However, the COVID-19 pandemic put everything on hold.

A historic bull market was swiftly cast aside in the wake of lockdowns and widespread economic turmoil caused by the novel coronavirus.

With rapidly growing unemployment rates and general uncertainty about the severity of the economic impact of the shutdowns, mortgage lenders began tightening their lending standards.

Many homeowners bought just before COVID-19 took over the country, when the market was seemingly strong. Since then, many pre-pandemic buyers have lost significant portions of their household income and are facing unexpected financial hardships.

Many buyers continue to show interest in the housing market in spite of stricter standards.

Sellers have tended to be more cautious in the wake of the lockdowns by keeping their homes off the market: Realtor.com data show an average of nearly 32% fewer new weekly listings and 43% fewer listing-price reductions since mid-March compared to the same weeks last year.

Despite that large drop in new listings and steady prices, home buying demand remains strong with continued week-over-week increases in sales throughout May, according to the Mortgage Bankers Association; but how has the financial security and general outlook of recent home buyers changed in the wake of a global pandemic?

To answer questions like this, we surveyed 1,000 homeowners (May 31 through June 2, 2020) who purchased their home between January and May of 2020. We asked them questions about their current finances, mortgage, and how they felt about homeownership.

Recent home buyers have had very different experiences than those who purchased their homes before the pandemic. Most notably, they experienced more negative affect related to homeownership, higher levels of buyer’s remorse, and more concerns about finances than those who bought between 2015 and 2019.

2020 home buyers are more than twice as likely to report feelings of anxiety and stress than home buyers who bought in the last 5 years, and they’re less likely to report feelings of comfort, security, happiness, and pride.

In this study we’ll dig deeper into financial challenges recent home buyers are facing.

JUMP TO SECTION

• Key Insights
• Recent Home Buyers Are Concerned About Finances
• Financial Contributors Have Lost Jobs
• Mortgage Payments Are Cause for Concern
• Homeowners Are Running Out of Savings, Taking on Debt
• 2020 Homeownership Brings Anxiety and Remorse
• Recent Home Buyers Report More Negative Feelings Toward Homeownership
• Buyer’s Remorse Hits Hard
• Mortgage Lenders Have Tightened Their Standards
• Sellers Have the Upper Hand
• 2020 Buyers Are Less Motivated by Money
• 2020 Buyers’ Must-Haves Include Garages, Large Kitchens, Growth Opportunities and Safe Neighborhoods
• Methodology

» MORE: 27 Surprising Things About Recent Home Buyers

Key Insights

• 2020 home buyers are more than twice as likely to report feelings of anxiety and stress than home buyers who bought in the last 5 years, and they’re less likely to report feelings of comfort, security, happiness, and pride

• Roughly 75% of 2020 home buyers reported feeling concerned about paying their mortgage due to COVID-19-related financial hardships.

• In spite of COVID-19 fears, it’s still a seller’s market. 42% of homeowners who bought during the pandemic reported entering a bidding war

• 55% of 2020 home buyers reported that at least one person who typically contributes financially to housing costs has lost their job since purchasing their home

• 63% of home buyers who bought in the beginning of 2020 reported being concerned about their home going underwater compared to 53% of people who bought during the pandemic.

• 37% of recent homeowners have taken out more than $2,000 in non-mortgage debt since purchasing their home

• Nearly one-quarter of recent buyers have less than $1,000 in emergency savings

• 23% of home buyers who bought during the pandemic reported never entering the home in person, only viewing photos or doing a virtual tour

• Regrets of homeownership are largely related to worries about the value of one’s home as a result of the pandemic

Recent Home Buyers Are Concerned About Finances

Buying a new home can be more expensive than expected once you account for moving costs, warranties, insurance, new utility fees, and other often overlooked costs. People who purchased their home in 2020 were in for some additional concerns in the wake of COVID-19, though.

Financial Contributors Have Lost Jobs

COVID-19 brought about millions of job losses in a matter of weeks in early March as shutdowns began to sweep across the country. By April, when the economy lost 20.5 million jobs, the unemployment rate reached a record high of 14.7%.

Joblessness is financially stressful regardless of homeownership status, but people who lose their jobs after a big purchase like a house are put into a unique position.

Over half of the homeowners we surveyed said that at least one person who typically contributes to housing costs had lost their job since purchasing their home, leaving many with a new mortgage and far less money coming in.

Pre-pandemic buyers who purchased before the WHO declared COVID-19 a pandemic (i.e., in January or February, 2020) were slightly more likely to be affected by those widespread job losses with nearly 60% of homeowners losing one income compared to 50% of those who purchased since March (i.e., pandemic buyers).

Mortgage Payments Are Cause for Concern

The coronavirus-related shutdowns brought about the CARES Act, which required banks to allow deferred payments without penalty for government backed mortgages.

As a result, many homeowners aren’t paying their full mortgage each month. In April, we asked homeowners whether they were paying their mortgage as part of our COVID-19 Financial Impact Series (denoted as "Average Homeowners" in the graphs below). The homeowners in that survey could have purchased their homes at any time prior to April 28, 2020.

At that time, nearly 84% said they were paying in full.

In stark contrast, only 55% of the recent home buyers we surveyed said they’re paying their mortgage in full — even fewer (45%) if a financial contributor has lost their job.

Even more concerning is that many of those who aren’t paying their mortgage in full right now don’t have an agreement with their lender.

Recent buyers were 1.7x more likely to be late on their payments without having an agreement in place than the average homeowners we surveyed back in April, suggesting that more-recent buyers were less financially prepared for the pandemic.

Regardless of whether people are currently paying their mortgage in full, nearly 80% of recent buyers said they’re concerned about making mortgage payments in the coming months as a result of COVID-19 related financial hardships.

Homeowners Are Running Out of Savings, Taking on Debt

Many new homeowners use the bulk of their savings as a down payment toward their mortgage and take on additional debt as they settle into their new home. Loss of savings to fall back on and racking up debt amid an economic downturn isn’t ideal.

American consumer debt is around $14 trillion, leaving the average household with over $137,000 in debt. While much of that debt is from mortgages, the average household with at least one credit card carries over $8,000 in credit card debt alone, according to Debt.org.

Credit card debt alone makes up a small proportion of household debt but high interest rates can cause long-term expenses and difficulty repaying those debts, especially during a financial crisis.

37% of the homeowners we surveyed have taken on more than $2,000 in non-mortgage debt since purchasing their home this year.

The combination of increasing expenses from a brand new house and taking on additional debt as a result of homeownership and the coronavirus pandemic has put many homeowners in a tough spot financially.

Having little in emergency savings leaves people at risk of taking on even more debt when unexpected events — like suddenly losing income during a pandemic — hit home.

Last year, 31% of respondents in our annual Credit Card Debt Survey indicated that they wouldn’t be able to pay for a $2,000 emergency out of pocket and would instead use a credit card.

Recent home buyers are in a similar situation: Nearly one-quarter of those who purchased a home in 2020 currently have less than $1,000 in emergency savings.

2020 Homeownership Brings Anxiety and Remorse

The majority of prospective home buyers consider owning a home to be part of the American Dream — a rite of passage into adulthood that exudes success.

But purchasing a home can come with feelings of regret, anxiety, and stress as costs pile up and other factors, like the state of the economy, shape buyers’ view of the future.

Recent Home Buyers Report More Negative Feelings Toward Homeownership

Last year, we surveyed people who purchased their home between 2015 and 2019 about costs related to their home in our True Cost of Homeownership Survey. Many of those buyers were more likely to report feelings of happiness, security, pride, and comfort as a result of homeownership.

Those who purchased their home in 2020, however, immediately experienced an economic downturn. Millions of people lost their jobs, businesses closed, and the world seemed to change overnight as a result of COVID-19.

Those 2020 buyers have different feelings when it comes to homeownership than the people we surveyed last year. More specifically, 2020 home buyers are more than 2x as likely to report feelings of anxiety, 1.6x as likely to report stress, and nearly half as likely to say homeownership makes them feel comfortable and secure than those who bought in the last 5 years.

Buyer’s Remorse Hits Hard

The cost of buying a home can bring on feelings of regret in many new owners regardless of whether the purchase was a good decision or not. Worries about the future likely exasperate feelings of regret when it comes to buying a home.

In fact, 2020 home buyers are 28% more likely to report having feelings of buyer’s remorse than those who purchased their homes between 2015 and 2019.

Those feelings of remorse were largely associated with concerns about home values dropping, wishing a better deal came along, and the expense of a mortgage.

The possibility of home values declining is especially worrisome for new homeowners who have little equity in their new homes — and that worry was reflected in our data such that 58% of recent homeowners were concerned about going upside down on their mortgage.

Interestingly, those who purchased during January and February of this year are more concerned (63%) about going underwater on their mortgages than those who bought during the pandemic (March through May, 53%).

The discrepancy between pre-pandemic and during-pandemic 2020 buyers is likely due to expectations: Those who purchased a home during the pandemic had expectations that the market was slowing down and may have purchased accordingly, whereas those who bought a home before March this year were under the impression that the housing market in the U.S. was going strong.

Interestingly enough, the fears of going underwater may be unwarranted as home prices have yet to dip down past last year’s prices and historically home values don’t suffer as a result of pandemics, according to Zillow.

In the case that home values do depreciate, many projected a "checkmark" shaped impact wherein the market would rebound quickly after the pandemic lockdowns were eased.

Mike DelPrete’s recent research on the real estate market suggests that trends in many — but not all — markets have begun to show that checkmark pattern as restrictions have been lifted.

The trend toward a quick rebound implies that people’s worries about home equity are likely unfounded in the long run.

Mortgage Lenders Have Tightened Their Standards

The 2008 financial crisis caused banks to tighten their lending standards for mortgages to avoid future housing bubbles. But as time went on, those standards loosened.

Over the last couple of years, banks were requiring lower down payments and credit scores than in previous years and there was an increase in subprime lending. For instance, nearly 40% of home buyers put less than 20% down on their homes in 2018, up from only 22% in 2008.

Since the pandemic, lenders have begun tightening their standards again. According to Reuters, the largest lender, JPMorgan, increased minimum credit scores and down payments in April as a protective measure against COVID-19 related economic hardships.

The Mortgage Bankers Association’s mortgage credit availability index suggests that lenders took a swift turn toward tightening standards in recent months, as well.

New homeowners are having a harder time getting a mortgage without a hefty downpayment and high credit scores.

In fact, people who purchased a home in 2020 were 32% less likely to put less than 20% down on their homes than those who purchased between 2015 and 2019.

Sellers Have the Upper Hand

Even though mortgages are more difficult to obtain, there seems to be plenty of demand in the housing market.

In line with our previous survey data that suggested homeowners were holding off on putting their homes on the market, Realtor.com reported 23% fewer homes on the market now than this time last year.

Moreover, the prices have remained relatively steady compared to last year and a smaller proportion of sellers have reduced their listing price as of late (41% fewer in the week ending on May 30), suggesting that the demand for homes is still present.

While inventory was down over the past few months, the Mortgage Bankers Association reported increased week-over-week sales throughout May, including a 5% increase in the first week of June, 2020. Redfin also suggested that demand for housing was up 17% in May from pre-pandemic rates, showcasing a "seller’s market."

The seller’s market means that buyers have to act quickly and aggressively when making decisions on buying a home — sometimes offering over asking price or getting into a bidding war with other potential buyers.

In fact, over 40% of homeowners who purchased their home during the pandemic reported entering into a bidding war on at least one home.

The shutdowns from the pandemic have also led to restrictions on how real estate processes are carried out. While specific state and local governments put in place different mandates, many real estate agents moved toward online viewings and meetings instead of in-person.

In pre-pandemic times, buying a home sight unseen was relatively rare. According to the National Association of Realtors, the average buyer looked at about 9 homes in person before putting in an offer in 2019, but over 20% of 2020 home buyers bought their home without viewing it in person.

Buying a home without seeing it does come with some risks, even in the middle of a pandemic. Much of that risk lands on the buyer, putting the seller in a better position to frame their home positively in photos or virtual tours.

2020 Buyers Are Less Motivated by Money

People’s desire to own a home is like a rite of passage — homeownership is part of the American Dream and a symbol of success and prosperity. The reasons people buy a certain home at a particular time, though, varies depending on personal and economic circumstances.

The majority of homeowners who purchased their homes in the last 5 years said they bought their current home because it was cheaper than renting and they were tired of throwing money away on rentals and the home was a good investment.

People who purchased their home in 2020 had slightly different motivations. More specifically, 2020 buyers were less likely to be motivated by renting versus buying advantages and investment opportunities, but were more motivated by the ability to make renovations, starting a family, and being able to host family and friends.

2020 Buyers’ Must-Haves Include Garages, Large Kitchens, Growth Opportunities and Safe Neighborhoods

Earlier this year, we asked prospective home buyers what features of a home they considered "must haves." The majority of respondents needed a garage and large kitchen, a dedicated laundry room, and space to grow.

While those who did purchase a home this year had similar top requirements, they were more interested in having room to grow, two stories, a pool, and dedicated office space than those who hadn’t purchased a home yet.

The differences in must haves likely has something to do with concessions during the buying process, but the pandemic situation could have encouraged buyers to look for different properties, as well.

More specifically, remote work has become widely available for many jobs where it wasn’t before, so more people were likely looking for dedicated office space in their new homes to ensure they had a place to work in the coming months or long term. Additional space to grow and play with a family, like a pool, could also be motivated by the increased need to stay homes as a result of the pandemic.

Buyers are also typically concerned about the location of their home. Previous prospective buyers indicated family matters and safety concerns to be the top-ranking priorities when it came to looking for a home and those who bought this year were no different.

Nearly 40% of 2020 home buyers indicated that safe neighborhoods were the most important location factor when they chose their home, followed by good school districts (18%) and proximity to family and friends (18%).

Methodology

The data in this report were gathered from an online survey on May 31 through June 2, 2020. The only restriction for participation was that respondents were 18 or older, lived in the United States, and had purchased a home between January and May of 2020.

We collected data from 1,000 homeowners who each answered up to 21 questions (some were dependent on answers to other questions, so not all respondents answered all of the questions).

You can find all the questions and data here.

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The post Recent Home Buyers Experience COVID-19-Induced Fears appeared first on Semya-Moya.

According to the Bureau of Labor Statistics, people spent 10% (or nearly $1.5 billion) less during the second quarter of 2020 than they did during the first. Monthly spending has fluctuated dramatically since March and continues to be volatile as lockdowns, business closures, and joblessness wax and wane.

Earlier this year, we surveyed Americans to learn more about their financial wellbeing going into the pandemic at the end of March and one month later in April as part of our COVID-19 Financial Impact Series. We surveyed an additional 1,500 people on September 9, 2020, to see where people stand six months into the pandemic.

In March, when uncertainty was especially high, the stock market plummeted to record lows, toilet paper was hard to come by, and the government passed the CARES Act, people were very concerned about an impending recession. In fact, many believed the economic situation would be as bad, if not worse, than the Great Recession of 2008. Those concerns were coupled with dismal savings: 50% of respondents said their emergency savings had already run out or wouldn’t last them through the end of April.

Americans weren’t financially prepared for record-breaking job losses. To help relieve the financial burden on American families, the federal government enacted the CARES Act that provided a one-time stimulus check of up to $1,200 and an extra $600 per week in unemployment assistance on top of state-funded benefits for anyone receiving unemployment insurance (UI).

At the end of April, we ran the second installment of our COVID-19 Financial Impact Series. At that point, 40% of respondents who had lost their job reported receiving UI, but half didn’t think it was enough to cover their expenses, which led to people accumulating even more debt in April.

The additional $600 per week was likely helpful for many Americans throughout its tenure, but most people can’t afford minimal living expenses like food, transportation, and rent for a two bedroom apartment on state UI benefits alone, which likely means that many will start accumulating even more debt now that they’re not receiving those extra benefits.

What’s more, even people who were receiving income weren’t in a great position to begin with. In April, 63% of respondents reported that they were living paycheck to paycheck, making it impossible for them to save throughout the pandemic.

As Americans see the sixth month of a recession, we checked in to do a temperature check on their current financial situations as the third installment of our COVID-19 Financial Impact Series.

We surveyed 1,500 Americans about their current finances, future spending habits, and concerns over the last six months. We were particularly interested in whether people’s finances were more stable now that joblessness has slowed and lockdown restrictions have been at least partially lifted in most major areas across the country.

61% of Americans now say their emergency savings won’t last through the end of the year or that they have already run out of savings.

In general though, Americans are less worried about their financial future now than they were in April, and there might be a silver lining in that the pandemic might permanently change the way Americans spend and save their money.

Check out the sections below for more detail about what we found (note table of content links work best on Safari, Edge, or Firefox, they may not jump to the appropriate section on Chrome):

JUMP TO SECTION

• Debt and Savings Insights
• Consumer Spending Habits and Concerns Insights
• Homeowner vs. Renter Insights
• Americans Have Dismal Savings and Many Live Paycheck to Paycheck
• Americans Are Racking Up Debt During the Pandemic
• Spending Habits Have Changed and Might Look Different After the Recession
• Despite Financial Struggles, Americans Are Currently Less Concerned About Their Financial Futures Compared to April
• Many Americans Are Struggling Financially, but Renters Fall Further Behind
• Summary
• Methodology

Debt and Savings Insights

• 61% of Americans say their emergency savings won’t last through the end of the year or they’ve already run out of savings.

• 37% of Americans have no emergency savings at all: 21% reported never having emergency savings to begin with, and 16% reported running out of their emergency savings earlier this year.

• 74% of Americans reported seeking additional income, taking on credit card debt, digging into savings, or cutting spending during the COVID-19 pandemic to cover their living expenses.

• 2.3x more people reported taking on additional credit card debt to cover expenses during the pandemic in September (18%) than in April (8%).

• 1 in 4 Americans reported taking on more non-mortgage debt as a result of the pandemic, and 54% of those in debt borrowed an additional $2,000 or more.

• 62% of Americans reported living paycheck to paycheck in September compared to 54% in April and 49% before the pandemic.

• 42% of those with household incomes of more than $100,000 reported living paycheck to paycheck this month.

• Almost half of Americans (48%) reported helping out friends or family members financially as a result of the pandemic; however, 45% of those who helped reported negative effects such as damaged relationships, lower credit scores, or financial problems of their own.

• 33% of Americans intentionally cut their spending, 28% used savings or an emergency fund, 19% sold personal items, and 18% took out additional credit card debt to cover living expenses.

» MORE: 70% of Americans Say Recent Levels of Inflation Impact Their Finances More Than the Pandemic

Consumer Spending Habits and Concerns Insights

• 84% of Americans reported having sleepless nights since the beginning of the pandemic and lockdowns due to concerns about the COVID-19 pandemic (50%), the current state of the world (49%), their children/families (44%), not being able to pay bills (40%), losing income (37%), and running out of savings (34%).

• In the light of the pandemic, the biggest regret among Americans is not having enough emergency savings (40%), followed closely by saving too little for retirement (32%).

• The economic impact from the pandemic might have a long-term impact on saving and spending: 41% of Americans say they’ll put more into emergency funds and save for the future, while only 10% of Americans say their spending habits will return to normal after the pandemic.

• Americans’ biggest financial concerns include job stability (40%), paying for unexpected expenses (40%), paying for everyday bills (37%), and running out of emergency funds (29%).

Homeowner vs. Renter Insights

• Homeowners might not be able to pay back their deferred mortgage payments: 46% of homeowners who missed payments in 2020 reported being at least $2000 behind on their mortgage.

• 33% of renters reported missing or deferring rent payments since March, compared to 19% of homeowners missing or deferring mortgage payments.

• 72% of renters and 55% of homeowners are currently living paycheck to paycheck compared.

• Renters (30%) are twice as likely as homeowners (15%) to report not having stable income.

• 39% of renters are not saving for retirement, while homeowners are twice as likely to save for retirement (78%).

• Renters were more likely to report taking money from retirement savings, selling personal items, working a gig job, moving, and borrowing from family or friends to help cover everyday expenses than were homeowners.

• On the other hand, homeowners were more inclined to take on additional credit card debt or dip into emergency savings.

• Homeowners were 25% more likely than renters to say they’ll put more toward retirement in the future.

Americans Have Dismal Savings and Many Live Paycheck to Paycheck

Americans 27% More Likely to Live Paycheck to Paycheck Now Than Before the Pandemic

Many Americans can’t afford to save any money during the pandemic, as most are living paycheck to paycheck. In fact, the proportion of people living paycheck to paycheck has increased from 49% before the pandemic to 54% in April to 62% in September, according to our current and previous COVID-19 Financial Impact Series surveys.

Considering many Americans lost jobs or income during the pandemic, it’s not surprising that more are living paycheck to paycheck — especially as many weren’t saving much prior to the pandemic.

According to data from the St. Louis Federal Reserve, the proportion of income people saved has slowly decreased since the 1980s, when it was about 12%.

Evidence suggests that people struggle to save at most income levels for a number of reasons. One obvious reason is continued inflation without increased wages.

People spend a significantly higher portion of their income on housing, student loans, and healthcare costs than they did previously and, therefore, struggle to save. Rent, for instance, increased approximately 25% between April 2014 and April 2020, compared to a 19% increase in inflation-adjusted income between 2014 and 2019.

The graph above highlights the discrepancy between income and inflation growth since the 1970s. Current income in the graph represents the actual median income at the time, while real income is the inflation adjusted income (to 2019 dollars), or the "buying power" of median income each year.

A typical American in 1981, for instance, earned $19,074 in 1981 dollars. After accounting for the cost of goods and services at the time, that income would be equivalent to earning $51,627 in 2019.

Between 1981 and 2019, current median income increased 260% to $68,703, while purchasing power, or real median income, only increased about 33%. Therefore, the ability to save at the same income level has become exponentially more difficult over time as income levels remain relatively stagnant compared to inflation.

Those earning more than six figures aren’t immune to the cost-of-living to income discrepancy, either: Even 42% of those with a household income of more than $100,000 reported living paycheck to paycheck in September.

While initially counterintuitive, Americans tend to spend most of what they earn regardless of their income levels, and few do a good job of saving for the future.

The proportion of six-figure earners living paycheck to paycheck was on the rise prior to the pandemic: Only about 10% were living paycheck to paycheck in 2017, according to a CareerBuilder study, but that number had nearly doubled to 18% by February of this year.

By April, 27% of respondents in our COVID-19 Financial Impact Series Survey who earned more than $100,000 reported living paycheck to paycheck. Therefore, it’s not surprising that even more six-figure earners are struggling to make ends meet as the recession continues.

The Majority of Americans Will Run Out of Savings by the End of 2020

Americans are notoriously bad at saving for the future: Most people didn’t have enough in savings to cover an unexpected $400 expense before the pandemic, much less keep themselves afloat for 3-6 months, as experts suggest.

Respondents in our study were no different: 61% will be out of savings by the end of the year, including 21% who never had any savings to begin with and 16% who ran out of emergency savings earlier this year.

Nearly 30% of respondents reported dipping into their emergency savings to help cover expenses during the recession, with 19% having spent more than $5,000 of their savings.

Recessions can impact how much people save, perhaps permanently. Prior to the 2008 financial crisis, for example, people saved about 3.5% of their disposable income (December 2007). By June 2009, that had nearly doubled to 6.7%. That trend toward saving more continued until it peaked at 10.2% in 2012, and — while it dropped off afterwards — savings didn’t reach pre-recession lows until 2020.

Early on in the current recession, which officially began in February, people were putting nearly 34% of their disposable income into savings. As people have become slightly more confident in the economy and 42% of lost jobs have resurfaced, savings has sharply declined to only 17.8% as of August.

People in our survey did report having less in savings now than before the pandemic, but they’re attempting to spend less, too. In fact, one-third of respondents said they’ve intentionally cut spending since March.

Americans Are Racking Up Debt During the Pandemic

1 in 4 Americans Have Taken on More Debt Since March

All types of non-mortgage debt have increased since the 2008 financial crisis. In fact, Americans held more debt toward student loans (+113%), auto loans (+81%), and personal loans (+29%) in 2019 than they did in 2009, according to Experian’s Consumer Debt Report.

By December 2019, the typical U.S. household had more than $80,000 in non-mortgage debt. And they’ve borrowed even more since: 25% of respondents said they’d taken on additional debt as a result of the pandemic, over half of whom have accumulated at least $2,000 more.

Widespread job losses across the country since March have driven people to pay for expenses using credit cards. In fact, 2.3x more respondents reported racking up additional credit card debt in September (18%) than in April (8%).

50% of Americans Have Helped a Friend of Family Member Financially During the Pandemic — And Nearly Half Were Negatively Impacted by It

People strapped for cash might not be able to secure personal loans or credit cards during the pandemic, as banks tend to tighten their standards during economic downturns.

The net percentage of domestic banks reporting tightened standards on consumer loans and credit cards was 13.6% in the first quarter of 2020 and jumped to 71% by Q3, meaning fewer people qualify. And credit card companies aren’t as eager to open new accounts: According to the New York Times, credit card companies mailed out 80% fewer offers in June this year than they did last year.

To help cover expenses when getting a loan or line of credit is more difficult, people have turned to friends and family. In fact, about 1 in 10 Americans have borrowed money from family or friends to help cover expenses since March.

And, despite the fact that the majority of respondents reported that they’re currently living paycheck to paycheck or will run out of emergency funds soon, 48% said they’ve helped out an adult friend or family member financially during the pandemic.

Of those who have helped someone else:

• 45% simply gifted the money without expectation of repayment

• 35% loaned money with the expectation of repayment

• 13% cosigned on a personal loan

• 10% cosigned on a lease

Mixing finances with family and friends can be financially and personally risky as many loans go unpaid and relationships become strained. Unsurprisingly, 45% of those who helped family or friends reported being negatively impacted by that financial assistance, including:

• Financial problems of their own (24%)

• Lower credit scores (20%)

• Damaged relationships (16%)

Spending Habits Have Changed During the Pandemic and Might Look Different After the Recession

People Regret Their Past Financial Choices

Prior to the pandemic, the economy was in a historically long expansion, and people’s spending habits followed suit. Americans were spending more and saving less with little consequence.

But the sudden fall into an economic recession was a wake-up call for many Americans who were not financially prepared to deal with unemployment. Americans’ biggest financial regret is not having enough in savings going into the pandemic.

The pandemic shed light on people’s lack of emergency savings but also caused people to reconsider their investments. Respondents reported regret when it came to:

• Not having enough emergency savings at the beginning of the pandemic (40%)

• How little they put into retirement (32%)

• How little they put into investments (22%)

• Having an unstable source of income (22%)

• Living outside their means prior to the pandemic (19%)

Confidence in the Economy Continues to Dwindle, and People Plan to Spend Accordingly

A sudden economic downturn combined with a lack of financial preparedness caused regret in spending and saving habits for many Americans, which could lead to long-term changes: 41% of Americans say they’ll put more into emergency funds and save for the future, while only 10% said their spending habits will return to normal after the pandemic.

In addition, 21% Americans plan to put more money toward retirement, and 6% will invest in less-volatile markets.

People’s optimism about their future spending and saving habits might be biased though, as past behaviors, which are often the best predictors of future behaviors, suggest people’s consumption bounces back quickly after a recession. Moreover, people’s expectations about the future economy often impact behavior (and vice versa), according to economists’ theory of rational expectations.

For example, while consumer consumption tends to rebound quickly after recessions, spending came back slower than expected after the Great Recession and didn’t reach pre-recession levels until June 2010 (after adjusting for inflation), nearly an entire year after the end of the recession.

Researchers from Stanford University found that the driving factor behind the slow recovery was consumer confidence in the economy: Consumers didn’t have very high confidence in the future of the economy, and their behavior followed suit.

Current consumer confidence is relatively low compared to pre-COVID-19 levels but never reached the same lows it had during the Great Recession and has already started to turn around. It’s possible, then, that people’s spending habits will rebound more quickly than they expect.

Even with Great Recession rebound speeds, we should expect spending to reach pre-recession levels approximately one year after the recession ends.

Despite Financial Struggles, Americans Are Currently Less Concerned About Their Financial Futures Compared to April

A whopping 84% of respondents reported having sleepless nights since March, which were due to financial worries such:

• Inability to pay bills (34%)

• The possibility of losing income (32%)

• Running out of savings (29%)

Other major causes of sleeplessness were more broadly related to the mental strain of the pandemic, including worries about:

• The pandemic in general (43%)

• The current state of the world (42%)

• Respondent’s children / family (38%)

• Maintaining relationships with family and friends (24%)

» MORE: 25 Things to Know About U.S. Workers' Mental Health During COVID-19

Considering more 60% of respondents reported living paycheck to paycheck and 61% believe they’ll run out of savings by the end of the year (or already have), those sleepless nights aren’t unwarranted.

Similarly, people’s biggest financial concerns include:

• Job security (40%)

• Paying for an unexpected expense (40%)

• Paying for everyday bills (37%)

• Running out of emergency funds (29%)

Despite these worries, Americans are generally less worried about their finances now than they were in April.

Compared to April, people in September are:

• 72% less concerned about the potential for going into bankruptcy

• 59% less concerned about the value of their investments

• 55% less concerned about running out of emergency funds / savings

• 51% less concerned about being able to feed their family

• 43% less concerned about paying for unexpected costs

• 38% less concerned about paying every day bills

• 33% less concerned about job stability

Americans might be less worried about their finances because the initial shock to the economy has leveled out. Put differently, the U.S. job market lost more than 30 million jobs between mid-March and the end of April, with unprecedented numbers week over week. Since then, nearly half of those jobs have been recovered and, with employment continuing to climb, people are likely less worried that they’ll lose their jobs in the near future as a result of the pandemic.

The economy overall seems to be doing better, too, as indicated by stock markets and people’s confidence in the markets. The Dow Jones, for instance, dropped 37% between February 12 and March 23, 2020. People were uncertain about how quickly the stock market would turn around and believed at the time that the pandemic would lead to a recession as bad or worse than the 2008 Financial Crisis.

As of September 18, though, the Dow has made a substantial recovery and was only about 6.8% lower than it was on February 12. That quick recovery of the stock market has seemed to put many people’s fears at ease.

Many Americans Are Struggling Financially, but Renters Fall Further Behind

In our previous COVID-19 Financial Impact Series reports, we evaluated financial stability differences among homeowners and renters in the U.S. Unsurprisingly, homeowners were generally better off financially than renters. That held true in September, as well, but continued financial struggles have impacted both homeowners and renters.

Renters Are 31% More Likely to Live Paycheck to Paycheck Than Homeowners

Renters (30%) are twice as likely as homeowners (15%) to report not having stable income, leaving many renters more likely to lose income or experience stress related to the uncertainty of their jobs. Moreover, renters don’t just have less stable jobs; they also struggle to save: 72% of renters reported living paycheck to paycheck compared to 55% of homeowners.

This isn’t new to the recession, though. Renters tended to struggle more financially than homeowners long before the pandemic. According to a study by the Urban Institute, for instance, renters have more hardships than homeowners across several metrics on average. Renters are 1.45x more likely to have trouble paying rent, 1.5x more likely to struggle to pay utilities, and 1.54x more likely to experience food insecurity than homeowners over the year leading up to the study.

Overall, 74% of renters and 50% of homeowners report they will run out of emergency savings in 2020. In addition, 27% of renters and 14% of homeowners reported never having emergency savings to begin with — even before the pandemic.

With more stable incomes and a higher likelihood of living comfortably between paychecks, homeowners were 2x more likely to report their savings would last 6 months or more than renters, and renters were 1.74x more likely to have no savings (because they’ve never had any emergency savings or they’ve already spent it) than homeowners.

Interestingly though, homeowners have spent a larger amount of money from their savings: 54% of homeowners have spent at least $1,000 from their emergency funds compared to only 36% of renters.

Differences in how much renters and homeowners have taken from their savings to pay for costs is likely due to a number of factors, including differences in housing costs. The median gross rent (which includes utilities and other housing costs) in the U.S. is about $1,023 per month, while homeowners with a mortgage spend about $1,600, according to data from the Census.

Moreover, homeowners were less likely to have missed housing payments than renters (more on that below), meaning they’re more likely to be dipping into savings to pay for their housing than renters on average.

Homeowners might also be taking on additional projects around the house that cost extra money: Home remodeling projects were up nearly 60% this summer compared to last year. According to a study by ValuePenguin, 38% of homeowners who have taken on home projects during the pandemic helped cover the cost by dipping into their savings.

Homeowners Less Likely to Miss Payments Than Renters but Owe More on Deferred Payments

The CARES Act allowed both homeowners and renters to defer payments on their residences without penalty in some cases. Although many took advantage of the opportunity to push off payments in order to pay for other expenses or provide a cushion in the case of a job loss, deferred payments still have to be paid back after some time.

Not surprisingly, homeowners and renters differed in terms of how likely they were to defer payments and in how much they currently owe on top of their normal payments.

In total, 24% of homeowners and renters have missed or deferred a mortgage or rent payment during the pandemic.

1 in 5 homeowners with a mortgage said they’ve missed or deferred at least one payment since March. Of those, 46% have missed three or more payments, and 18% are still more than $5,000 behind on payments.

Moreover, homeowners who reported living paycheck to paycheck were 3.7x more likely to have missed at least one mortgage payment than those who are saving money.

Renters were more likely to miss or defer rent payments than homeowners, but they tended to owe less when they did. More specifically, 1 in 3 renters reported missing payments (compared to 19% of homeowners), but only 25% owe more than $2,000 (compared to 46% of homeowners).

Like homeowners, renters who live paycheck to paycheck are more likely (2.7x) to have missed or deferred payments than those who don’t.

Just 16% of homeowners and 15% of renters have paid back their missed payments.

Pushing those payments off might put renters and homeowners in a tough spot when they do have to repay, as it’s possible all delayed payments will be owed at the same time or in a shorter amount of time than is financially feasible.

Renters are at a larger disadvantage when it comes to repaying deferred housing costs. According to Freddie Mac, homeowners who put their mortgages into forbearance under the CARES Act have until the end of their loan to repay missed payments. Their minimum monthly payment isn’t affected by the deferral, so homeowners can choose to go back to paying the same amount once their forbearance is lifted.

Renters, on the other hand, are at the mercy of their landlords (who have their own finances to consider). Under the CARES Act, renters whose landlords put their mortgage into forbearance were protected from eviction, late fees and, in some cases, couldn’t be required to pay any missed rent payments as a lump sum payment. Many of those protections are no longer guaranteed, though.

The CDC has issued an extended moratorium on evictions through the end of the year, but the order doesn’t preclude penalties related to missing or late payments — landlords can still charge late fees and interest and are not obligated to provide any relief when it comes to repayment plans or deferring payments in most circumstances.

Therefore, barring local ordinances, landlords can require all missed rent payments to be paid at once and can legally evict renters who can’t pay the lump sum in January.

Summary

• A staggering number of Americans live paycheck to paycheck and have little in savings to help cover everyday expenses or unexpected costs. This has held true for many years but is especially unsettling during a recession.

• Americans are still struggling financially but aren’t nearly as worried about their finances as they were in April due to large economic and job recovery.

• Renters are struggling more than homeowners now and are much more vulnerable to future financial hardships due to the pandemic.

Methodology

The data in this report were gathered from an online survey on September 9, 2020. The only restriction for participation was that respondents were 18 or older, lived in the United States, and were either paying rent or a mortgage on the home in which they lived.

We collected data from 1,500 respondents, who each answered up to 21 questions (some were dependent on answers to other questions, so not all respondents answered all of the questions).

You can view the results of the survey here.

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The post How COVID-19 Has Impacted Americans Financially: September Update appeared first on Semya-Moya.

The novel coronavirus (COVID-19) is rapidly spreading throughout the United States, after making its way through much of Asia and Europe.

Many experts have suggested that widespread infection is inevitable and people should do what they can to "flatten the curve," or a deceleration of the spread of infection so fewer people are sick at one time. According to the National Institutes of Health, "the most concerning problem will be if a health system is overwhelmed in the wake of rapid transmission so that affected patients cannot receive the care they need."

Flattening the curve takes some intervention but is usually simple. Johns Hopkin University suggests washing your hands thoroughly and regularly and practicing social distancing, whereby the majority of the population largely avoids interacting with others.

In addition to social distancing, places like South Korea have focused on ramping up testing in order to flatten the curve. According to Science Magazine, South Korea learned an important lesson about testing for viruses in 2015 after an outbreak of Middle Eastern Respiratory Syndrome (MERS) that infected nearly 200 people and killed 36 was attributed to one patient with the illness. They’ve tested nearly 5,200 per million residents.

We can’t know exactly when or where interventions will take place or whether people will abide by them, but, like many experts, we’re assuming that most of the country will be affected by COVID-19 at some point and some areas are more vulnerable to its effects.

To gauge COVID-19 vulnerability, we ranked 107 cities across the United States based on health, financial, economic, and social vulnerability.

It’s important to note that this ranking is not indicative of when or how COVID-19 will affect these cities, or what measures are being taken at the moment. Rather, this is an assessment of the each city's vulnerabilityto the virus based on existing healthcare systems, economic and financial well-being, and social responsibility.

Toward that end, less vulnerable cities are still at risk, and should continue to take the necessary precautions to mitigate the spread of the virus.

Here’s how we defined each metric:

• Health vulnerability: Likelihood of rapid spreading, likelihood of high death rates, and treatment availability. (4x full weight)

• Financial vulnerability: The ability of residents to afford testing, care, and time off from work if needed. (3x full weight)

• Economic vulnerability: The likelihood that the city will be negatively affected economically as a result of precautionary measures and/or the spread of the virus. (2x full weight)

• Social responsibility: Residents’ willingness and ability to participate in socially responsible actions to prevent the spread of COVID-19 as measured by civic engagement and innovation. (1x full weight)

For more detail about these measures, see the methodology section.

» MORE: 25 Things to Know About U.S. Workers' Mental Health During COVID-19

Health Vulnerability

Health vulnerability factors include those that increase the rate of viral communication, the availability of treatment, and the percentage of high-risk citizens.

We included the percentage of the population who commute via public transportation^[1] (weighted as 20% of the health vulnerability metric) and population density^[2] (15%), and proportion of the population living in overcrowded housing (i.e., more than 1.5 people per bedroom on average)^[3] in each city as measures of rapid spreading. Both indicate that people are likely to be in close proximity to others and, therefore, are more likely to come into contact with or pass along COVID-19.

The availability of treatment was defined as the number of acute care hospital beds available per 1,000 residents^[2] (25%). The more beds available per person, the better chance people have at treatment and isolation once they’re sick. More beds also means the curve doesn’t need to be as flat to have the same effect, leaving some wiggle room for human error.

We also included the percentage of the population who is 65 years old or older and living alone^[2] as an indication of accessibility of care. COVID-19 disproportionately impacts older adults, leaving people over 65 more vulnerable and in need of more established care methods. Therefore, a higher proportion of older people in the population increases the potential need for care while decreasing the availability of care to others.

Larger cities have higher health vulnerability due to high population density and more-common public transportation usage.

Financial Vulnerability

People’s ability to afford care and participate in social distancing are directly tied to their financial stability and characteristics of their employment. Importantly, people who are not employed^[3], don’t have health insurance^[2], or spend over 50% of their income on rent^[2] may not be able to afford hospitalization or care if they become infected, increasing the likelihood that the virus will spread.

While many businesses are allowing or mandating employees to work from home, some occupations aren’t possible to complete remotely. Many people still have to go to a physical location to work, where they might come into contact with COVID-19. That’s even more likely if their employer doesn’t provide paid sick leave, as people are more likely to go in to work when they’re not feeling well if they have to take unpaid time off or vacation time to stay home.

There are no federal regulations related to paid sick leave, but many states and local legislatures have put into place statues that require some form of paid sick leave. Cities were given a score of 0 (no laws related to sick leave), 0.5 (state or local law present), or 1 (state and local laws present) depending on paid sick leave laws enforced in the city^[4].

Most states and cities don’t have any legislation pertaining to paid sick leave, leaving people in a tight spot if they are showing signs of illness. The west coast has state and local laws that require employers to provide paid sick leave.

Economic Vulnerability

A city’s economic vulnerability to widespread, potentially fatal disease has to do with possible long-term effects on the local economy as a direct result of a recession or measures taken to flatten the curve.

More specifically, we included the amount of debt held by the city (per resident)^[2] as a measure of the city’s ability to sustain economic growth or maintenance in the case of a national or global recession.

Coupled with city-level debt, people’s ability to participate in the economy as a result of coronavirus will impact the local economy. People who work for small businesses are likely the most affected by the city- and state-wide measures taking place as of late (e.g., dine-in restaurant restrictions, gym closures).

Therefore, we considered the percentage of each city’s population who are employed by small businesses^[5] as a vulnerability.

The least vulnerable cities economically tend to be located in California, where there are fewer employees of small businesses and less city-wide debt.

These are areas where we expect the housing industry to struggle if home buyers are unable to recover from COVID-19's impact on their financial well being. Home sellers are also more likely to utilize discount agents and low commission options.

Social Vulnerability

Many governments have mandated some businesses to close or reduce service and implored residents to practice excellent hygiene and social distancing as much as possible.

So far, those in the United States haven’t been required to follow these guidelines. It’s up to the individual to do their part. Therefore, we included civic engagement^[2] as a measure of people’s willingness to participate in activities for the "greater good" to indicate the likelihood that people in a certain city will cooperate with recommendations that reduce the spread of the virus.

As mentioned above, it’s expected that most cities will experience some outbreak of the virus to some extent, and it will be up to residents to help deter or recover from any negative effects of this pandemic.

We used a city’s general innovation capabilities (as measured by the number of patents per capita)^[2] to estimate the ability for a community to quickly and efficiently help restore the economy.

Social determinants of vulnerability are slightly more abstract than the other metrics, but suggest that innovation in California may present the ability to combat the pandemic’s effects through creative use of resources, while many southern cities have high civic engagement that can help slow communication of coronavirus.

Methodology

To calculate each vulnerability category — health, financial, economic, and social — we standardized each of the data points. Most variables, except the presence of paid sick leave, number of acute care hospital beds, and social vulnerability factors were multiplied by -1 in order to establish higher and lower vulnerability. In short, multiplying by -1 allowed higher values to be ranked lower (i.e., more vulnerable) and vice versa (e.g., higher population density increases vulnerability); values were then multiplied by their corresponding weight.

Each major category was calculated as the sum of the corresponding standardized, weighted variables. The sum was multiplied by the category’s weight, then summed to get an overall value for each city.

Below is a list of each vulnerability category and each factor thereof (along with their individual weight toward the vulnerability category).

Health Vulnerability (40% weight):

• Percentage of the population who commute via public transportation (20%)^[1]

• Population density (15%)^[2]

• Percentage of the population who is 65 years of age or older and living alone (20%)^[2]

• Share of population living in overcrowded housing (20%)^[3]

• Number of acute care hospital beds available per 1,000 residents (25%)^[2]

Financial Vulnerability (30% weight):

• Percentage of the population who is unemployed or non-employed (10%)^[3]

• Percentage of the population without health insurance (20%)^[2]

• Percent of the population who spends over 50% of their income on rent (25%)^[2]

• Percentage of the population in poverty (20%)^[2]

• The presence of state and/or local legislation mandating paid sick leave. This was counted as either 0 (no legislation), 0.5 (state or local legislations), or 1 (both state and local legislation; 25%)^[4]

Economic Vulnerability (20% weight):

• The percentage of the population employed by small businesses (fewer than 500 employees; 70%)^[5]

• Amount of debt held by the city (per resident; 30%)^[2]

Social Vulnerability (10% weight):

• Civic engagement as measured by voter turnout (50%)^[2]

• Innovation capabilities as measured by patents per capita (50%)^[2]

Sources

1. Census, Annual Community Survey. Table C08141.

2. Notre Dame Global Adaptation Initiative; Urban Adaptation Assessment database.

3. Graham Center, Social Deprivation Index.

4. Integrity Data. https://www.integrity-data.com/blog/do-mandated-sick-leave-laws-apply-to-you/

5. Census, Economic Annual Surveys. Dataset CBP2017.

The post U.S. Cities That Are the Most Vulnerable to the Effects of COVID-19 appeared first on Semya-Moya.

College tuition is on the rise: The average cost of a 4-year degree is $26,000 in the United States, 3x more than it was in 1990. Even in-state tuition has increased 2.4x faster than income since 2009.

The discrepancy between income and tuition growth over time means that more household income is going towards college, and now over half of families have to borrow to cover those costs.

Slow income growth compounded with student loan repayment and accruing interest could mean that graduates won’t recoup those costs very quickly.

The high cost of education begs the question:

Are college degrees worth it?

In general, it seems like they are: people with a college education earn more money over their lifetime than people who never attended college, and it’s easier to get a job with a degree. According to the Center on Education in the Workforce, nearly two-thirds of jobs will require some college experience by 2028 and even those that don’t are more likely to go to people with bachelor’s degrees.

The 48% of Americans who have a bachelor’s degree might be on to something, but what about the 13% who have a graduate or professional degree? Those degrees can require an additional 2 to 10 years of schooling before graduates can start earning back the money they spent on their education.

According to our analyses, many graduate degrees might not be worth the investment as returns diminish the more time you spend in school.

» MORE: Reality Check: Exploring Unrealistic Undergraduate Salary Expectations

That’s not always the case, of course, but the expense and lack of financial payoff highlight the nuance of choices when it comes to getting a college education. We’ll dive more into this later.

To explore variations within degree types — specifically bachelor’s degrees — we created a ranking system to determine the best majors based on return on investment (ROI), job opportunity, and job meaningfulness using data from PayScale, the Bureau of Labor Statistics, and College Scorecard.

See the methodology section for more detail about our data and how we calculated these metrics.

Key Insights

• People with a bachelor’s degree earn $2.7 million more in their lifetime than high school graduates

• Spending more time in school doesn’t always pay off: the ROI of bachelor’s degrees (190%) is higher than that of master’s (142%) and doctoral degrees (88%)

• The typical student spends $29,955 on student loans and interest for a bachelor’s degree, $62,146 for a master’s degree, and $100,166 for a doctorate

• High ROI doesn't always equate to job satisfaction: People who major in gerontology, social work, religion/religious studies, and human services find their careers most meaningful but have low ROI

• Careers related to plastics engineering, information sciences, industrial engineering, natural sciences, and operations research have high ROIs but degree holders don't find these jobs as meaningful

• Engineering majors (ocean, architectural, systems, chemical, nuclear, and petroleum) were among the highest ROIs, but all are expected to experience slower-than-average job growth through 2028

Best and Worst Majors

• Best bachelor degrees: operations research, petroleum engineering, biological and physical sciences, biopsychology, and gerontology

• Worst bachelor degrees: interior architecture; polymer / plastics engineering; real estate; English language and literature; and communication, journalism, and related programs

• Best master's degrees: social work, computer science, behavioral sciences, information sciences, psychology

• Worst master's degrees: urban studies, international / global studies, anthropology, archeology, and business

• Best doctorates: psychology, business, social work, education, and religion / religious studies

• Worst doctorates: sociology, anthropology, computer science, English language and literature, and information sciences

Best and Worst Bachelor Degrees

We ranked majors based on their return on investment, opportunity growth, and meaningfulness. We included all three metrics to establish a prediction of job satisfaction and stability.

More specifically, we chose return on investment because college not only costs a lot, but also takes many years to complete. With the rising cost of college and student debt, obtaining a college degree should lead to larger returns than what is lost by attending college.

Opportunity growth — or the growth in job availability through 2028 — was included to provide a metric of a graduate's ability to obtain a job after college, as well as his or her ability to growth professionally overtime.

Both return on investment and opportunity growth are related to financial well-being, but we also wanted to highlight the importance of having a meaningful career. People who find meaning in their jobs tend to be more engaged at work and are more satisfied with their jobs than those who don't.

The cost of an undergraduate degree doesn't differ much by major but income after college does, leading to large variations in returns on investment. Many of our best majors, for instance, have relatively high ROIs.

While most of our worst majors have lower ROIs than our best majors, that's not always the case. Polymer / plastics engineering, for instance, has an ROI comparable to that of our top 5 majors.

If we only consider ROI, city / urban, community and regional planning; petroleum engineering; nuclear engineering; biopsychology; and biological and physical sciences take the cake. Each of those majors has an ROI over 269%, so students with those degrees earn at least $3.9 million more in their lifetime than someone with a high school diploma after paying for school.

On the other hand, the lowest ROIs go to social work, nutrition sciences, real estate, human services, and religion / religious studies. A religion major might only earn an extra $230,000 in their lifetime than someone who didn’t go to college.

A major’s return on investment isn’t the only characteristic people should consider when deciding upon a major, though. The ability to get and keep a job in a related field after graduation could reduce financial and emotional stress in the future.

The #1 major on our list also has the most job growth projected through 2028 at 18%. Many engineering majors — which typically result in a high monetary payoff after graduation — have low projected growth.

Slow growth in some of these engineering areas (like electrical engineering) is consistent with previous projections by the BLS. And some suggest that many of the engineering jobs are experiencing slower-than-average growth in America because companies are moving to contracted labor or hiring overseas.

Those who spend more on their bachelor’s degree find their jobs more meaningful according to our analyses. So people who want to find more meaning in their careers might be more willing to invest more without expecting (or seeking) monetary returns.

Gerontology has a relatively low ROI — especially compared to the rest of our top 5 majors — but landed the #5 spot on our list because nearly 80% of people in jobs related to gerontology find their work very meaningful.

Jobs where employees felt lower meaningfulness included computer science; communication, journalism and related programs; and plastics engineering. While technical majors like computer science tend to pay well and offer job security and opportunities, many degree holders feel a lack of connection with their work.

More generally, majors that lead to "helping" careers tend to have the highest meaningfulness ratings: gerontology, social work, religion, and human services all made the top of the list with nearly 70% or more reporting their jobs are highly meaningful.

Diminishing Returns of Graduate Degrees

Getting a degree leads to higher lifetime earnings than no college education, but graduate degrees diminish returns.

There are two major factors driving the drop in ROI with more education: earnings and debt. Both are related to the amount of time people spend in school either missing out on earnings or spending more money to complete their degrees.

Counterintuitively, people with a bachelor’s degree actually earn more in their lifetime on average than those with graduate degrees. Therefore, even though graduate degrees are more profitable than a high school diploma, spending an additional 2-8 years in college doesn't usually pay off financially.

As an example, a computer science student who earns a bachelor’s degree has an ROI of about 154% over their life. That student might spend about 4 years in college, and would earn a median salary of $86,000 over the course of their career. A computer science student who pursues a PhD, however, might not be so lucky.

A PhD in computer science takes an additional 5-7 years to complete beyond a bachelor’s degree, which can cost an additional $176,000 in tuition and loans. That student’s salary would be similar to the student who earned a bachelor’s degree in computer science, but the ROI equates to about 103% because the PhD is in more debt and will likely spend fewer years earning money unless they push off retirement.

That's not always the case, though. Some graduate degrees lead to higher income; in fact, with an ROI of 235%, a master’s degree in computer science is more profitable than a bachelor’s or PhD.

People who major in behavioral sciences also see a boost in returns if they continue on to get a master’s degree. A behavioral science major with a master’s degree has an ROI of 182% and, as a result, could earn $1.2 million more than someone with a bachelor’s degree in the same major, where the ROI is only 96%.

And professional degrees (like law or medicine) have higher ROIs than most doctoral degrees. Our analysis of various professional degrees showed that the largest ROI is attributed to medical degrees, with doctors earning 400% more over their lifetime than the typical high school graduate (despite the high cost of medical school).

The second factor impacting the ROI of graduate degrees is debt. The longer people are in school, the more money they borrow to cover the costs and interest costs balloon with increased debt.

Here we were conservative in considering a 10-year repayment on those loans, but the typical borrower spends over 20 years repaying their student loans. In that case, interest would be much higher than we have depicted here for the average student.

In conjunction with borrowing more, higher interest rates are applied to loans borrowed for graduate school and interest starts accruing when the loan is borrowed instead of after graduation. That means graduate students are earning more interest even at the same loan amount and they're building up that interest for longer, driving those costs up even more.

While there seem to be overall diminishing returns with each additional degree, we did find that people tend to find more meaning in these degrees. This and other research suggest a tradeoff exists between pay and meaningfulness such that people are willing to work for less if their job is more meaningful.

Is It Worth It?

As mentioned, all college degrees lead to higher earnings than a high school diploma and many find their careers to be meaningful. Long-term job satisfaction and security could be considered priceless when it comes to a career.

It’s also possible to take opportunities to make a degree more fruitful while in school. We used average tuition costs based on published prices collected by College Scorecard but actual costs are typically lower due to financial aid, scholarships, grants, waived costs, etc. that are not required to be repaid.

Over 40% of full-time college students take on jobs to help pay for school or pay for cheaper living arrangements off campus. This can improve a major’s ROI greatly.

The ability to reduce costs is especially true for graduate students. Many doctoral students receive a stipend and have waived tuition and/or fees to offset the cost of education and provide some earnings while in school. Those benefits vary by major and university, but are often in place. Master’s degree students can sometimes find similar ways to reduce tuition.

So the answer to the question of whether college degrees are worth it is "sometimes." Most bachelor’s degrees and some graduate degrees seem to pay off in the long run. When you consider that many people who obtain doctorates aren’t looking for a monetary payoff, but a means to an end to get the job they really want or to land an academic job, it becomes clear that returns are about more than money.

Methodology

We used three major metrics to define the best and worst majors: return on investment, job opportunity, and job meaningfulness. You can download our data here.

Here’s how we defined each metric:

Return on Investment: We defined ROI as the net lifetime earnings for each major as compared to the lifetime earnings without a degree. This calculation allowed us to consider earnings, the cost of education, and opportunity cost.

We calculated net lifetime earnings by using data from the BLS on median annual earnings for occupations related to each major using the SOC-CIP crosswalks. We then multiplied that number by the average number of years those people would be in the workforce (48 minus the average number of years to complete the degree). We then subtracted the cost of education from that total.

The cost of education was calculated as the interest paid on loans if the loans were paid off on a 10-year schedule. We calculated this using the monthly payment from the Department of Education’s College Scorecard data and multiplied by 120 months to get a total payment over the course of the loan. We then subtracted the median debt amount from that price to calculate typical interest for each major / occupation.

The loan interest was then added to the average cost of the degree and subtracted from the lifetime earnings at each major to calculate net lifetime earnings.

Earnings without a degree were used as a baseline comparison and were calculated as the average lifetime earnings of a high school graduate. ROI was calculated as the percent difference between net earnings of a college graduate and those of a high school graduate.

Job Opportunity was BLS projected job growth between 2018 and 2028.

Job meaningfulness was defined as the percentage of people in each major category who believed their job is very meaningful. These data were gathered from PayScale. Majors / occupation categories from PayScale were matched with majors from the BLS and College Scorecard data using natural language processing (FuzzyWuzzy) programs in Python. Those that did not have good matches were matched manually by the research team.

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Most Americans work throughout adulthood with the hopes of retiring from the workforce someday. Ideally, the milestone is achieved when one is young enough to enjoy their work-free lives without worries about finances or debt.

Unfortunately, half of U.S. households can’t maintain their pre-retirement standard of living throughout retirement.[1] Many Americans are forced to tighten budgets and give up luxuries during retirement, partly due to dismal savings and an upward trend in financial struggles among more than 80% of households with adults older than retirement age.[2]

That decline in household wealth is particularly concerning during a pandemic that has disproportionately impacted the health of older adults. Infection can lead to unexpected costs related to acute or long-term healthcare, loss of the ability to live independently, and the death of a partner. Many don’t have the means to cover a financial shock, and even fewer have a cushion to fall back on.

The grim financial security for those in retirement begs the question: How are American retirees faring during the pandemic?

To answer this question, we surveyed 1,500 Americans about their retirement funds, debt, and financial worries.

We learned that many retirees are struggling. On average, retirees only have $178,787 in retirement funds and hold nearly $20,000 in non-mortgage debt, with their debt more than doubling in 2020.

Key Insights

The Average Retiree Has $177,787 in Retirement Funds — Just 39% of Recommended Savings

Retirees rely on a variety of sources to finance their retirement, including retirement funds and social security income.

The most common sources of retirees' income include:

• Social security (33%)
• Personal savings (32%)
• Retirement fund, including 401k, Roth IRA, etc. (31%)
• Company / employer-funded pension plan (19%)
• Other investments, including CDs, stocks, real estate (17%)
• Part-time employment (12%)
• Financial support from government agency other than SSI (9%)
• Income from consulting / self-employment (6%)
• Inheritance (6%)
• Financial support from children (4%)

Experts recommend that workers save approximately $465,000 for retirement.[3] The typical retiree in our survey, however, reported having less than $180,000 in retirement funds, despite expecting to have expenses for 20 more years. Two-thirds of retirees have less than $50,000 in retirement funds.

Sparse retirement funds leave many retirees reliant on social security income (SSI) to cover their expenses. In fact, nearly 60% of older adults’ household wealth comes from social security, which is less than ideal considering SSI is only about $1,514 per month on average — much less than the typical spending of about $3,900 monthly.[1][4][5]

Unsurprisingly, many retirees aren’t sure if they’ll be able to leave inheritance to their heirs after their passing: 28% said they won’t have enough money to pass on, while another 29% said they’ll pass on what they have but aren’t purposefully saving to do so.

Retirees More Than Doubled Their Debt in 2020

Many Americans are living beyond their means as a result of the lack of income sources. According to the Bureau of Labor Statistics, retirees’ average post-tax income from all sources is about $39,591 annually, which doesn’t even cover typical spending ($47,259).[5]

The $7,700 difference between income and expenditures means many are falling behind despite living relatively modestly, as the majority of retirees live below the standard of living they experienced prior to retirement. The average worker, for instance, spends more than $63,000 annually.[5]

Instead, retirees are spending less than they did before retirement while still spending more than they earn. In fact, nearly 60% of retirees said they struggle to pay for necessities and bills.

More specifically, those who said they can’t always cover expenses have trouble paying for:

• Medical bills (47%)
• Groceries (43%)
• Credit cards (37%)
• Mortgage / rent (32%)
• Insurance (29%)
• Debt repayment plans (22%)
• Car payments (19%)
• Student loans (11%)

In order to cover those bills, retirees are going into debt. The average retiree said they have about $19,200 in non-mortgage debt.

Although they’re holding on to less debt than non-retirees, who have an average of about $44,000, retired Americans have been hit harder financially the past year: The average retiree took on an additional $9,779 in debt 2020, increasing their debt by 104%. Non-retirees, on the other hand, accumulated an additional $5,035, only increasing their debt by 13%.

Some of that increased debt is due to more people carrying credit card debt. In fact, the percentage of retirees carrying credit card debt has increased over the last decade, including a 48% increase between 2019 and 2020.[6]

59% of Retirees Retired Earlier Than Planned, Including 65% Who Retired Early Because of Health Issues

Only about 3 in 10 retirees actually retired when they planned. Of those who didn’t retire when they planned, 59% reported retired earlier.

Although an early retirement sounds ideal on the surface, only 3% retired early because they had additional wealth, while the overwhelming majority were forced into retirement because of health issues (65%) or job loss (22%) or because they had to care for a family member (10%).

Forced early retirement can leave retirees in a tough spot financially, as they simultaneously lose out on time they planned to save for retirement and have longer retirements to cover expenses. That’s even more troubling for those who left the workforce due to illness, as they will have additional medical expenses to cover, as well.

The COVID-19 pandemic has likely contributed to an increase in unexpectedly early retirements and worries about health, considering the virus disproportionately impacts older adults.[7]

Unsurprisingly, 1 in 3 retirees said they fear declining health that requires long-term care. Their concerns aren’t unfounded, as complex medical issues are more common in older age, with 1 in 6 requiring medical care for more than five years, which can cost more than $260,000.[8] Those long-term care expenses can add up to more than what retirees have saved for their entire retirement.

The high costs associated with healthcare aren’t just a worry for retirees — they’re a reality. Of those who reported having trouble paying for their expenses and bills, nearly half (47%) said they’re struggling to pay medical bills— more than any other type of cost.

Retirees are most worried about:

• Medical issues that require long-term care (33%)
• Being a burden to their family (28%)
• Losing independence (28%)
• Cognitive decline (23%)
• Isolation and loneliness during retirement (20%)

Retirees’ health concerns might be exacerbated by the current pandemic’s disproportionate impact on older adults, as many reported being worried about their physical health (52%) and their family’s health (62%) as a result of COVID-19.

Retirees' COVID-19 worries include:

• Family's health (62%)
• Physical health (52%)
• Finances (30%)
• Mental health (30%)
• Loneliness / lack of social interactions (26%)

Only 35% of Retirees Think They Prepared Adequately for Retirement; 1 in 4 Worry They’ll Outlive Their Savings

Only slightly more than one-third of retirees believe they were well-prepared financially for retirement, while most wish they saved differently.

The majority (56%) said they waited too long to start saving for retirement, likely because they didn’t really understand what they should have been doing. About 63% said they wish they better understood savings and investments when they were working.

The lack of financial education during their working years has led to concerns about finances during retirement: Nearly one-quarter of retirees said they’re fearful of outliving their savings.

Other financial concerns include:

• Social security ceasing to exist (42%)
• Difficulty accessing affordable healthcare (21%)
• Leaving family with debt (20%)
• Not being able to meet the basic needs of their families (18%)
• Difficulty acquiring affordable housing (15%)

An interesting juxtaposition is that 57% of non-retirees think they’re preparing for retirement well.

That actually does seem to be the case, as the average non-retired respondent in our survey reported saving about 10% of their income for retirement, which matches up well with what experts suggest.[9]

Younger generations have also started saving for retirement earlier than older generations: Millennials started saving around 23, compared to 30 for Gen Xers and 40 for baby boomers.[10]

That’s not to say all non-retired Americans are saving appropriately: 19% reported saving nothing from their income for retirement.

16% of Retirees Work Part-Time, and Nearly Half Work by Necessity

Struggling to make ends meet has forced some to seek employment during their retirement: 16% of respondents said they earn income from part-time employment, contract work, or self-employment, including 9% who had to find part-time employment because of the pandemic.

The top reasons for employment during retirement include:

• Retirement and social security are not enough to cover expenses (48%)
• For the social interaction / something to do (37%)
• Additional discretionary income (35%)
• Employee discount or other perks (32%)
• They enjoy the work but don’t need the additional money (30%)
• Additional money for heirs (22%)

Although post-retirement work isn’t ideal, there’s some good news for retirees searching for employment: The average employer values older workers as much as — if not more than — younger workers because they’re viewed as more productive.[11] The perception that older workers are more productive has increased significantly since the mid-2000s.[11]

Older Americans looking for work can find listings in a variety of occupations, with the majority falling into occupations that are typically associated with older workers.[12] According to an analysis of RetirementJobs.com, the large majority of listings for retirees in late 2019 were for the following job categories[12]:

• Office or administrative support (15%)
• Healthcare support (14%)
• Computer and mathematics, e.g., programming (10%)
• Transportation and material moving (9%)
• Healthcare practitioners, management, and food preparation or serving (7%)
• All other occupations (<5% each)

The analysis also found that jobs listed on the retiree job site offered lower pay on average ($43,800 annual salary) compared to job sites aimed at the general public ($50,000).[12] Moreover, jobs recruiting older workers were less likely to offer fringe benefits, putting post-retirement workers at a disadvantage when it comes to income.

Current Retirees Think They’re Better Off Than Their Parents and Children in Retirement

Particularly concerning is current retirees’ perception of their comfort during retirement compared to older and younger generations. By all accounts, current retirees are not faring well: They’re worried they’ll outlive their savings, heavily rely on uncertain social security, and continuously accumulate more debt. Yet many are confident that both older and younger generations were and will be less comfortable in retirement than they are.

Despite financial regrets during their working years, 42% of retirees believe their retirement is and will continue to be more comfortable than their parents’ retirement was.

That’s not particularly surprising, considering the silent and boomer generations tended to be more wealthy throughout their lives than their parents’ generations.[13]

Retirees (60% agree or are neutral) also think they’re better off than their children will be when they reach retirement age. Their belief that younger generations will struggle more during retirement is congruent with reports that millennials are the first generation to be less financially secure than their parents, largely due to stagnant wages and inflation — particularly when it comes to education and housing costs.[14]Median wages, for example, grew three times faster between the mid-1980s and mid-1990s than they did between 2007 and 2017.[15][16]

Non-retired respondents, however, reported retirement saving rates similar to those that experts suggest. Their saving for their future may result in a more comfortable retirement than would otherwise be expected.

Key Takeaways

The pandemic has hit retirees harder for a number of reasons, including the impact of the virus on older adults. The health care costs associated with potential long-term effects of the virus could put even more financial stress on retirees, who are already struggling to make ends meet.

Nearly 1 in 10 retirees has been forced back into the workforce as a result of the pandemic, but a substantial proportion has to work part time during retirement to cover costs, regardless of the ongoing recession. In fact, nearly half of retired respondents who have some form of employment do so because their retirement funds and social security income aren’t cutting it.

The good news seems to be that younger Americans are doing a better job of saving for retirement: The average non-retired respondent said they’re saving about 10% of their income for retirement, and other sources suggest that younger generations began saving earlier than those who are currently retired.[10] Current workers, then, might have more comfortable retirements to look forward to than previous generations of retirees. That, of course, somewhat depends on the longevity of social security, which makes up approximately 60% of current retirees’ income.[1]

Overall, retirees’ financial struggles are concerning, as people are living longer and have more expenses throughout their retirement years.

Methodology

We surveyed a total of 1,500 Americans in two surveys on October 30, 2020, and November 24, 2020.

Each respondent answered up to 20 questions related to their financial situation, retirement preparations, and worries surrounding retirement and financial planning.

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People don’t like to commute. It’s time consuming and can be frustrating. More importantly, commuting can be costly — both in terms of finances and well being — so we set out to calculate the true cost of commuting.

But people don’t seem to change the way they get to work despite the negative aspects of commuting. According to an analysis of Census data by Eno Transportation, the distribution of people using different modes of transportation (e.g., driving alone, carpooling, or walking) to work has remained steady since 2010. Each year, nearly 80% of Americans commute by driving to work alone. With an increasing population, there are more vehicles on the road, which increases traffic and, therefore, the time people spend commuting to work.

So, with the vast majority of American's driving to work, what's the real cost of commuting?

We were particularly interested in the personal costs related to the time and distance people commute, so we focused on the 80% of people who drive alone to work to best estimate the cost of commuting. We calculated the cost of commuting as the sum of the costs associated with fuel, vehicle maintenance, and time (i.e. the opportunity cost).

We used data from the Census' American Community Survey, Bureau of Labor Statistics, U.S. Department of Transportation, County Health Rankings and Roadmaps, and Gas Buddy to assess those metrics.

Here’s how we defined fuel, maintenance, and time; for more details, see our Methodology section at the end of the article:

• Fuel: The gas needed to commute was calculated as the average distance to work divided by the average miles per gallon (21.13 MPG). The cost was estimated by then multiplying that by the average price per gallon ($2.60).

• Maintenance: The cost of maintenance was calculated as the average cost of maintenance per mile (8.94 cents) multiplied by the average number of miles to work.

• Time: Opportunity cost was quantified as the average hourly wage divided by the amount of time spent commuting.

In this study, we'll analyze the monetary, health, and psychological costs of commuting that everyone should consider.

Key Insights:

• The opportunity cost of commuting is roughly $6,449 for the average American when you factor in fuel, maintenance, and time

• The average American spends $1,249 (2% of their income) on fuel and maintenance to commute to and from work each year

• Over the course of a year, the average commuter spends over 200 hours getting to and from work, and the opportunity cost of that lost time is roughly $5,200

• Commuting costs Americans over $16 billion annually in time, fuel, and maintenance

• Americans spend 489 million hours driving 14.5 billion miles to and from work each year

• The cost of commuting disproportionately affects low-income workers. People with lower incomes drive farther to work and spend more out of pocket.

• People with long commutes are more stressed, more depressed, and less productive than those who don’t commute as long

• Our analyses of U.S. Department of Transportation and County Health Rankings revealed that longer and farther commutes were linked to worse health outcomes

• Unscheduled absences from work can be related to the effects of commuting, and cost employers nearly $2,700 per worker each year

The True Cost of Commuting

Americans spend $16 billion annually commuting to and from work when we consider the costs of fuel, maintenance, and people’s time. We break down those costs below:

Time Alone Costs Americans $12.9 Billion Per Year

Americans spend an average of 46 minutes commuting to and from work each day and nearly a third spend over an hour.

That translates to over 200 hours spent commuting annually (assuming an average of 260 working days per year). Those hours cause commuters to lose out on other opportunities, like earning money or doing more enjoyable things: an economic concept known as opportunity cost. To calculate the true cost of commuting, we defined the opportunity cost as the wages the commuter could have made during their commute (at their average hourly wage). In 200 hours of work, the typical American worker could earn an additional $5,200 a year.

Of course, people wouldn’t likely swap commute time for more time at work unless they were paid hourly; instead, those 200 hours could be used for hobbies, spending time with family or friends, or leisure activities.

In a year, someone could get an additional 30 minutes of sleep every day, become best friends with an acquaintance, learn 10 new skills, watch all 23 Marvel Cinematic Universe films plus 100 more 90-minute movies, or fly to the moon and back 23 times if they had those additional 200 hours.

Maintenance and Gas Cost Americans $3.1 Billion Per Year

The cost of commuting is compounded by added wear and tear, as well as fuel costs.

As of last week, the national average for gas was about $2.60 per gallon. And, according to AAA, the typical cost of vehicle maintenance is 8.94 cents per mile. Considering driving to and from work accounts for a quarter of a vehicle’s miles, commuting contributes a great deal to vehicle costs over time.

On average, commuters travel nearly 23 miles each day getting to and from work, which costs about $2.00 in maintenance and $1.39 on gas. That calculates to 5,907 miles and $1,249 in maintenance and gasoline costs just to cover commuting.

According to our analyses, longer distances to work are associated with lower incomes, so people who are driving the farthest are spending more out of their pocket (as opposed to the potential for earning additional wages) and making less money. As a result, people with farther commutes spend a larger proportion of their income on fuel and maintenance costs than those with shorter commutes.

On top of maintenance and fuel costs, the distance you drive to work can affect your vehicle insurance rates. State Farm reported that "people who use their car for business and long-distance commuting normally pay more than those who drive less."

Those increases in premiums are typically related to people’s increased likelihood of a collision, which would increase the cost burden even more; but can also be directly due to the vehicle’s use. Pleasure vehicles, for instance, cost less to insure than primary commuting vehicles under most insurance company plans. We didn’t include the potential for accidents or insurance rate differences in our metrics because they’re too variable and dependent on other factors, but we estimate that these expenses would be more burdensome to people who commute farther and for more time.

Long Commute Costs Aren't Just Monetary

Commutes don’t just cost people money, they also negatively impact mental and physical health. People with longer commutes are less healthy, experience more stress and depression, take more days off work, and are less productive than those who have shorter commutes.

Long commutes contribute to increased stress because of the unpredictability of traffic and driving conditions, which bleeds into people’s overall satisfaction with their jobs and leisure activities. A 20-minute increase in commute time, for instance, has the same impact on people’s job satisfaction as a 19% pay cut!

Data from the County Health Rankings and Roadmaps suggests that over 16% of Americans are considered to be in poor or fair health; we were interested in whether health was related to commutes, so we used regression analyses to assess potential relationships between the percentage of the population in poor or fair health and commute measures.

Here’s what we found:

Longer and farther commutes were related to worse health: Increasing the time someone spent commuting increased the proportion of the population in poor or fair health by 0.7 percentage points. And an additional 1 mile in commute distance was related to a larger (an increase of 1.36 percentage points) proportion of the population in poor or fair health.

Those findings are supported by past research that suggests there are negative effects associated with long commutes: People who have longer commutes are 33% more likely to be depressed, 46% more likely to get less than 7 hours of sleep per night, and 21% more likely to be obese than people who commute less than 30 minutes to work (one-way), all of which can contribute to poor health. Those health costs might play a role in why commuters also tend to miss more work than those who live closer; adding to the potential for unforeseen consequences of commuting.

Commuting doesn’t only impact employees’ quality of life, it also has repercussions for other teammates and the employer. Commute time, satisfaction in the job, and happiness in the workplace directly contributes to people’s productivity at work. People whose commutes are over an hour are affected the most, losing approximately 7 days of productive work each year — by missing work and being less productive while at work — compared to their counterparts who commute less than 30 minutes each way.

And considering commute time is related to productivity and the likelihood that someone will miss work, people with longer commutes might be a burden to their employers and, therefore, might be at risk of losing their job. For instance, according to Circadian, unscheduled absences cost companies about $2,660 per worker each year, and "fatigued workers cost employers $156.5 billion annually in health-related lost productive time, almost 4x more than their non-fatigued counterparts."

Methodology

We acquired county-level data related to commuting from the Census American Community Survey (ACS) data to estimate averages for the amount of time people spent commuting to work, the number of commuters, the mode of transportation, and household mean incomes. Hourly wages were part of the Bureau of Labor Statistics Wage Data. The data were aggregated (means based on MSA or state) with the pandas Python library.

Distance traveled to work are estimates from the 2017 National Household Travel Survey (NHTS) by the U.S. Department of Transportation, Federal Highway Administration. The survey is "the only source of national data that allows one to analyze trends in personal and household travel. It includes non-commercial travel by all modes, including characteristics of the people traveling, their household, and their vehicles."

Health information (i.e., the percentage of the population considered to be in poor or fair health) was taken from the County Health Rankings and Roadmap (CHR&R), which is a program of the Robert Wood Johnson Foundation in collaboration with the University of Wisconsin’s Population Health Institute. We used state-wide averages for "poor physical health days" and "poor mental health days."

Gas prices were pulled from the Gas Buddy Price Map API.

Relationships between health and commutes were analyzed using linear regressions with data from the CHR&R (unhealthy percentage of the population), Census (travel time to work), and NHTS (distance to work). We used Python’s Statsmodels to calculate ordinary least squares regressions. All relationships were considered significant at the p < .05 level.

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If you’re an entrepreneur who wants to start a business, there are seemingly endless factors to consider. While your product or service is the most important, where you start your business also plays a pivotal role in your business’s success.

Though the prevalence of startups has been on the rise since the Great Recession and almost half of the U.S. workforce is employed by a small business, ~45% of startup businesses don’t make it to the end of their fifth year. An assessment of postmortems by CB Insights cited bad location as one of the top 20 reasons startups fail.

In that same report, approximately 37% of founders claimed the lack of investment or running out of cash to be reasons for their collapse. Another 23% stated that something missing from the team, typically a set of skills the company lacked, impacted their success.

Starting a successful business requires access to equity and talent, both related to the local economy. Considering that most funding for a new business comes from the founders’ personal finances or investments, availability of equity is important. Even with startup funds, a business needs to make that money last in order to stay afloat, which is why lower cost-of-living areas are smart places to build your business.

Location influences whether you can build a productive team, as you’ll need access to talented individuals who meet your company’s needs, like a young, well-educated population, or be located in a place that’s desirable and affordable to live.

Process

We assessed various datasets (see Methodology) to rank the 50 most populated U.S. metros on startup friendliness. We considered the current startup culture by evaluating startup density in the metro area, investment in businesses, and the proportion of people employed at a startup or self-employed. We also included startup growth in the recent past, the education level of the local population, and the cost of living, all of which may predict future startup and economic success.

Here’s how each metric is defined:

• Startup density: Indication of new (three years old or younger) businesses and upcoming new businesses (based on state-wide business applications) in the area.
• Startup growth: Growth of small business prevalence based on density measures over time.
• Investment in businesses: Indication of ability of capital (venture capital and private equity) for starting a business.
• Employment at startups: The percentage of workers working for startups as an indication of the availability of startup jobs and desire to work in those environments.
• Self-employment: Percentage of workers who own their own business as a measure of entrepreneurial spirit.
• Education: Potential employee pool with a bachelor’s degree or higher, ages 18-34. Fresh college graduates make great hires for startups, and this metric accounts for young, college-educated individuals flocking to different areas.
• Cost of living: Measured by Regional Price Parities in 2017, which evaluates the cost of living of a metro as a percentage of the national average cost of living.

To account for the importance of each of the above metrics, we used a weighted ranking system. Because building a business requires funding—much coming from the founders’ pockets—we attributed the highest weight to cost of living to account for general affordability (40 points). Startup growth was weighed slightly lower (30 points), but higher than our other metrics — as growth indicates startup successfulness. Growth was followed by startup density and investment in businesses (20 points each). Education and employment measures were weighted with the least importance (10 points each).

Fast Facts:

• Texas was ranked highly (#1 or #2) on many of our state-wide measures, including new and growth of business applications, number of private equity backed businesses, billions invested in businesses, and number of private equity firms.
• Texas cities had the best representation of workers employed at startups (3 of the top 5 metros were located in Texas).
• Florida had the largest representation of cities with the highest proportion of self-employed workers (4 of the top 5 were in Florida).
• Southern and Southwestern states made up a majority of our list, with Texas and Florida accounting for 8 of the top 10 cities.
• The West Coast was not represented on our list, likely due to the high cost of living rates in those areas.
• St. Louis, Buffalo, and Charlotte metro costs of living fell below 95% of the national average.

15. Buffalo-Cheektowaga-Niagara Falls, NY

The Buffalo metro area may not seem like a prime location to build a business, but there’s more than meets the eye in this Upstate New York city. Unlike most metro areas in the U.S., the Buffalo area never experienced a drop in gross domestic product (GDP) from the Great Recession. Instead, it’s seen consistent increases for the last two decades, a resilience that should prove beneficial for a new business if the case of another economic dip.

Moreover, Governor Cuomo initiated the Buffalo Billion program to actively create more jobs and economic activity in the Buffalo area. The program helps fund 43North, a worldwide competition that has put Buffalo on the startup map by awarding winners with $5 million total and requiring relocation to the Buffalo area.

• Startup density: 17.69%
• Startup growth: 11.72%
• VC businesses: 0.8%
• Workers employed by startups: 5.6%
• Self-employed workers: 2.7%
• Education: 29.62% with bachelor’s or higher
• Cost of living: 94.9%

14. St. Louis, MO-IL

St. Louis, surrounded by the Missouri and Mississippi Rivers, is home to approximately 2.8 million residents, the Stanley Cup-winning St. Louis Blues, and the nation’s best zoo. If that’s not enough to convince you St. Louis is a great place to build a business, the Gateway to the West was ranked in the top 70 places for business and careers by Forbes and is located in the state with the 8th-lowest cost of doing business.

Not only does the greater St. Louis area offer affordable French-colonial style homes, but also offers plenty of opportunities for entrepreneurs, like accelerators, dozens of incubators, and college and technical education. According to Forbes, amenities like those might be worth more than a business degree when it comes to building your business, so a location like St. Louis is a great place to consider.

• Startup density: 26.29%
• Startup growth: 18.09%
• VC businesses: 0.5%
• Workers employed by startups: 4.72%
• Self-employed workers: 3.1%
• Education: 29.31% with bachelor’s or higher
• Cost of living: 91.4%

13. Salt Lake City, UT

Salt Lake City is more likely to spark thoughts of skiing than technology, but it had the highest rate of startup growth on our list, is located in the third-best state to do business according to CNBC, and is considered one of the most trendy (and affordable) places to live. The metro is recognized as a financial hub with a highly skilled workforce, which could predict business prosperity.

Salt Lake City’s 1.2 million residents might see a huge tech boom in the future, as some consider it to be the next Silicon Valley. That predicted influx of commerce will benefit the local economy. The quality of SLC’s workforce and the many recreation options in the nearby Wasatch Mountains makes Salt Lake City a great place to start a business now.

• Startup density: 22.98%
• Startup growth: 17.4%
• VC businesses: 0.7%
• Workers employed by startups: 5.91%
• Self-employed workers: 3.9%
• Education: 26.39% with bachelor’s or higher
• Cost of living: 99.1%

12. Denver-Aurora-Lakewood, CO

Most of us don’t need to be convinced that the Denver metro sounds like a great place to live. Surrounded by the Rocky Mountains, the views are gorgeous and the weather is mild compared to much of Colorado. And don’t let the slightly higher cost of living frighten you! While it’s above average, the median household income is near $76,600 — about 25% above the national median.

The metro has experienced consistent GDP growth since 2009, with a 6% increase from 2016 to 2017 alone, a great indicator for business growth and success. With a highly educated population, business owners should have an easy time hiring talented employees as well.

• Startup density: 25.3%
• Startup growth: 25.98%
• VC businesses: 0.6%
• Workers employed by startups: 6.25%
• Self-employed workers: 4.8%
• Education: 37.14% with bachelor’s or higher
• Cost of living: 106.3%

11. Charlotte-Concord-Gastonia, NC-SC

Located on the North Carolina-South Carolina border, the Charlotte metro area is a rapidly growing startup hub. The appeal for business owners is undeniable: this #1 tech town has experienced consistent economic growth since 2010, and experienced the most startup growth of any metro on our list.

This home of the Carolina Panthers and Charlotte Bobcats is the second most affordable on our list, with a cost of living only 93.8% of the national average. If cost of living isn’t attractive enough, the metro doesn’t skimp on wages either, the median income is 20% higher than the state of North Carolina.

• Startup density: 24.25%
• Startup growth: 19.67%
• VC businesses: 0.6%
• Workers employed by startups: 5.63%
• Self-employed workers: 3.7%
• Education: 30.12% with bachelor’s or higher
• Cost of living: 93.8 %

10. Miami-Fort Lauderdale-West Palm Beach, FL

Whether you’re looking to rollerblade the South Beach and experience Miami’s vibrant culture, explore the canals in Fort Lauderdale, or want to visit world-renowned art museums in West Palm Beach, this metro is a perfect stop. The economy here is growing: Miami is ranked an alpha city by the Globalization and World Cities (GaWC) Research Network, and the metro has the 12th highest GDP (of 121 U.S. metro areas examined by the Bureau of Economic Analysis). The area also saw a 1.61% increase in median income in 2016.

While the metro area scored the highest cost of living on our list and has a relatively low median household income, Florida’s standing as the 10th best U.S. state to do business and the metro’s status as a startup mecca might convince you to open your small business here. The miami area had the highest proportions of self-employed people and startup employees and the second-highest overall startup density on our list.

• Startup density: 27.48%
• Startup growth: 7.69%
• VC businesses: 0.5%
• Workers employed by startups: 9.39%
• Self-employed workers: 6.8%
• Education: 24.91% with bachelor’s or higher
• Cost of living: 108.4%

9. Raleigh, NC

Raleigh, North Carolina is part of a research and educational hub known as the "Research Triangle" that includes three prominent research universities (University of North Carolina Chapel Hill, North Carolina State University, and Duke University) across the larger combined statistical area of Raleigh-Durham-Chapel Hill. The Research Triangle contributes to Raleigh’s lead in educated residents with the highest percentage of 18-34 year olds with a bachelor’s degree or higher. That educated population can prove useful to those looking to start a business, especially those who need specialized talent.

US News ranked this area as the 10th best place to live out of 125 US metro areas based on metrics related to quality of life, job market, value of living (Raleigh’s median income is over $12,000 above the national median and has been growing), and people’s desire to live there.

• Startup density: 23.49%
• Startup growth: 14.36%
• VC businesses: 0.6%
• Workers employed by startups: 7.5%
• Self-employed workers: 3.9%
• Education: 38.11% with bachelor’s or higher
• Cost of living: 96.2%

8. San Antonio-New Braunfels, TX

The San Antonio-New Braunfels metro is the third-largest metro in Texas, with ~2.5 million residents. For entrepreneurs, the Alamo City might be a great place to start your next business, as indicated by the metro’s #1 rank on our average investment score (tied with Houston).

Texas has the second-highest number and growth of new business applications compared to other states on our list and was ranked as the #1 state to do business in a recent CNBC study, partially due to the low cost of doing business (ranked #18 in the U.S.). Additionally, this hill country metro offers the potential to reach a wider customer base, as a large (32.1%) percentage of the population are native Spanish speakers.

• Startup density: 24.68%
• Startup growth: 4.97%
• VC businesses: 0.7%
• Workers employed by startups: 5.14%
• Self-employed workers: 2.6%
• Education: 20.7% with bachelor’s or higher
• Cost of living: 94.4%

7. Tampa-St. Petersburg-Clearwater, FL

Our #7 spot goes to the Tampa Bay area, which resides on Florida’s west coast. With 16 colleges, including the University of South Florida, 22 golf courses, 20 marinas, 8 state parks, and plenty of space to lounge on the beach, the area once known as the "cigar capital of the world" has quickly become a hotspot for entrepreneurs.

The metro’s estimated 3.1 million residents would agree that it certainly attracts more than tourists, though, including a culture that supports small businesses: 5.4% of workers here are self-employed, making it the second-largest proportion of self-employed workers on our list.

• Startup density: 25.83%
• Startup growth: 12.64%
• VC businesses: 0.5%
• Workers employed by startups: 6.36%
• Self-employed workers: 5.4%
• Education: 24.35% with bachelor’s or higher
• Cost of living: 98.9%

6. Houston-The Woodlands-Sugarland,TX

The second Texas metro on our list is the largest in the state with an estimated 6.89 million residents spanning 8265.8 square miles. According to the Bureau of Economic Analysis, the Houston metro area’s GDP, estimated at $490 billion, is the 7th highest of any metro in the United States and is considered an alpha city by the GaWC Research Network, both indicating sizeable economic success.

Considering Houston’s metro is tied with San Antonio’s for the highest average investment in small business, and the proximity to great food, the Gulf of Mexico coast, and attractions like Minute Maid Park and the NASA Space Center, we would definitely suggest considering starting a business here.

• Startup density: 25.40%
• Startup growth: 10.17%
• VC businesses: 0.7%
• Workers employed by startups: 6.54%
• Self-employed workers: 2.8%
• Education: 24.65% with bachelor’s or higher
• Cost of living: 101.7%

5. Orlando-Kissimmee-Sanford, FL

The next metro on our list is a playground for adults and kids alike: with attractions where you can find out whether the sorting hat places you in your favorite Hogwarts House at The Wizarding World of Harry Potter or drink around the world at Epcot, there’s never a dull moment in the Orlando area.

Its lower-than-average cost of living and median household income only slightly below the national average makes it more affordable than you’d think. There’s good reason to build a startup here, too! The metro had the highest overall startup density score and landed 2nd for percentage of self-employed workers, suggesting the residents of the Orlando metro area have an affinity for entrepreneurship.

• Startup density: 28%
• Startup growth: 15.37%
• VC businesses: 0.4%
• Workers employed by startups: 6.03%
• Self-employed workers: 5%
• Education: 23.42% with bachelor’s or higher
• Cost of living: 98.3%

4. Jacksonville, FL

Jacksonville, located on the northeast coast of Florida, is home to approximately 1.5 million people. The metro consistently fell within the top 33% of our list on a few metrics: business owners make up ~4.4% of the workers and startups account for over 25% of the businesses in Jacksonville. Florida itself had 108,983 new business applications by March, 2019, landing the #1 spot.

The Jacksonville metro juxtaposes the stereotypical Floridian town with ~50% single residents and a median age of about 38 years old (compared to Florida’s median age of 42). With median household incomes 10% above those of the state and a cost of living approximately 5% below the national average, Jacksonville makes for affordable beach dwelling.

• Startup density: 25.21%
• Startup growth: 18.62%
• VC businesses: 0.6%
• Workers employed by startups: 6.10%
• Self-employed workers: 4.4%
• Education: 22.9% with bachelor’s or higher
• Cost of living: 95.4%

3. Dallas-Fort Worth-Arlington, TX

People are flocking to the Metroplex, from the Big D to Cowtown, by the hundreds. Dallas-Fort Worth-Arlington (DFW) has increased its population by an estimated 277,747 residents in the last two years — that’s over 380 new residents per day—and it isn’t expected to slow down any time soon. The Texas State Data Center projects the metro to reach almost 8 million by 2025. That influx of residents, along with graduates from DFW’s 40+ colleges, could pave the way for a productive team at any company.

There also seems to be plenty of available capital for entrepreneurs: the Metroplex had the second-largest average investment in businesses on our list.

• Startup density: 26.53%
• Startup growth: 7.26%
• VC businesses: 0.6%
• Workers employed by startups: 7.04%
• Self-employed workers: 3.0%
• Education: 26.35% with bachelor’s or higher
• Cost of living: 100.2%

2. Atlanta-Sandy Springs-Roswell, GA

Located at the foothills of the Appalachian Mountains, the home of Coca Cola boasts weekends filled with food and music festivals, a rich civil rights history, and southern charm. According to the GaWC Research Network, Atlanta is one of the economic hubs of the United States, suggesting there’s a place for business owners in this city in a forest.

Between 2012 and 2017, Georgia saw the highest business application growth (0.86%) of the 8 states on our list and the Atlanta metro ranked #2 in our overall growth metric. The metro area is home to over 5.8 million residents and 66 higher education institutions, leaving plenty of potential employees for new businesses.

• Startup density: 24.77%
• Startup growth: 11.77%
• VC businesses: 0.7%
• Workers employed by startups: 6.18%
• Self-employed workers: 4.6%
• Education: 28.75% with bachelor’s or higher
• Cost of living: 98.6%

1. Austin-Round Rock, TX

If you love stand-up paddle boarding, barbeque, and live music, then the Texas capital is the place to be. Between music festivals like Austin City Limits and South by Southwest, and the drivable seven lakes that surround the Colorado River, keeping it weird is pretty easy.

Recreation isn’t the only thing Austin does right, though. The metro has over 2.2 million residents, up nearly 80% since 2000. With cost of living expenses only 0.5% above the national average and no corporate or personal state income tax, we can see why the Austin metro ranked #1 in startup density and #2 in the percentage of residents working for a startup.

• Startup density: 28.14%
• Startup growth: 9.14%
• VC businesses: 0.5%
• Workers employed by startups: 8.61%
• Self-employed workers: 3.6%
• Education: 34.46% with bachelor’s or higher
• Cost of living: 100.5%

Methodology

For the purposes of this study, startups were defined as small businesses three years or younger. We used seven metrics to evaluate startup friendliness in the metro area. All data were standardized (z-score) by subtracting the variable’s mean from the raw value then dividing by the standard deviation. Standardizing scores allowed us to aggregate across data to develop metrics that assessed broader concepts. We explain how each metric was calculated below:

• Startup density: This metric was an aggregate of the proportion of startups in the metro in 2016 and the number of new business applications across the state in the first quarter of 2019.
• Startup growth: Growth of small business prevalence by averaging startup density growth and new business application growth measures. We calculated startup density growth as the proportional change in the startup density between 2014 and 2016. We then calculated new business growth as the proportional change in the number of new business applications between 2005 and 2019.
• Investment in businesses: We averaged four measures: the proportion of businesses in the metro created with venture capital investments in 2016, the number of private equity-backed companies in the state between 2012 and 2017, the number of private-equity firms in the state in 2017, and the state-wide billions invested in businesses between 2012 and 2017.
• Employment at startups: The percentage of metro-area workers who were employed by a startup in 2016.
• Self-employment: The percentage of metro-area workers who owned their own business in 2017.
• Education: The proportion of the metro-area population of 18-34 year olds with a bachelor’s degree or higher.
• Cost of living: Cost of living was the metro’s percentage of the national average cost of living.

After standardizing and calculating each of the above metrics, we developed a weighted ranking system to assess the best startup locations. We assigned 0.4 (our highest weight) to cost of living to account for affordability, 0.3 to our startup growth metric, startup density and investment in business were each assigned 0.2, and startup employees, self-employment, and education were each assigned a weight of 0.1. We multiplied each metric by its assigned weight, then divided the product by 1.4 (the sum of our weights) to provide a proportion-based rank.

Statistics on the current and growth of startups, the percentage of workers employed at startups, and the share of businesses created with venture capital investment were taken from the Annual Survey of Entrepreneurs (ASE) 2014-2016. The ASE reports statistics on businesses’ economic and demographic characteristics.

The number and growth of businesses applications were taken from the 2019 Business Formation Statistics dataset, which provides state-level business application statistics each quarter.

The percentage of workers who were self-employed was acquired from the 2017 American Community Survey (ACS). The ACS includes social, housing, economic, and demographic information about the 50 most-populated metropolitan statistical areas (MSAs) in the United States.

All investment statistics except the proportion of those created with venture capital investment were taken from the American Investment Council (AIC) data. The AIC provides quarterly estimates of private equity trends and investments in each state.

Cost of living information was acquired from the Bureau of Economic Analysis’ Regional Price Parity data. The Regional Price Parities data evaluates the cost of living of a metro based as a percentage of the national average cost of living, including costs for all consumption goods and services, including housing.

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Widespread shutdowns and health concerns amid the pandemic forced 88% of organizations worldwide to adopt remote work in some capacity during 2020.[19] That shift toward remote-based teams shined a light on the fact that remote work is not only possible but also beneficial for both employees and employers, causing many to consider remote work in the post-pandemic world.

Letting employees work from home can save companies a lot of money in the long run, especially when it comes to commercial real estate costs. Dell, for example, saves approximately $12 billion in real estate costs annually by encouraging remote work.[20]

Remote work isn’t without disadvantages, though. Many huge organizations, including IBM, Zappos, and Google, limit remote work opportunities because science suggests in-office work is better for collaboration.[21]

The pandemic has severely impacted the commercial real estate industry, as many businesses have lessened office space or closed completely. Gross square footage leasing for office space specifically took a dive in 2020, dropping from over 57 million square feet in Q3 of 2019 to less than 26 million in Q3 of 2020.[17] Prices for office space are in decline, as well, particularly in large and expensive markets in the Northeast, California, and Texas.[22]

We surveyed 1,000 remote workers and in-office workers in the U.S. to learn more about people’s intentions to return to work, causes for concern regarding working in an office environment, and desires related to office real estate.

About 63% of respondents said they prefer working remotely to in a traditional office, and nearly 30% said they plan to continue to work remotely in the future, even after the pandemic.

The possibility that many won’t return to work in an office could have long-term effects on the commercial real estate market, as 53% of larger organizations plan to scale down office size post-pandemic.[23]

There are, however, certain amenities that can entice employees back to the office, which businesses and those in the commercial real estate sector can consider for 2021 and beyond in the hopes of decreasing the need for downsizing office space. Read below to learn more.

Key Insights

63% of Employees Prefer Working From Home to in the Office

Nearly two-thirds of employees said they prefer working remotely over working in a traditional office space. This preference was especially pronounced for those who are currently working remotely, while in-office employees were more evenly split: 72% of remote employees prefer remote work compared to 48% of those currently working in an office.

People aren’t simply enjoying the ability to wear sweatpants and nap in the middle of the day as part of the work-from-home lifestyle: They’re recognizing the real, long-term benefits. In particular, they enjoy the flexibility and lack of commute.

Here’s what people like about remote work:

• Saving time by eliminating commute (62%)
• Flexibility (61%)
• Saving money (55%)
• Spending more time with people I live with (50%)
• Sleeping in (43%)
• Increased productivity (39%)
• Spending time with pets (38%)
• More breaks during the workday (30%)
• Developed healthier habits working remotely (29%)
• Ability to live in a different location than company (24%)
• Less management oversight (20%)

The average American spent about 200 hours commuting to and from work each year prior to the COVID-19 pandemic.[24] Eliminating that time in a vehicle or other transportation doesn’t just save workers time; it saves them money, too. In fact, working remotely could save more than $1,200 in annual fuel and car maintenance costs from their commute alone.[24]

What’s more, the additional flexibility improves employee productivity: 85% of businesses in one survey said increased flexibility led to greater productivity among employees.[18] Another survey found that just 9% of American workers are less engaged and satisfied when working remotely.

Nearly 30% of Remote Workers Plan to Work Remotely After the Pandemic

About 89% of respondents said they worked remotely at some point in 2020 — many more than the 24% of workers who worked remotely in 2019.[25]

Very few workers (17%) have already returned to work in the office, suggesting that many companies and employees still don’t feel safe enough to shift back to conventional workspaces.

The newly approved vaccines, however, have many expecting to go back to the office sooner than later: More than 60% anticipate a return by Q2 2021 or earlier.

And despite the majority of workers preferring remote work, not all can do so permanently. About 29% of those currently working remotely intend to continue to do so after the pandemic. That 21% increase from the 2019 remote workforce means fewer workers will return to the office.[25]

Those who are returning to the office, however, aren’t necessarily doing so because they want to. The majority of workers said they have already or plan to return to the office because their job requires it. Far fewer want to return for office perks and amenities such as socializing.

Top reasons employees plan to return to in-office work include:

• My company requires returning to the office (54%)
• My specific position requires me to be in the office when possible (35%)
• I enjoy the social aspects of office life (29%)
• I am more productive in the office (28%)
• Distractions make working at home hard / unenjoyable (20%)
• I don't have a sufficient home office (13%)
• I enjoy the shops, restaurants, and/or bars around the office (12%)
• In-office amenities and perks (11%)
• Office-building amenities (10%)

Only 24% of Office Workers Feel Safe in the Office

The uptick in COVID-19 cases moving into the winter months has caused many Americans to feel uncomfortable with the idea of working in an office. The majority reported concerns related to their and their family’s health, along with feelings of anxiety, when asked how they felt about returning to the office. Just 20% of workers reported feeling safe at the thought of working in an office.

Reported feelings related to working in an office for all workers:

• Worried about their health (54%)
• Worried about their family’s health (52%)
• Anxious (45%)
• Uncomfortable (45%)
• Productive (22%)
• Connected (20%)
• Safe (20%)

Those who are currently working remotely tended to report more concern when asked about working in an office, but even those who are currently working in an office don’t feel completely comfortable. In fact, just 24% of in-office workers reported feeling "safe" in an office, and 46% said it provokes worries about their health.

Remote workers, on the other hand, were more concerned about the thought of returning to an office, with only 17% feeling safe and nearly 60% reporting worries about their health.

Considering many companies plan to return to in-office work in early 2021, employers should take steps to ensure employee safety and comfort.[18]

Currently, 56% of respondents don’t think their company is taking appropriate safety measures regarding COVID-19, which has led many to feel leery about working in an office. In fact, 16% reported they wouldn’t feel safe in an office until the pandemic was under control. Those currently working remotely were nearly 2x more likely to feel that way than in-office workers.

Encouraging in-office work hours will require employers to put more safety measures into place, as more than 80% of remote workers said they’d feel more comfortable returning to the office if certain precautions were taken.

Employees aren’t requesting extraordinary measures; instead, the majority of their safety requests are in line with CDC guidelines for office workplaces, such as spaced-out workspaces, social distancing in communal areas, improved ventilation, and daily health checks, among others.[26]

Precautions that would increase employee comfort in the office include:

• Requiring everyone to wear a mask (62%)
• Easy access to sanitizing equipment (62%)
• Office deep cleaning each evening (57%)
• Properly distanced desks (56%)
• Equipping office with a sanitizing AC system (52%)
• Temperature / symptom checks each morning (50%)
• Properly distanced meeting spaces (47%)
• Individual office space for each worker (45%)
• Weekly COVID-19 testing (44%)
• Requiring vaccines for all workers (34%)

Commercial Real Estate Developers Need to Stand Out to Get People Back to the Office

The commercial real estate market may continue to be devastated by the shift toward remote work, and many companies are beginning to downsize their office space to account for fewer in-office workers.[18]

Gross leasing activity in U.S. office space is much lower in 2020 than previous years, with a 47% decrease between Q1 and Q2 alone.[17] And, while there was a slight uptick in Q3 compared to Q2, activity remains startlingly low.

Some accounts estimate that the need for office space will decrease by 15% in the coming months as a direct result of continued remote work, as 77% of large companies plan to increase flexibility when it comes to working from home.[18]

Although downsizing office space doesn’t provide a great outlook for commercial real estate, it does mean there will be movement in the industry and office-space owners will need to stand out to employers looking to move.

We asked employees what amenities they’d like when it comes to their office building. Unsurprisingly, location matters! Employees prefer nearby parking and places to grab a snack or lunch during their break over nightlife and retail.

Office building amenity wishes:

• Close to coffee and lunch spots (49%)
• Close parking (45%)
• On-site cafes and restaurants (44%)
• On-site security guard, cameras, security fobs, etc. (41%)
• Parking garage (38%)
• On-site gym (37%)
• On-site day care (31%)
• Eco-friendly building certifications (30%)
• Rooftop / patio space (29%)
• Pet-friendly building (26%)
• Close to public transportation (23%)
• Communal space in building (19%)
• Nearby retail shops (18%)
• Close to nightlife and bars (14%)
• Busy, commercial area (11%)

Takeaways

In the wake of the pandemic, companies have fundamentally changed the way they think about remote work — both during and after the pandemic.

Many employees are enjoying perks of the work-from-home lifestyle but are mostly hesitant to return to the office due to COVID-19. In fact, 56% don’t believe their company is taking appropriate precautionary measures to prevent COVID-19 spread, causing many to delay returning to the office.

Nearly 1 in 3 don’t plan to return to a traditional office even after the pandemic, which will increase the remote workforce overall and cause companies to reconsider their current office space.

Fewer in-office employees will undoubtedly negatively impact commercial real estate in the coming years, and commercial real estate developers will need to make adjustments in order to stand out to attract potential lessees in what will be a competitive market after restrictions subside.

Methodology

We surveyed 1,000 Americans who reported currently working from home for a company that has office space (N = 607) or working in an office (N = 397) most of the time.

Respondents answered up to 20 questions on December 11, 2020, about their experience during the pandemic as part of a larger Remote and Office Work Survey. Select questions related to COVID-19 safety; office and building amenities were selected for this study.

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The ongoing debt crisis put many Americans in a tough spot, as thousands lost jobs earlier this year, while the majority had little to nothing in savings as a safety net.

In fact, 50% of Americans were worried they’d run out of savings after one month, according to a March 2020 Clever Research survey. Now, nearly nine months into a recession, many have dug themselves into a much deeper financial hole.[29]

We surveyed 1,000 Americans to get a pulse on how their spending habits, credit card use, and debt have changed since 2019 and over the course of the pandemic. We found that Americans — particularly millennials — are struggling financially.

In fact, Americans have increased their debt by more than $7,500 this year, and 52% carry a balance on their credit card month over month.

Key Insights

The average American reported having $41,559 in non-mortgage debt and having taken on an additional $7,512 in debt since this time last year.

• Learn about what Americans spend their money on and how that's led to an 18% increase in average non-mortgage debt.

52% of Americans carry a balance on their credit card, and 79% of them carry more than $1,000 in credit card debt month-over-month.

• Get the details on how people use their credit cards in 2020 compared to 2019.

Nearly one-quarter of respondents said they have dipped into their savings to help cover expenses during the pandemic, and 30% have spent more than $5,000 of those savings.

• Learn more about how much Americans are spending and the surge in savings rates throughout 2020.

81% of Americans agree a second stimulus check of similar value as the first ($1,200) would be a huge help, and 46% of Americans would use a stimulus check to simply pay their bills.

• Learn about Americans' need for additional financial support now compared to earlier this year.

Millennials are more likely to struggle financially in 2020 than baby boomers: They’re 3x as likely to miss or defer a credit card payment, 2x as likely to miss or defer a mortgage payment, and 2x as likely to miss or defer a medical bill.

• Get the details on millennial spending, debt, credit card use, and saving compared to boomers.

The Average American Has More Than $41,000 in Non-Mortgage Debt, up $7,500 From Last Year

It’s no surprise that many Americans are in debt, considering that people spend the large majority of their income: In 2019, the typical household earned about $68,703 and spent $62,438 on goods and services. The majority of those expenses were spent on necessities such as[30][31] :

• Housing ($20,506)

• Transportation ($10,410)

• Food and beverage ($8,500)

• Insurance and pensions ($7,354)

• Healthcare ($5,049)

Despite changes in spending during the pandemic due to business closures and social distancing measures, the overall amount of money people spend hasn’t changed drastically.[32] As a result, the respondents in our survey have taken on an additional $7,512 in debt, on average, in the last year, increasing their total non-mortgage debt to $41,559.

The surge in debt is problematic for a variety of reasons, but most notably, 54% of Americans said they’ve missed or deferred at least one payment in 2020 compared to the 29% who were worried about missing a payment in January.[33]

Those who missed a payment reported missing:

• Student loan payments (45%)

• TV, internet, or phone bills (34%)

• Credit card bills (30%)

• Medical bills (30%)

• Electric, water, or other utility payment (27%)

• Rent (21%)

• Mortgage (21%)

Three in 10 Americans said they would likely miss at least one payment in 2020 because they wouldn’t have enough money to cover it.[34] Their predictions weren’t far off: Those who did miss a payment this year did so because they couldn’t cover necessary expenses and their bills.

The top reasons for missing a payment included:

• Paying for food or groceries instead (37%)

• Prioritizing other debts (33%)

• Lost income (28%)

• Covering an unexpected emergency (25%)

• Prioritizing rent or mortgage (24%)

• Paying utilities (22%)

• Forgetting to pay (18%)

• Spending too much on nonessentials (15%)

Missing a payment can be costly, regardless of the reason. U.S. households spend nearly $17 billion on costs associated with late bill payments annually, averaging out to about $234 per affected household.[35]

52% of Americans Carry a Balance on Their Credit Card

The majority of Americans (92%) have at least one credit card, and the typical adult has three. We often buy with credit cards due to convenience, security, and rewards, but Americans have increasingly relied on credit cards during the pandemic.

More than three-quarters of respondents opened a new credit card account in 2020 for the following reasons:

• Sign-up bonuses, points, or rewards (41%)

• Build credit score (41%)

• Have credit in case of an emergency (34%)

• Balance transfers (25%)

• Help covering expenses due to the pandemic / economy (23%)

• Help covering expenses not due to the pandemic / economy (20%)

• Fraud protection (17%)

• Brand name of the card (16%)

More half of respondents (53%) said they carry a balance month-to-month on their credit cards, up from 47% last year. And those who do carry a balance are carrying more on their cards: 79% said they hold at least $1,000 on their cards this year, compared 72% last year. In addition, 46% hold at least $5,000 on their credit cards in 2020.

Carrying a balance leaves people paying more for their purchases due to notoriously high interest rates on credit cards. The average APR hovers around 24.43% for those with bad credit and nearly 16% across all cards, as of November 4, 2020.[36] Americans end up spending an average of $890 per year just in credit card interest.[37]

Many aren’t just paying extra in interest; they’re incurring late fees, too: 30% of Americans said they’ve missed a credit card payment this year.

Those snowballing effects of carrying balances and missing payments can lead to serious delinquency. The percent of accounts severely delinquent (90+ days) was 8% higher at the end of Q2 2020 than it was the same time last year, suggesting people are struggling more to catch up on their missed payments.[38]

As a result, people are prioritizing credit card debt over other forms of debt: 33% plan to pay off their credit card debt in the next year, compared to 20% who have a goal to pay off other forms of debt.

Nearly One-Quarter of Americans Have Dipped Into Emergency Savings to Cover Expenses

Experts suggest that people should have enough in savings to cover about 3-6 months of expenses in case of an emergency.[39] Despite the fact that the percent of disposable income people save was steady or increasing for years before the pandemic, the typical American still isn’t financially prepared for an emergency, much less 3-6 months’ worth of expenses.[40]

In fact, 39% of people couldn’t cover a $400 expense with cash or its equivalent, according to a Federal Reserve study last year — and that was before the pandemic.[41]

More recently, only 31% reported having enough savings to last at least the recommended 3 months, according to the Semya-Moya COVID-19 Financial Impact Survey.

The pandemic and related recession have caused nearly one-quarter of Americans to dip into the little savings they do have to cover expenses. And 31% of people who have dipped into their savings have spent more than $5,000 of their emergency funds.

One good thing to come out of the pandemic is that many are rethinking their saving habits. This year, people started saving more than ever.[40] In the next year, about one-third of respondents said that building an emergency fund is a major financial goal.

81% of Americans Say Another Stimulus Check Would Be a Huge Help Financially

From skipping monthly bill payments to dipping into emergency savings, Americans have experienced extreme financial stress in 2020. Earlier this year, the CARES Act provisions included a one-time payment of up to $1,200 plus $500 per dependent to American households. At the time, most Americans agreed or strongly agreed that the check would be a huge help.

The need is even stronger for the second proposed stimulus payment: 81% of Americans reported that another check through the Heroes Act would be a huge financial help, an 29% increase from April.

Although the additional stimulus check would not necessarily put more money into the economy as intended, it could significantly decrease the financial burden many are experiencing during the recession, as more than 6 in 10 could cover one or more month’s worth of expenses with the stimulus cash.[42] Respondents in our survey said they’d use the stimulus money on:

• Paying for bills (47%)

• Paying off debt (45%)

• Covering necessities such as groceries (32%)

• Savings (31%)

Millennials Are More Likely to Struggle Financially in 2020 Than Baby Boomers

Millennials only had about 2% more family wealth than families the same age in the early 1980s (after adjusting for inflation), while baby boomers had 135% more wealth than families their age 30 years prior.[43] The current recession is likely to exacerbate the large financial gap between boomers and millennials, as it appears to have more negatively impacted millennials.

While millennials (25%) and boomers (22%) were equally likely to dip into their savings as a result of the pandemic, boomers spent significantly more money than did millennials.

The lack of emergency savings caused millennials to look elsewhere for funds. In fact, they were 29% more likely than boomers to rely on credit and other forms of debt to cover expenses this year.

In fact, those younger than 40 increased their debt by 2% between Q1 and Q2 of 2020, while those over 40 actually decreased theirs by 1%.[44]

Those financial struggles have impacted millennials’ ability to act responsibly when it comes to credit cards and spending: Millennials were more likely than boomers to pay off their credit card balance each month last year. But this year, millennials are 32% more likely to carry a balance month-to-month on their credit cards than they were last year, catching up to boomers.

Millennials are 3x as likely to miss credit card payments.[34] In January, 29% of millennials reported they expect to miss at least one credit card bill in 2020 (31% actually did). Boomers were more optimistic: Only 5% said they’d miss a payment, but 17% have actually missed one so far.

Millennials were more likely to miss other forms of bills, as well: 55% of millennials missed at least one payment this year, compared to only 33% of boomers.

Millennials missed bills related to:

• Student loans (52%)

• TV, internet, or phone service (33%)

• Credit cards (31%)

• Medical bills (29%)

• Electric, water, or another utility (28%)

• Rent (22%)

• Mortgage (20%)

• Other debts (11%)

Millennials' reasons for missing payments was often related to a lack of funds, but it wasn’t always due to responsible spending, as millennials were 100% more likely than baby boomers to have missed any payment due to spending too much money on non-essentials.

Other reasons millennials missed payments included:

• Needing to cover food or groceries instead (38%)

• Prioritizing other forms of debt (36%)

• No longer having income to cover the bill (31%)

• Paying for an unexpected emergency (25%)

• Having to pay rent/mortgage (27%)

• Forgetting to make the payment (17%)

• Spending too much on non-essentials (14%)

Key Takeaways

Americans were woefully unprepared for the financial crisis the coronavirus brought on, and many — especially younger and lower-income earners — have been hit hard as a result.

People have had to spend some or all of their emergency funds even after receiving help via the economic stimulus money earlier this year and are beginning to rely more heavily on credit cards to help cover basic living expenses. Those shifts could have long-term, dire financial consequences by increasing people’s debt through interest charges and late fees — a snowball effect that can cause Americans to feel hopeless about their financial situation.

Overall, Americans’ spending and saving behaviors have changed substantially over the course of the pandemic, and many will likely continue to struggle until joblessness drops to pre-pandemic levels and the economy evens out.

Methodology

Respondents were 1,000 Americans who answered up to 20 questions about their finances on October 30, 2020.

The post Americans' Spending, Savings, and Debt in 2020 appeared first on Semya-Moya.

The United States is the 4th-largest country in the world, covering 3.5 million square miles.

However, over 80% of the population lives in metropolitan statistical areas (MSAs) that account for only 26% of the country’s land; and as more people move to MSAs, cities become more dense and expand outwards to account for growth. As a result, getting to and from work can be a nightmare and the costs of commuting rise.

This raises an interesting question: Which cities are the best (and worst) for commuters in terms of the overall opportunity costs?

We set out to answer this question by examining commuting trends and costs across the 50 most-populated metros, cites most likely to experience more traffic and longer commutes. We used data from the Census' American Community Survey, Bureau of Labor Statistics, U.S. Department of Transportation, County Health Rankings and Roadmaps, and Gas Buddy to explore regional and metro-level trends.

We were particularly interested in the personal costs related to the time and distance people commute, so we focused on the 80% of people who drive alone to work to best estimate the cost of commuting. We calculated the cost of commuting as the sum of the costs associated with fuel, vehicle maintenance, and time (i.e. opportunity cost).

Here’s how we defined each metric:

• Fuel: We estimated the cost of fuel by calculating the amount of gas used to commute to work (in gallons) by dividing the average distance to work by the average miles per gallon across vehicles (21.1333 MPG), then multiplied that by the average gas price per gallon.

• Maintenance: The cost of maintenance was calculated as the average cost of maintenance per mile (8.94 cents) multiplied by the average number of miles to work.

• Time: We estimated the opportunity cost of a person’s time as the amount of money they could have earned had they been working instead of commuting by multiplying the average hourly wages by the number of hours spent commuting to work.

By adding these metrics together, we were able to rank the best and worst cities for commuters based on the average opportunity costs. Our full methodology and the formulas used can be found at the end of this study.

This analysis also uncovered regional trends, such as where commuters pay the most for gas, as well as where commuters spend the largest portion of their income on commuting.

Key Insights:

• The five best metros for commuting include New Orleans, Buffalo, Milwaukee, Oklahoma City, and Miami.

• The five worst metros for commuting were Washington, D.C., San Francisco, New York City, Seattle, and San Jose, CA.

• The average commute costs nearly $6,500 annually, but location makes a difference: Some states' commuters spend less than $3,000 on average and others more than $9,000 on their commutes.

• West Coast commuters spend more on fuel, but they also earn more than the other regions of the U.S.

• Southern commuters spend the largest proportion of their income on fuel and maintenance.

• Studies show longer commutes are linked to more sick days, stress, and less productivity. Our study found regional trends, with southern states feeling unhealthy more often and enduring longer commutes.

The Best and Worst Cities for Commuters by the Numbers

We ranked the 50 most-populous MSAs by the cost of commuting. The best cities were those with the lowest costs: Buffalo and Milwaukee residents were able to travel to work for less than $10 on average; while those in Seattle and Washington, D.C. spent nearly $25.

For each metro, we included fuel, maintenance, and time to calculate our opportunity cost of commuting.

Regional Trends

The annual individual cost of commuting varies depending on where you live: Costs ranged from $6,427 in the South to $6,815 in the Northeast. But that’s not the whole story. When we break down the total cost, we find that those in the South actually spend more out of pocket for fuel and maintenance (as opposed to lost opportunity costs) than other regions.

Southern States Spend More of Their Income Commuting

Commuters in the South also earn less than other regions, making maintenance and fuel costs account for a larger proportion of their income. Southerners spent an average of 2.3% of their income on commuting while those in the Northeast only spent 1.8% of their income on commuting costs. That 0.5% difference may not seem like much, but the average southerner who earns $69,972 annually would save $3,448 each year if they only spent 1.8% of their income on fuel and maintenance.

Gas Prices Rise the Further West You Go

The trend that southern states spend more on fuel and maintenance costs is largely driven by their longer drives to and from work; they don’t actually spend the most on gas per gallon, the western states do. Commuters in the West spend an average of $2.99 per gallon, but prices are over $4.00 per gallon in much of California (compared to $2.36 in the south). So even though western commuters don’t travel as far (5,405 miles) as those in the south (6,548 miles) each year, they still spend the most on fuel — both per gallon and over the course of a year.

Southern States are the Unhealthiest

Research suggests that people who have long commutes are typically less healthy. That is, people who commute longer than an hour report being more depressed, more stressed, and experience a lower quality of life than those who commute less than 30 minutes. Our analyses showed that those trends may be regional. More specifically, we used analysis of variance to assess statistical differences in the proportion of the population considered to be in poor or fair health across regions.

A significantly larger proportion of the southern population (19%) was in poor or fair health than the midwestern (15%), northeastern (15%), or western (16%) populations. The South also had a larger proportion of commuters who spent over 60 minutes traveling to work (8%) than the Midwest (6%) and West (6%). The Northeast had a similar proportion of long commutes (8%) as the South, and those states had the second-highest proportion of unhealthy people.

Note: This doesn't show that southern commuters are necessarily less healthy because their commutes are longer, but it does indicate longer commutes are a contributing factor.

Final Thoughts

Location undoubtedly impacts workers' commutes, but unexpectedly the commutes are much costlier in certain metros and in the South. Those costs might not be considered when accepting a new job or choosing where to live in a city; but thinking twice about traveling long distances to work could ease stress on your checkbook and your health.

Methodology

Data were pulled from the 2017 3-year estimates of the Census American Community Survey (time spent commuting, number of commuters, modes of transportation, and mean incomes), the Bureau of Labor Statistics Wage Data (hourly wages), 2017 National Household Travel Survey (NHTS) by the U.S. Department of Transportation, Federal Highway Administration (distances traveled to work), the County Health Rankings and Roadmap (percentage of population in each state considered unhealthy), and Gas Buddy Price Map for gas prices.

Differences in health across regions were analyzed using one-way analysis of variance (ANOVAs) in Python’s scipy using data from the CHR&R (unhealthy percentage of the population). All relationships were considered significant at the p < .05 level.

Formulae:

Fuel = (distance / 21.133) * gas per gallon

Maintenance = 0.0894 * distance

Time = hourly wage *commute in minutes / 60 minutes

Cost = fuel + maintenance + time

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