This is the third story in a series about Americans' financial health, based on a survey provided by the FINRA Investor Education Foundation, a nonprofit dedicated to financial education and empowerment.
Note: A previous version of the graphic on paying bills transposed the percentages under education.
Are you better off than you were when the Great Recession ended 10 years ago?
For many Americans, the answer is yes.
Half have no difficulty covering bills, up from just over third in 2009. Only a fifth experienced an unexpected drop in income in the last year, down from two-fifths. And the share of Americans satisfied with their personal finances doubled in the last decade, according to the 2018 Financial Capability survey from the FINRA Investor Education Foundation, a not-for-profit that focuses on financial education and empowerment.
The advances, though, have been uneven. Older, college educated, white and higher-earning individuals have recovered the best, while the financial fortunes of younger people, lower earners, those with no college degree and African-Americans improved more slowly.
“We’ve seen an impressive recovery on important measures, but certain groups continue to struggle,” says Gerri Walsh, senior vice president of investor education at FINRA. “We’re entering into a new normal where even as the economy improves, financial capability is not keeping pace for all Americans.”
As many economists predict a new recession starting sometime next year, it’s important to understand how far Americans have come in the last decade during what will be the longest economic expansion next month. Equally important, how prepared are they for another recession?
'The part that makes me cry’
In 2009, it began to fall apart for Michelle and Michael Phillips of Dingman’s Ferry, Pennsylvania. That year, Michael, who worked on the wholesale counter at an auto supply store, suffered a trio of setbacks.
To cut costs, his boss took away the company car Michael used, increased his monthly share of health insurance premiums and slashed his holiday bonus – typically one month’s pay – to only a week’s pay going into 2010.
Within six months, the couple took in $1,000 less each month, a common occurrence then. Two in five American reported an unexpected income drop in FINRA’s 2009 survey.
“It was: ‘Just put it on the Discover card, just put it on the Amex. We’ll figure it out later,’” says Michelle, who worked at a hair salon where business also slowed.
That wasn’t atypical, says Kim Cole, a credit counselor for Navicore Solutions who helped clients then and now. “We were seeing many people who had been financially stable become dependent on credit cards,” she says. “With such a drop in income, they couldn’t support their monthly bills.”
By May, the Phillipses owed $18,000 in credit card debt. Michelle’s emergency hysterectomy left them with another $38,000 in medical bills. They settled some but were sued for one balance.
“We did everything humanly possible to stay in our life,” Michelle, now 48, says. “Everything we could unload, we did.”
They got rid of the landline and cable, sold furniture, a pool table and a 1967 Camaro RS that Michael was restoring. They auctioned off jewelry and motorcycle parts on eBay.
They filed for bankruptcy in 2012 and held onto their house for two more years when the mortgage payment became too much. A modification saved them only $40 a month, not enough.
In 2015, the lender offered to refinance for $197,000 when they owed $138,000. They said no and moved into a rental with their adult son who helped with the rent. In January 2016, the lender sold Michelle and Michael's house for only $119,000.
“This is the part that makes me cry,” Michelle says. “They wouldn’t let me stay in my house for $119,000, but they would give it to a complete stranger for that.”
That same year, Michael lost his job. That was the bottom for the couple.
Fast forward to today. Michael has a new job, albeit making less than he did. And last month, cashing in a mutual fund, the Phillipses closed on a smaller, more affordable home.
There are no vacations. Instead, they ride their motorcycles on sunny afternoons. Retirement is a non-starter.
Only Michael has health insurance. It’s too expensive to add Michelle. But she’s been able to monitor her health in other ways. More than half of those without insurance go without a medical service, according to FINRA’s latest survey.
Michelle pays $20 for medical consultations over the phone or online and visits a cardiologist once a year for $88 in cash to check on a hereditary heart problem.
“Whatever it takes not to spend money,” Michelle says. “That is what the recession has given me.”
‘A bad blow to my ego’
By the time 2010 rolled around, Warren Austin, then 49 and now living in Pennsylvania, thought he had weathered the recession with his job intact.
He worked at Chartis, a subsidiary of the troubled American International Group, or AIG, which two years before survived only because of a $182 billion taxpayer-funded bailout, making it one of the poster companies of the Great Recession.
“I thought: ‘The worst is over. Everything will be OK,’” he says.
But then he was snagged in layoffs at the end of 2010. He thought he could find another job within four months – six months, tops. Almost a decade later, he hasn’t found a permanent position – a hallmark of the Great Recession: prolonged unemployment.
“To be unemployed for this long, I can’t fathom this,” he says. “It’s really a bad blow to my ego.”
He made a comfortable $58,600 before he lost his job. And with his wife’s income, they were solidly middle class. He estimates he’s lost as much as $600,000 in income in the last nine years.
“The state of the economy affected everyone. It was across the board,” says Lisa Frankenberger, a credit counselor in Buffalo. “It even trickled down to people who were successful.”
Austin tapped his $35,000 in savings to pay his mortgage, uncommon at the time. Just over a third of Americans had a rainy day fund to cover three months of expenses in 2009, according to FINRA. That’s risen to just under half today.
He applied for a thousand jobs and got his master’s degree to improve his odds, spending $17,000 out of pocket. He’s still looking.
“I apply for one to two jobs every day,” he says.
Last year after his wife retired from her job with a pension, they sold their house in Garwood, New Jersey, and moved to Pennsylvania where property taxes, insurance and utilities were cheaper. They were able to buy another house outright with the sale proceeds.
He depends on his wife’s health insurance through her old job, but that runs out this year. “I’m thinking about going without health insurance. It’s so damn expensive,” he says.
Austin is also working on getting his real estate license. If he can get a job, he figures he could work another 10 to 20 years to save up enough to retire himself. Otherwise, he may take Social Security early.
“I grew up in a household where nothing was given out. When I asked for an allowance when I was 8, my father growled at me and told me to get a job. I delivered newspapers,” he says. “I’m supposed to do better than my father, but I’m doing worse.”
‘From Prada to nada’
Tami Chavez was happily married with two children in 2009, living an upper-middle-class life in Omaha, Nebraska. Her then-husband was a successful immigration lawyer. They had three luxury cars and a Toyota Camry for her son. They owned 13 properties: a second home in Florida, condos and land in New Mexico and rentals in Phoenix.
All seemed good.
“I knew we potentially had a financial house of cards,” Chavez, 57, says now. “I remember looking at my personal rollover statement, and there was no money in it. I remember thinking: ‘Where is my retirement money?’”
What she didn’t know was that her husband was draining retirement and college accounts to stay afloat as the real estate investments faltered, especially those in the once-hot markets of Florida and Arizona.
“All of sudden it was, boom, all foreclosures,” says Anissa Schultz, a credit counselor who worked in Arizona at the time. “When people called us, it wasn’t: ‘I’m having a hard time.’ It was: ‘I’m about to lose my house.’”
That’s what happened to Chavez after her husband walked out in September 2009. A stay-at-home mother out of the workforce for 14 years, she ended up losing the Arizona homes to foreclosure and the rest, including her own home, were taken back by the bank as deed in lieu arrangements.
“It was shell-shocking,” says Chavez. “That’s my Prada-to-nada story.”
She held an estate sale in her home and lived on the things she sold. She and her children moved into a stranger’s basement for six months. She filed for bankruptcy.
Somewhat ironically, she got a job as a registered investment adviser, and 10 years later, she’s in a relationship and may someday buy another house. Retirement is iffier. She has a family farm that could help fund her golden years.
“It’s scary,” says Chavez. “I’m one of those retirement statistics.”
Chavez – along with Austin and the Phillipses – point to another looming problem in this country: retirement. The share of Americans saving for retirement hasn't budged since 2009, and half worry they will run out of retirement savings, according to FINRA's stats.
It may be starting to happen.
“We’ve seen more older Americans depend on credit cards for health care, medication and groceries. They don’t have substantial retirement savings,” says Cole. “It’s causing a new crisis.”
For the younger generation, the overwhelming problem is student debt. Almost half with student loans worry they won’t be able to pay them back. A similar share wish they had gone to a less expensive school. Chavez’s own son quit medical school three weeks in because he couldn’t stomach the $300,000 in student loans he’d have to pay back.
“He couldn’t sleep at night,” she says.
There are other concerns that popped up in FINRA’s survey. More than a third say they're carrying too much debt and less than half have socked away three months in emergency savings. The share of Americans spending less than their incomes hasn’t increased since the recession ended, despite the robust economy.
What happens when things turn sour as many predict?
“What we do know,” FINRA’s Walsh says, “is that many Americans are not financially positioned to handle another recession."
This article originally appeared on USA TODAY: From 'Prada to nada' and back: Has America really recovered from the Great Recession?