money Money, Honestly podcast: Pandemic ruined many Americans’ finances from depleted savings to bankruptcy
With more than 44 million job losses over the past three months, many Americans have felt the consequences of the pandemic on their personal finances, including running out of savings, cashing out 401(k)s, and even filing for bankruptcy.
Recovering from those setbacks could take months, or even years, for some of the hardest-hit workers as the economy digs out of a historically deep and rapid recession.
Here are some of their stories from the “Money, Honestly” podcast by Yahoo Money’s sister site, Cashay.
‘I don't want to file bankruptcy’
Shonna Clark was already in a dire financial situation before the pandemic, which exacerbated and accelerated her financial struggles.
“I'm a single mom, so the only income I have is what I have from my employer, “ Clark, 33, said. “And I have two kids and I had just moved up here.”
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Just when the pandemic was starting, Clark was leaving an abusive marriage and moving from Texas to Minnesota with her two children. Starting her new life there, she used all her savings for moving and paying some bills in advance.
Clark was supposed to start her new job at a specialty clinic on March 16, but was laid off that same day. To get through those challenging times, Clark had to cash out her 401(k) and is now struggling to pay her bills.
The layoff along with her previous financial hardships from her divorce has left Clark with only one choice: To file for personal bankruptcy.
“I don't want to file bankruptcy,” Clark said. “But at this point, the only thing I can afford is making sure I have a roof over my head, food, and car that I can get to my son's appointments.”
‘My savings are just depleting’
Like Clark, Nicole Vitale was also coming off a period when she was relying on her savings, making her feel the financial strain of the pandemic even more. She was supposed to return from an unpaid maternity leave to her hair and makeup artist job in Las Vegas when the lockdowns swept across the country.
“It's been tough, I was already on leave, so I was using my savings at the time,” Vitale, 33, said. “There are lots of bills that are coming out and my savings are just depleting.”
Taking a 12-week unpaid maternity leave — she received short-term disability insurance for four — took a toll on her finances, since she’s the main source of income for her family. Returning to work would stabilize the family budget, but now she’s not sure when that will happen.
“I got a phone call from my director of the salon and spa,” Vitale, 33, said. “She let me know that I would not be returning from maternity leave because we were closing the doors of all the resorts.”
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Nevada has the highest unemployment rate as of April at 28.2%, or almost double the national rate of 14.7%, according to data from the Bureau of Labor Statistics.
›“Leisure and hospitality has just been absolutely devastated,” said Martha Gimbel, manager of economic research at Schmidt Future. “That is an industry where it's really hard to do a lot of jobs if you are not face to face.”
More than 40% of the layoffs that have occurred since the lockdowns began will likely never come back either, according to a recent paper from Becker Friedman Institute at the University of Chicago. The industries that thrive in Las Vegas are some of the hardest hit. There’s also the question of how many of those temporary layoffs may become permanent.
“These leisure, hospitality, entertainment sectors have been hit the strongest,” Jose Maria Barrero, co-author of the report, told Yahoo Money. “So there's going to be a shift away from these sectors and towards others.”
‘It’s going to be a slow process’ to recover
With the pandemic changing the look of a city like Las Vegas, Vitale is not sure whether she will return to work and if her job will exist in the future.
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“We live in a luxury city, so we actually need a lot of people to be comfortable with their finances to take a vacation and come here and spend money,” she said. “It's going to take longer to have some sort of normalcy.”
While Vitale is not sure what her job will look like after the end of the pandemic, Clark knows that she will soon return to her job — a piece of good news after filing for bankruptcy.
“My work is hoping to get me back in mid-June or end of June. Right now everything is up in the air,” Clark said. “They don’t know the timeframe yet.”
Filing bankruptcy will make future borrowing difficult for Clark, because her credit score has been decimated and will likely result in paying more for a loan or a mortgage in the future.
“Bankruptcy is a very final decision,” said Bruce McClary, the spokesman for the National Foundation for Credit Counseling. “It has a long-lasting negative impact on your finances.”
Clark is relying on the unemployment benefits and hoping to get back on track with her finances when she returns to her job.
“I may not even start full-time right away,” she said.
She expects it will take five or six months to recover from the financial hit the pandemic took and it all depends on what her job will look like once she returns.
“To get everything back on track, as far as being able to pay more bills and my credit card,” Clark said, “it’s going to be a slow process.”
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.
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