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The economic fallout from the coronavirus pandemic is hitting families of color particularly hard.
A large majority, 86%, of Latino households with children and 66% of black households with children reported serious financial problems during the epidemic, including depleting their savings, difficulty paying credit card bills and other debts, and to pay for medical care, according to a September poll by NPR, the Robert Wood Johnson Foundation and the Harvard TH Chan School of Public Health. Meanwhile, 51% of white households with children said the same.
A separate survey by organizations found that 55% of Native American households also faced significant money problems.
It’s a stark reminder that people of color have long faced systemic money issues, a certified financial planner said. Lazetta Rainey Braxton, co-founder and co-CEO of New York-based consulting firm 2050 Wealth Partners.
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“We know that with the wealth gap that is at stake, the pay gap that is at stake, any shock will greatly shock the black community because our starting point is so much worse than most people,” said said Braxton, chairman of the Association of African American Financial Advisors and member of the CNBC Financial Advisors Council.
As for unemployment, the rate for black workers in October was 10.8%. Hispanics had an unemployment rate of 8.8%, Asians at 7.6% and white workers had an unemployment rate of 6%, according to the Bureau of Labor Statistics.
For many people of color, this can mean a dramatic change in their lifestyle and family dynamics.
Nicole Bailey, 39, has been unemployed since quitting her job at the end of March. A nursing assistant in Los Angeles, she worked in the Covid unit and was potentially exposed to the virus. She tested negative, but realized she couldn’t risk her health or that of her 65-year-old mother. The couple live together and suffer from high blood pressure.
Her mother makes money as a private home caregiver, but Bailey has cut expenses significantly and is worried that her unemployment will expire. The 13 additional weeks of unemployment offered by the CARES law, added to the end of the traditional 26 weeks provided by the States, expires in december unless there is action from Congress.
“It is this constant fear that persists,” she said.
Bailey also drew on the savings she began to rack up with her overtime money, intended to be used to eventually secure her own place. Now is his emergency savings. Her credit cards, which she paid off with some of her savings when the pandemic hit, are slowly starting to rebound.
“I feel like I’m right there and I’m not making any progress at all,” Bailey said. “I was on my way. I just feel stuck.”
The pandemic is sure to roll back some of the progress that has been made in trying to close the racial wealth gap, said Tiffany Aliche, financial educator and founder of The budgetist, a financial movement for women.
Before the crisis, in 2017, the median wealth of black households was expected to reach zero by 2053, according to a report by Prosperity Now and the Institute for Political Studies.
“My concern is that this pandemic may only be 2043,” Aliche said.
“A lot of the people who have lost their jobs are the ones who cannot afford to lose their jobs.”
Asian-American businesses have also been hit hard, due to closures and xenophobia. In February, as fears about the virus grew, businesses has experienced a marked decline. Asian-American unemployment rates jumped more than 450% from February to June 2020, according to a McKinsey & Company US Bureau of Labor Statistics data analysis. This was a larger increase than that of other racial groups.
Meanwhile, with many families of color still struggling, they may soon be evicted. The National moratorium on evictions expires at the end of the year, unless there are new policies issued by the government.
As people eat their savings and rack up credit card debt, many turn to predatory lenders, said Andy Posner, founder and CEO of Capital Good Fund, a Community development financial institution (CDFI) headquartered in Rhode Island. These organizations provide low-income communities with access to financial services.
“We’re going to see a lot of people with damaged credit and a lot of people with bankruptcy,” he said.
Sherlie Martinez and her daughter
Source: Sherlie Martinez
Sherlie Martinez, a 31-year-old single mother from Providence, Rhode Island, once turned to payday loans but has since found herself on her feet. In August, she told CNBC that she hopes to go to college and eventually open her own cafe.
Luckily Martinez, who lives with his sister, 12-year-old niece, 10-year-old daughter, and 4-year-old nephew, still works as a receptionist at a law firm and is now taking two college courses online.
However, she recently used her emergency fund to pay for her father’s funeral services. She begins to rebuild it and feels confident in her ability to pay her bills. It is his dream of becoming a business owner that begins to seem elusive to him.
“Lots of food establishments have been hit so hard [during the pandemic]”said Martinez recently.
“This is my ultimate dream,” she said. “The pandemic is taking this father further and further away.”
José Luis Pelaez Inc | Digital vision | Getty Images
First, cut back on excess spending. Get what Aliche calls your “noodle budget,” named the cheap Ramen noodles, which is a rudimentary budget.
Then if you have income, save as much as you can. Aliche thinks we’ll be here for the long haul, thanks to the Federal Reserve’s forecast to keep zero interest rate until 2023.
“We will keep the economy on life support for another three years,” she said. “It’s very revealing.”
If you’re in dire straits and can’t pay all of your bills, pay only your health and safety expenses, suggests Aliche. It’s a lesson she learned after going through financial hardship due to job loss. She paid everyone indiscriminately and found that even though her cell phone bill was paid, she did not have enough money to pay for her medications.
Also know where your resources are in case you need money. Try not to dip into your retirement account, Braxton said.
“If you don’t have emergency savings, where can you get the least consequences? ” she said.
Then set a goal of replenishing that money, even if you don’t know when you will. Don’t be discouraged if you can’t do it right away.
“You’re just trying to survive right now,” Braxton said. “Be kind to yourself because there are a lot of things out of our control.”
Remember to communicate with your family and explain the situation as best you can to your children in an age appropriate way. They’re going to feel the stress and they better have as many facts as possible, Braxton said.