Where you live could say something about how much debt you hold, a recent WalletHub survey said. (iStock)
Americans nationwide feel the financial impact of inflation, public health crises and natural disasters; but people in these three states are worse off than the rest of the country, according to a recent WalletHub survey.
WalletHub defines financial distress as having a credit account that is in forbearance or has its payments deferred, meaning the account holder is temporarily allowed not to make payments due to financial difficulty. Here’s which states ranked worse off financially:
1. Louisiana
Topping the list of the most financially distressed states is Louisiana. Roughly 11.6% of people living in the state have a credit account where they have temporarily been allowed not to make payments due to financial difficulty, the highest percentage in the U.S. That’s due in part to the state’s exposure to natural disasters as well as having the second-highest poverty rate in the country.
2. Mississippi
In second place is neighboring Mississippi. The state’s residents have the lowest average credit score in the country, at 634. It beats Louisiana with the highest poverty rate, at over 19%, according to the latest Census data.
3. Texas
Texas takes this place after a surge of more than 21% in non-business bankruptcy filings in the past year. Nearly 7% of the state’s residents have an account in forbearance or with deferred payments, which is in the top 10 in the U.S.
“Financial distress can be a vicious cycle,” WalletHub Analyst Cassandra Happe said. “People who can’t make payments on their accounts end up damaging their credit scores, which in turn makes it more difficult for them to qualify for the best solutions to their debt.
If you’re struggling with making your monthly payments and managing your budget, you could consider paying off high-interest debt such as credit cards with a personal loan. Visit Credible to speak with a personal loan expert and get your questions answered.
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Inflation improves, but Americans are still hurting
Inflation is dropping and is likely to continue moderating into 2024. Still, the sharp increase in the price of necessities over the past two years has significantly impaired middle-income Americans’ wallets, according to a recent Primerica survey.
On an annual basis, consumer prices rose 3.1% in November, down from 3.2% growth last month, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). Core inflation, which excludes more volatile food and energy prices, held steady at 4% on an annual basis.
The rise in the cost of food, gas, utilities and health care since May 2021 has created an average cumulative budget deficit of $2,440 in family budgets. As a result, rebuilding depleted savings and paying off debt is likely to take several more months and potentially even several years for many middle-income families.
“The compounding impact of inflation has left a deep mark on middle-income household finances,” Primerica economic consultant Amy Crews Cutts said.
“Over the past few years, families have repeatedly underestimated the economy’s impact on their finances, such as whether they would need to use their credit cards more frequently. That’s why even as inflation wanes, middle-income households are feeling increasingly less confident in their financial situations.”
If you are struggling with high inflation, you could consider taking out a personal loan to pay down debt at a lower interest rate, reducing your monthly payments. You can visit Credible to find your personalized interest rate without affecting your credit score.
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How to improve your financial health in 2024
Having a handle on your overall credit health is essential to help you set – and stay on track around – your personal finance goals. These are four steps Americans can take to improve their financial health in 2024.
Improve your credit score
Your FICO Score is vital to your overall financial health as it is the credit score used by the top 90% of U.S. lenders. So, the best way to stay on top of your credit health is to monitor your credit score and understand the factors that contribute to it. Ultimately, your FICO Score is in your control because it is based on your credit habits, as captured in your credit report.
“Understanding this can help you practice healthy credit habits such as maintaining a positive payment history and keeping debt levels low, which helps your FICO Score in the long run,” FICO Senior Director Jenelle Dito said.
Make a budget
Budgeting will help you see where you spend your money and how you might spend money differently. Your goal should be to figure out how and where you spend money rather than restrict spending, according to Achieve Co-CEO and Co-Founder Andrew Housser.
“Indeed, rather than intended to restrict spending, a budget is intended to be a plan to help you spend in line with your goals,” Housser said. “The step is to take some time to set and write down goals – everything from buying a house to making sure you have time for a daily walk or run. THEN, build the budget around the goals. You’ll likely modify it, but you’ll know where you’re going.”
Learn to live below your means
Housser said that Americans who take a step beyond just living within their means can use those extra savings to build a cushion for unexpected expenses.
“It may involve some changes in your spending habits and lifestyle patterns, but it lets you decide where your money goes instead of being influenced by whims, advertising, habits, or peer pressure,” Housser said.
Debt consolidation
If you are in financial distress, some of the best options to pursue are debt settlement, debt management and free credit counseling.
“If your credit score hasn’t been damaged too much yet, you may be able to save a lot of money through debt consolidation,” Happe said.
If you’re interested in consolidating or refinancing debt, it can help to have experienced loan officers on your side. Visit Credible to get all of your loan consolidation and refinancing questions answered.
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