive benefits for between 60 and 99 weeks, rather than the half-year state standard.
  • Extra weekly money: Another program offers an additional $25 weekly to certain unemployment beneficiaries.
  • Extension of COBRA benefits: The third program allows those who have lost their jobs to continue the health coverage they had at their last job and subsidizes the cost of that coverage, paying 65 percent for up to 15 weeks.

As some analysts have pointed out, for the millions of Americans unable to find a paying job, these extended benefits can mean the difference between good health and unmanageable medical bills.

Perhaps unsurprisingly, Senate Republicans are reportedly concerned that these extensions, while giving invaluable aid to many American families, are contributing ever more to the United States’ budget deficit, which is skyrocketing thanks in part to recovery efforts.

Though the situation may be sticky for some families, sources note that Congress still has time to act to renew the extensions.

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