Money Stress Across America: 'What Keeps Us Up at Night - and How We Cope'

Getting the kids to school on time. Finishing that big presentation. Squeezing in a doctor’s visit to finally get that cough checked out.

On any given day, you’re likely juggling so much that it leaves you reeling ... or at least wanting to jump the next flight to the Caribbean. But there’s one thing that actually wears us out more as a nation than family obligations, work demands and health concerns—and that’s money.

In fact, according to a survey from the American Psychological Association, financial stress in America is quite pervasive: 64% of people say that money is a somewhat or very significant source of stress. And that number is highest among Millennials and Gen Xers—three quarters of members of these generations report feeling stressed about money matters. But regardless of what exactly has you so worried, one thing is clear—financial stress can take a hefty personal toll. Nearly 1 in 5 Americans in the survey skipped doctor’s visits due to money concerns, and almost a third said finances were at the root of relationship conflicts.

“To have true wellness in your life, you need physical, mental and financial wellness,” says Travis Freeman, author of “Make Your Money Work” and a partner at Four Seasons Wealth Management in Creve Coeur, Mo. “That can be a combination of speaking with a counselor, exercising, and keeping a great diet—but also having a formalized financial plan so you know how you’re going to hit your goals long term.”

Sound like a pipe dream? It is possible to cope with (and even ease) financial stress—as we discovered while talking to people across the country. From dealing with epic debt to feeling the retirement-savings squeeze, read on for their stress-slaying tips.

How I Deal With … My Student Loan Burden

Who: Jonathan Craig, 26, television producer, Los Angeles

My Money Stress: "I graduated from college with student loan debt in the high five figures. But after school, I was only making enough to cover my monthly living costs, and I didn’t have much of a financial safety net.

How I Cope: The first step was to work on my mind-set—and I realized my stress was less about external forces, such as student loans, and more about internal ones, like a fear of the future. When my mind-set began to change, I saw that I had a lot more control over my finances than I realized. And I began living a much simpler life.

I cut streaming services and cable. I took a hard look at my food, alcohol, clothing and entertainment purchases. The goal was always moderation—never deprivation. Consequently, when I began making more money, my cost of living remained the same, so I had more to put toward saving, investing and my loans. Now I'm on track to pay them off by the end of 2015. I hesitate to call myself a success story because I still have work to do, but now that I've developed healthier financial habits, I definitely feel like I'm on my way."

"I talk to friends my age about their retirement plans. We compare notes, which makes it feel more like a team effort than a solo mission."

How We Deal With … Mounting Medical Bills

Who: Mike Welshonce, 33, child protective services worker; and Elizabeth Welshonce, 28, teacher; Studley, Va.

Our Money Stress: "Our 2-year-old son, Clay, was born with a severe case of hemophilia A, which means he has less than 1% of the proteins needed for proper blood clotting. Between emergency room visits, medication and multiple surgeries, our medical debt is in excess of $6,000. Each hospital visit is another copay, another bill, another sleepless night.

How We Cope: I usually set up a payment arrangement—I've learned many facilities are willing to lower the cost if you pay the balance within a certain time frame. I'm also constantly on the phone to fight denials of insurance coverage.

But through it all, we cope by trying to remain positive, knowing it could be worse. We try not to think too much about the costs, and focus on getting Clay the best possible treatment—and advocating for financial assistance for families like us, who fall between making too much money but not enough to cover all of the expenses. Elizabeth and I have moments when we argue about the ever-growing bills, but within a few minutes, everything is better—because we know that, at the end of the day, Clay will be right beside us laughing and playing."

How I Deal With … Saving Enough for Retirement

Who: James Lyon*, 36, IT program manager, Apex, N.C.

My Money Stress: "Shortly after my career started, my retirement offering went from a pension/401(k) combo to a 401(k) with a match—all within a few years. That shifted the burden of retirement saving on to me, so I had to figure out how much I needed to retire in 30 years—and how I was going to get to that number. It didn't help that the recession was a steady reminder that the road to retirement can be a long and bumpy one.

How I Cope: Education is the best stress reliever. For me, that means reading a lot of books and articles on retirement strategies and using multiple calculators to estimate my future expenses and investment growth.

All that has helped me to build my current strategy: I invest 10% into my 401(k), which has a 6% match—plus I max out a Roth IRA. Knowing that I have a plan in place makes it easier to absorb the stress of uncertainty. I also talk to friends my age about what they are doing with their retirement plans. We compare notes, which makes it feel more like a team effort than a solo mission."

How We Deal With … Our Debt Hangover

Who: Joe Payne, 30, creative director; and Cortney Payne, 32, bank manager; Rogers, Ark.

Our Money Stress: "Before Cortney and I had kids, we spent money like it was going out of style. But in 2008, reality set in when we had the first of our three children. Less than a year later, I was laid off. Suddenly, medical bills, car payments and credit cards had us in a chokehold. We mixed a healthy dose of naivete, inexperience and tunnel vision to get a recipe for a financial hangover.

How We Deal: One of the biggest steps we took was deciding that, going forward, debt wasn’t an option anymore. And one of the most powerful tools to fighting debt was boosting our income. We’ve worked feverishly to advance our careers—and both of us have better-paying jobs than we did back then. Additionally, we’ve captured the elusive beast that is a budget. We use software to help us get a month ahead on bills—a system we’ve embraced wholeheartedly. By following our budget, we put about four times what we pay on our mortgage toward debt every month. If we stick to our plan, we’ll be debt-free by December 2015. For us, the last few years have been about learning lessons, making mistakes, and—incrementally—taking back control of our money."

How We Deal With … Growing Family Pains

Who: Marisa Halliwell*, 34, digital marketing manager; and Jason Halliwell*, 35, pastor; Hershey, Pa.

Our Money Stress: "Jason and I will become parents for the first time later this summer—to twins. Going from zero to two kids means we’ll need double of everything, as well as a new car that can fit two car seats! On top of that, we sank a lot of money into fertility treatments, so our savings are lower than we'd like them to be.

"We plan on borrowing a lot of what we need—cribs, high chairs, bouncy seats—and we got great advice to stockpile diapers and gift cards now while we still have a bit more disposable income."

How We Cope: Thankfully, we've been diligent for the past four years about increasing our monthly student loan payments. That, along with cutbacks we made in areas like eating out and clothes shopping, should help us pay off our loans before the twins arrive. We don’t have as much saved up for a car as we’d like, but I had a great financial year at work, so I’ll put some of my bonus money toward a down payment.

We also plan on borrowing a lot of what we need—cribs, high chairs, bouncy seats—and we got great advice to start stockpiling diapers and gift cards now while we still have a bit more disposable income. We've also prepared by creating different versions of our spreadsheet, so we understand how much we’d have to cut back if one of us didn’t work—although we'd both like to continue working, not only for our careers but also so we can continue to save for retirement."

How I Deal With … Being House Poor

Who: Jessica Statler*, 27, editor, Boston

My Money Stress: "I saddled myself with long-term debt when I decided to buy a house with some family members just one year after finishing grad school. In addition, I have student loans and credit card balances that bring my total personal debt to roughly $268,000.

How I Cope: I live with two other family members and a tenant who rents from us, so we split the mortgage payment between us. I've also wrangled my student loans, using a combination of consolidation, forbearance and income-based repayment. My biggest monthly stressor, however, is my credit card debt. I make the minimum payments on my two lowest-interest cards, and pour any extra cash I have into the card with the highest rate.

I use my cards sparingly now, and pay off any major purchases—a strategy I wish I had implemented before the debt piled up. But you live, and you learn. That's not to say I've never freaked out about my debt—I have! But I recognize the changes I've made (sharing my living space, cooking at home, doing freelance projects for extra income) have gone a long way toward easing the mental burden. I also do yoga and meditate, eat well, get enough sleep, allow myself a “vice” in watching my favorite TV shows—and try to remain grateful for my “not ideal, but could be worse” financial situation."

*Names have been changed.

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US Government caught massively fabricating student loan default data

Ever since 2012 we have warned that one of the biggest threats arising from the US student loan bubble - which is no longer disputed by anyone except perhaps members of the outgoing administration - is not that it is soaring at an unprecedented pace, that's obvious for anyone with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government - either on purpose or due to honest miscalculation - was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality.

An the WSJ reported overnight "many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed."

The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed.

"Many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed." - Wall Street Journal

A spokeswoman for the Education Department said that the problem resulted from a "technical programming error."

And so, the infamous "glitch" strikes again.

How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was. And people mock China for its own "fake data."

According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

As the WSJ adds, this isn’t the first time data problems have affected the Education Department: a recent government report criticized how the department tracks information including the budgetary implications of student loan forgiveness.  “This is a quality control issue with a Department of Education that has been facing criticism already for other data issues,” Robert Kelchen, an assistant professor of higher education at Seton Hall University.  The department “needs to be regularly audited so these issues can be discovered sooner.”

There is another interpretation: as we reported [previously], when we revealed that a Chinese province admitted it had fabricated fiscal data for the period 2011-2014, the reason the data were made up "because officials wanted to advance their careers." One can imagine that the career pressure for those government workers who would report, and be held accountable, for revealing the true picture of America's disastrous student loan bubble, would be likewise staggering.

Going back to the report findings, the student loan repayment rates were originally released in 2015 as part of the Obama administration’s College Scorecard, which followed an aborted attempt to rate colleges and tie federal funds to those ratings.

"...some schools saw their seven-year repayment rates fall by as much as 29%"

At the time, the Journal reported that at 347 colleges and vocational schools, more than half of students had defaulted or failed to pay down their debt within seven years. Those figures were based on students were supposed to start repaying loans in 2006 and 2007.  In September, the Department released data tracking students who should have begun repayment in 2007 and 2008, and that number rose to 477. But with the updated number released last week, that number grew to 1,029. Worse, no college saw its repayment rate improve under the revision, and some schools saw their seven-year repayment rates fall by as much as 29%.

The worst offender was the University of Memphis which had one of the largest drops in its repayment rate following the recalculation. Previously, the Department said that 67% of its students were repaying loans within seven years of entering the repayment period. That number fell to 47% after the recalculation.

The University was not happy. In a statement, the school said it “was not contacted by or made aware of the data changes” from the Education department.  “Given the magnitude of the numerical changes in the report released by the Department of Education, the University of Memphis will be challenging the accuracy of the newly adjusted data,” the statement said.

"The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024"

The far more dire implications, however, are for broader student loan market, because if the latest unfabricated data suggesting that loan delinquencies are rapidly rising toward 50% across most of America's colleges, then the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.

 

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12 Ways to Break Through the Barrier of Financial Inertia

Here are 12 tips to help break through the barriers that keep individuals from taking action to relieve their financial stress provided by Carla Dearing, CEO of SUM180.

1. Set a Goal

Whether your goal is as simple as socking away six months of expenses in an emergency fund to protect against the unexpected, or as big as putting your kids through college debt-free, having a clear purpose for your efforts will help you stick with them.

2. Don't Know All the Answers? It's OK to Ask for Help

When it comes to dealing with our money, many of us are so afraid of making a mistake that we would rather not act at all. Of course, this only worsens the stress. The best way to deal with financial stress is to seek help from a trusted resource who can understand your specific concerns and show you the steps needed to address them. Having an expert at your back will give you the confidence to move forward, knowing you can course-correct as needed.

3. Start Wherever You Are

Many people do not make progress on their savings because they feel it is hopeless; that they have no chance of saving enough to secure their future. On the contrary, it's never too late to start. When you walk into Weight Watchers with 80 pounds to lose, no one is going to talk about that. Instead, they'll say, "Let's talk bout how to have a healthier lifestyle and begin to lose the first five pounds." Dealing with money is just like that. Focus on your own siutation and start taking baby steps to save more, pay down debt and begin to invest - no matter where you're starting from.

4. Take It One Step At a Time

How do you eat an elephant? One bite at a time. It is important to manage your own expectations to recognize that it will take time to save and build step by step. When it comes to financial security, each step adds up.

5. Get Your Emergency Fund Squared Away

Unexpected expenses happen all the time, but if you have a cushion of savings, these unexpected expenses don't have to derail you. How much should you set aside? Your cash reserves should cover six months' worth of expenses. After you have this six-month cushion, you should also set aside a separate emergency fund, enough to cover 24 months' of expenses, for longer-term situations such as an extended illness. The small spending sacrifices you make as you build your cash reserves will be well worth what you gain in peace of mind.

"More than half of respondents reported stress about finance and 45% report their stress increased over the prior 12 months."

6. Pay Off Your Credit Cards Like It's Your Job

To ease financial stress, pay off all your credit card balances, then once they are paid off, continue to pay off your credit cards every month. Why? Interest on credit card debt is usually many times more than that of other kinds of debt, and also many times more than what you could make if you put this same money in a savings or investment account. So every penny you pay down on your credit card saves you alot of money in the long run.

7. Save 10% Of Your Income Every Year

If you develop the habit of saving 10%, no matter how much you earn, you will always have the confidence of knowing you are living within your means. This step is also what makes many other key steps possible. For example, saving a down payment for a house, setting aside a college fund for the kids or saving for retirement. Think of saving 10% as the way you ensure that you will be able to make ongoing investments in your financial health, year after year.

8. If You're Married or Have a Child, Make Sure You Have Enough Life Insurance to Protect Your Loved Ones

To calculate the amount of the policy you  need, figure out thow much support your family needs annually and multiply that by the number of years the support will be needed. It's a good idea to ensure that the policy term covers children well through college, so a 20- or 30-year policy is usually best.

9. Maximize your Retirement Savings Contributions; No More Excuses

You can reationalize putting it off, but deep down, you know how important it is to save for retirement, and the longer you delay, the more anxious and stuck you feel. How to break through the paralysis? Focus on your dreams for the future, not your fears. Imagine the life you want for yourself and be inspired by that. Saving for retirement will feel less like a sacrifice, and more like an empowering gift to your future self.

10. Downsize

The flip side of boosting your savings is streamlining your expenses - and the beneficial effect on financial stress can be just as powerful. You can downsize your home, your car, your wardrobe, your lifestyle. As you reexamine your assumptions about your "needs," you may discover that you need far less than you thought. This will liberate you to put your resources and energy toward more important things.

11. Once a Year, Do An Insurance Checkup to Make Sure Your Assets and Future are Adequately Protected From Liability

Review your home, health and auto insurance policies to make sure you have enough coverage to protect your savings and your family in case of a medical, legal or other emergency. Other types of insurance to consider: identity theft coverage, which reimburses you for the costs of repairing your credit history if you become a victim, and umbrella liabliity coverage, which protects your assets beyond what your homeoners and auto policies already cover.

12. Realize You Are Far From Alone

Every day, there are more stories about how individuals have used knowledge and perseverance to overcome their financial challenges. Many of us still do not want to discuss money details openly, but there are safe, supportive communities where people can open up about their specific problems and learn what has worked for others.

 

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Millennials and Financial Stress: The Struggle is Real

This means financial stress in our society will continue to be an important topic, given that 1 in 4 Americans and 1 in 3 millennials suffers from Acute Financial Stress (AFS), according to a study conducted by Payoff.

"1 in 4 Americans and 1 in 3 millennials suffers from Acute Financial Stress."

Of the population shift, Ann Hermes for CBSNews writes: “Millennials, defined by those born between 1981 and 1997, now number 75.4 million, a hair’s breadth past the 74.9 million baby boomers. Until this point, baby boomers, defined by those born between 1946 and 1964, have constituted the United States’ largest living generation and have carried enormous economic, political and cultural clout as a result.”

AFS Symptoms Resemble Those of PTSD

Payoff’s Chief Science Officer Dr. Galen Buckwalter, along with his Science Team, was conducting a study on how personality relates to financial behaviors when he identified a significant connection between Post-Traumatic Stress Disorder (PTSD) and financially induced stress: the symptoms for the two are indistinguishable.

Dr. Buckwalter, who has spent years researching PTSD among members of the U.S. Military and humanitarian workers, explains, “As I analyzed our initial research on financial personality, I began to realize people were reporting on a psychological and emotional level the same symptoms I was familiar with from separate research I’ve done with PTSD.”

"There’s a significant connection between Post-Traumatic Stress Disorder (PTSD) and financially induced stress: the symptoms for the two are indistinguishable."

Payoff’s study ultimately defined 23.2% of all participants and 35.3% of millennial participants (ages 22 to 29) as meeting the total criteria for PTSD related to financial events and therefore positive for AFS.

Dr. Buckwalter says AFS is prevalent among millennials because numerous financial pressures coincide at that life stage. “Millennials have a lot on their minds,” he says. “They’re graduating, or just graduated, from college. They’re looking for jobs, moving, maybe even thinking about getting married or starting a family. The expectations run high to establish careers and really begin to fulfill themselves personally, professionally and of course, financially.”

He continues, “When you combine all of that on top of what might be a significant amount of student debt that they’re still struggling with — and wondering how they’re going to eventually get out from under it — the levels of stress these individuals confront is arguably unlike any previous generation.”

 

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Is There Life After A Student Loan Default?

Marie Blanc cried as she looked at the balance on her bill. She hadn’t looked at her student loan bill in the several months since she’d lost her job at a local distribution center. In fact, she hadn’t looked at it at all since she’d set up auto-payment. Now she owed over $52,000 for a degree that she wasn’t using.

Back in high school, Marie had been in several honor programs. She opted for a college degree in communications that would open doors to a great career. Though she had to sign off on federal student loans, she was still, by all accounts, doing everything right.

Seven years later, she was let go from her job when the company she had worked for since graduation went bankrupt. Marie was another casualty of the recession. And so were her $684 in monthly student loan payments.

The Consequences of Ignoring Loan Notices

In June, the New York Times released a personal piece about Lee Siegel, who willingly defaulted on his student loans. He nonchalantly discusses how his cosigners had passed, the government couldn’t touch him, and the banks that were the original lenders had basically disappeared. He also offered advice to those who want to take a similar path – prepare for the long haul by marrying someone with good credit, buy a home, get all the credit cards you can.

When Marie read that article, she was furious. The reality the man wrote about wasn’t so sunny for her. She couldn’t declare bankruptcy – that wouldn’t get rid of the loans. Worse, after ignoring her bill for 11 months (well past the 270-day limit), she didn’t qualify for payment plans, forbearance, or deferment.

Instead, she watched as her 700 credit score quickly dipped. “You could pinpoint the day I became delinquent by the large dip in my score’s chart,” she later noted. Because of her credit score taking a nosedive, she became stuck, trapped under the weight of her now 600 credit. No one would give her a loan for a much needed used car or rent her a new apartment. Moving back home and relying on her retired parents’ kindness was her only option.

"Then, the phone calls started. She blocked the “unknown” numbers one-by-one until she grew frustrated and simply hung up before they could even say hello."

The one student loan bill became two, three, four, five a month as her original student loan was sold off to the highest bidder.

Getting Honest About Defaulting

For Marie, a friend sharing his story led her to a solution. He, too, had defaulted on a $35,000 loan a few years earlier, and had benefited from actually facing his problem head-on through a Federal Loan Rehabilitation program. These programs work with the loan department to set up a payment plan. After six months of on-time payments, the loans are reinstated and the default is cleared.

Marie finally had the courage to call and got her payment down significantly. She began waiting tables and working other odd jobs until she had enough to make six monthly payments on her loan, effectively reinstating them. Once her loans were back in order, she tackled her credit by slowly improving her score. However, a year later, she still has only bumped up her number to 650. The consequences of defaulting on a student loan are still following her to this day.

Unlike Lee Siegel, Marie and the 27 percent of student loan borrowers who are currently delinquent (according to Breitbart) haven’t found life after default to be a walk in the park. They haven’t avoided the consequences or planned ahead to cheat the system. Instead, they – like Marie – must deal with the real cost of defaulting on a student loan head-on.