The economic fallout from the coronavirus pandemic is hitting families of color particularly hard.
A large majority, 86 percent, of Latino households with children and 66 percent of Black households with children reported serious financial problems during the outbreak, including depleting savings, trouble paying credit card bills and other debt, and affording medical care, according to a September poll by NPR, the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health. Meanwhile, 51 percent of white households with children reported the same.
A separate poll by the organizations found that 55 percent of Native American households also were facing significant money issues.
It’s a stark reminder that people of color have long faced systemic money issues, said certified financial planner Lazetta Rainey Braxton, New York-based co-founder and co-CEO of advisory firm 2050 Wealth Partners.
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“We know that with the wealth gap that is in play, the wage gap that is in play, that any shocks are going to greatly shock the Black community because our starting point is so much worse than most populations,” said Braxton, chair of the Association of African American Financial Advisors and a member of the CNBC Financial Advisor Council.
When it comes to unemployment, the rate for Black workers in October stood at 10.8 percent. Hispanics had an 8.8 percent unemployment rate, Asians came in at 7.6 percent and white workers had a 6 percent unemployment rate, according to the Bureau of Labor Statistics.
For many people of color, that may mean a dramatic shift in their lifestyle and family dynamics.
Nicole Bailey, 39, has been unemployed since she left her job in late March. A nursing assistant in Los Angeles, she was working 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 pair live together and both have high blood pressure.
Her mother brings in some money as a private home health aide, but Bailey has significantly cut back her spending and is worried about when her unemployment expires. The additional 13 weeks of unemployment offered by the CARES Act, tacked onto the end of the traditional 26 weeks provided by the states, runs out in December unless there is Congressional action.
“It is this constant fear that lingers,” she said.
Bailey has also dipped into the savings she started compiling with her overtime money, meant to be used to eventually get her own place. It’s now her emergency savings. Her credit cards, which she paid off with some of her savings when the pandemic hit, are slowly starting to creep back up.
“I feel like I’m just here and I’m not making any progress at all,” Bailey said. “I was on my way. I just feel stuck.”
The pandemic is certainly going to set back some of the progress that has been made in trying to close the racial wealth gap, said Tiffany Aliche, a financial educator and founder of The Budgetnista, a financial movement aimed at women.
Pre-crisis, in 2017, the median Black household wealth was forecast to hit zero by 2053, according to a report by Prosperity Now and Institute for Policy Studies.
“My worry is that this pandemic can make that 2043,” Aliche said.
“A lot of people that have lost their jobs are those who can’t afford to lose their jobs.”
Asian-American businesses have also been hard hit, due to shutdowns and xenophobia. In February, as fears about the virus grew, businesses saw a marked decline. Asian-American unemployment rates jumped by more than 450 percent from February to June 2020, according to a McKinsey & Company analysis of U.S. Bureau of Labor Statistics data. That was a greater increase than that of other racial groups.
Meanwhile, as many families of color still struggle, they may soon face eviction. The nationwide moratorium on evictions expires at the end of the year, unless there are new policies issued by the government.
With people eating through their savings and running up credit card debt, many are turning 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 access to financial services.
“We are going to see a lot of people with damaged credit and a lot of people with bankruptcy,” he said.
Trying to forge a new path
Sherlie Martinez, a 31-year-old single mom from Providence, Rhode Island, once turned to payday loans but has since landed on her feet. In August, she told CNBC she had hopes of going to college and eventually opening her own cafe.
Fortunately, Martinez, who lives with her sister, 12-year-old niece,10-year-old daughter and 4-year-old nephew, is still working as a receptionist at a law firm and is now taking two online college classes.
However, she recently used her emergency fund to pay for her father’s funeral services. She’s starting to build it back up and feels confident about her ability to pay her bills. It’s her dream of becoming a business owner that is starting to feel out of reach.
“A lot of food establishments have been hit so bad [during the pandemic],” Martinez said recently.
“That is my ultimate dream,” she said “The pandemic is pushing that father and farther away.”
Strategies for navigating the crisis
First, cut any excess spending. Get down to what Aliche calls your “noodle budget,” named after cheap Ramen noodles, which is a bare-bones budget.
Then, if you have income coming in, save as much as you can. Aliche believes we’ll be in this for the long haul, thanks to the forecast by the Federal Reserve to keep interest rates at zero through 2023.
“We are going to keep the economy on life support for another three years,” she said. “That is very telling.”
If you are in dire straits and can’t pay all your bills, only pay your health and safety expenses, Aliche suggests. It’s a lesson she learned after she went through financial difficulties due to a job loss. She paid everyone indiscriminately and found that while her cell phone bill was paid, she didn’t have enough money to pay for her medication.
Also, know where your resources are in the event you need cash. Try not to dip into your retirement account, Braxton said.
“If you don’t have emergency savings, where can you pull from in the least consequential way?” she said.
Then, make it your goal to replenish that money, even if you don’t know when you’ll get around to doing it. Don’t get discouraged if you can’t do it right away.
“You are just trying to survive right now,” Braxton said. “Be nice 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’ll pick up on stress and it’s best they have the most fact possible, Braxton said.
“It is so easy to be stressed and not communicate,” she said. “It shows up in your money and in your relationships.
Lastly, don’t be afraid to ask for help, whether it is for a job lead or someone to watch your kids while you work.
“We have to almost take it back to old school and lean into family friends and neighbors,” Aliche said.
“Lean into your support system.”