- More than half of Americans with debt say it has negatively impacted their lives
- Millennials are twice as likely to worry about their debt compared to Baby Boomers
- Household debt is now at a record-high
The old saying goes, ‘money can’t buy happiness.’ It should also say ‘and debt can make you anxious, keep you up at night and cause problems in relationships.’ That’s according to a new telephone survey of 1,004 U.S. adults conducted by Harris Poll on behalf of the American Institute of CPAs (AICPA). The survey found nearly three-quarters of Americans (73 percent) are living with debt driven by factors such as everyday expenses, a lack of income, mortgage costs and student loans, reflecting the far-reaching potential impact of debt upon society.
Recent data shows outstanding household debt reached a record high of $12.84 trillion, making this survey timely. With U.S. consumer spending growing at its fastest pace since 2009, it appears the frugal habits many Americans adopted directly after the Great Recession are a thing of the past.
What’s more, the downside of debt goes well beyond the interest Americans are being charged. According to the telephone survey, two-in-five (39 percent) saying they feel anxious at the mere thought of paying off their debt.
“For Americans watching their debt levels rise while they struggle to make monthly payments, the situation can feel hopeless and have a serious impact on their quality of life,” said Greg Anton, CPA and chair of the AICPA’s National CPA Financial Literacy Commission. “The good news is, people don’t need to be held hostage by debt. Establishing a plan to live debt free in the future will help reduce your anxiety today.”
More than half of Americans with debt (56 percent) say it has negatively impacted their life.
Of those, one-in-five (21 percent) say debt is causing relationship tension with a spouse or partner and one-in-ten (11 percent) have misled family or friends about their financial situation. Debt is not just impacting life at home, it has found ways to creep into all aspects of the day. Nearly a third (31 percent) admit to worrying about their debt in general while nearly one-in-five (18 percent) say they worry while at work and one-in-four (25 percent) worry at bedtime.
Living with debt has become a financial and mental burden for nearly three-in-ten Americans with debt (28 percent) who stress about everyday financial decisions because of their debt. Nearly one-fifth of Americans with debt (19 percent) have received letters and calls from collection agencies. While the low interest rate environment has the potential to keep payments lower, one-in-four (25 percent) say that they’re worried a rate hike could change that.
Millennials are now the largest generation in the U.S. and debt is playing a huge role in their lives.
Nearly seven-in-ten Millennials with debt (68 percent) admit it has had a negative impact on their everyday life compared with roughly half of Baby Boomers (48 percent) and three-fifths of GenXers (59 percent) with debt. Most concerning, the survey found that of those with debt, Millennials are twice as likely to worry about debt compared to Baby Boomers (M: 43 percent, BB: 19 percent) and more than a third (37 percent) admit that their debt causes them to stress about everyday financial decisions.
“Debt is taking a greater mental toll on Millennials than older generations. But the good news is that they also have the most time to do something about it,” added Anton. “Positive financial changes incorporated into a plan now can lead to a big positive financial benefit over time.”
Not all debt is created equal.
It is often said that investing in yourself, be it through education or professional enrichment, or investing in real estate, is good debt to take on. Seventy-one percent of Americans with debt agree that certain debt can be a smart investment and a way to improve your long-term financial situation. Looking at the causes of Americans’ debt, everyday expenses or bills (44 percent) was the most commonly cited, with one-in-three saying their debt is driven by not enough income (36 percent), car payments (33 percent) and healthcare costs (32 percent). However, ‘good debt’ still adds to overall debt levels, with 41 percent citing their mortgage and 23 percent pointing to student loans as driving their debt.
“In many cases, it makes good financial sense to invest in yourself in the form of taking out student loans for higher education or taking on a mortgage as an investment for you or your family,” said Anton. “It’s important to be realistic about the long-term costs and benefits of any debt you take on. Job markets can change and housing markets have peaks and valleys. Even so-called ‘good debt’ can linger, accruing interest and negatively impacting your entire financial life.”
The good news is that 42 percent of Americans believe their debt level will go down in the next five years – more than twice as many as those who think their debt level will go up (18 percent). With a plan, paying off your debt is possible. Here are four tips from the American Institute of CPAs National CPA Financial Literacy Commission to help Americans put together a plan of their own to pay down their debts and help put their minds at ease.
- Utilize the tools and technology available to help you – There are so many apps and other technology tools, many of which are free, that can help you track your saving and spending in real-time. Using technology, like automated payments, can help reduce the amount you have to remember every day.
- Prioritize – Take time to think about whether what you are purchasing is going to strengthen you as a person or add value to your investment portfolio. In other words, is that new TV worth the additional monthly payment and finance charges? Think about your spending habits and trigger points if you are a compulsive or impulsive shopper.
- Get your credit score – Taking an inventory of where you stand financially, including obtaining your credit score and report. This is a great way to assess the damage, come up with a plan and move forward in a positive direction.
- Put together a cash flow analysis – It’s important to know what money is coming in, your required outflows and where you can cut down on expenses. Create an inventory of total debt on hand, including type, institution held, interest rate and maturity date. This will give you a solid idea as to how much you have that can repay per month.
To help Americans on their way to a better financial future, the AICPA created the 360 Degrees of Financial Literacy website which provides articles, calculators and Q&A’s on the topic of debt.
This Harris Poll was conducted by telephone within the United States between September 28 and October 1, 2017, among 1,004 adults, aged 18 and over, including 504 interviews from the landline sample and 500 interviews from the cell phone sample. 678 identified as having debt. 180 adults were Millennials, 164 were GenXers and 364 were Baby Boomers. Figures for age were weighted (using data from the Current Population Survey) where necessary to bring them into line with their actual proportions in the population.
2020: the year mortgages went digital
By Francesca Carlesi, co-founder and CEO, Molo
It’s safe to say that the past year has changed everything. With restrictions in place that limited almost every aspect of our lives, from work to socialising, it’s no surprise that some industries were decimated and others were left severely shaken. The mortgage sector was no exception, as it also underwent a vast transformation which may have changed the course of mortgages forever.
The industry saw a paradigm shift, which was driven by consumers being forced online. This was the case for everything from mortgage applications to online house viewings and property valuations. As expected, this resulted in an increased demand for digital mortgage solutions with more flexibility.
While the industry was already slowly shifting, the pandemic has accelerated this and now the traditional process of getting a mortgage is increasingly coming under threat. We’ve seen a number of somewhat surprising trends over the last year that support this argument and suggest that consumers are embracing the change. For example, compared to March last year, we’ve seen the number of people aged over 45 applying for a mortgage loan increase by 70%. This indicates that consumers who may have previously resisted applying for a digital mortgage saw no alternative option in lockdown.
It seems that this paid off, as our data suggests that overall consumers were more satisfied with the simpler and quicker process.
A shift in behaviour
It’s clear that the pandemic did nothing to discourage those seeking a mortgage from doing so and the industry continued to grow. For example, in October last year, the UK mortgage industry saw a 13-year high, where over 97,500 loans were approved – the highest figure since September 2007, the month at the start of the financial crisis. But what led to this and why?
In a post-pandemic world of financial uncertainty and instability, the idea of purchasing property is now being perceived by many as a safer bet than investing in the stock market or other investment options.
As a result, buy-to-let properties are becoming an increasingly appealing option and Google has now coined it as ‘breaking out’. Not only did Google trends observe a 5000% increase in the search term ‘how to get a buy-to-let mortgage’ last year, but at Molo, our own data also supported this and found a significant rise in the number of first-time buyers who were mortgage hunting.
Despite being introduced twenty years prior to buy-to-let mortgages, let-to-buy mortgages also saw huge growth in 2020. The pandemic has led to increased numbers of remote workers and commuting has become a thing of the past. UK cities are seeing somewhat of a mass exodus as the priorities of city dwellers are changing and many are going in search of more space. Let-to-buy mortgages offer the flexibility to facilitate this. Investing in this kind of mortgage means that families, for example, can afford to rent out their property in the city and move to locations that are more rural.
We’ve also seen the industry pivot slightly in terms of regional demands. While there is continued demand from London and the South East, for example, we’ve also seen growth in areas such as the North West and we predict this won’t slow any time soon. One of the cities with especially high demand was Blackpool, where growth in demand was twice the national average.
Future gazing: 2021 and beyond
We’re expecting that the changes seen across the industry over the past will stick. After all, if even the sceptical customers were happy with the ease and simplicity of the online mortgage application and approval process, why on earth would they go back?
It’s important that we learn from these observations and use them to draw insight into the future of the mortgage sector. For instance, while Coronavirus has certainly caused disruption for lenders and consumers alike, it’s also highlighted the need for a more advanced, digital offering. It’s shown that digital mortgages really have become the best option for customers. The pandemic has been a test run for businesses and has proved that, even after restrictions are lifted, there is no good reason for mortgage providers to return to the traditional but slower business-as-usual.
At least in the property world, 2020 could well be remembered as the year that mortgages went digital. While it’s true that the pandemic was the catalyst for this shift, it’s now gone beyond the virus. The changes we’ve seen over the past year are likely to shape the mortgage industry for years to come.
EU finance chief says UK’s Northern Ireland move a breach of trust
DUBLIN (Reuters) – The European Union’s finance chief said Britain’s decision to make unilateral changes to Northern Irish Brexit arrangements raised questions over whether it can be trusted in future trade negotiations with any partner.
“It does open a question mark about global Britain, if this is how global Britain will negotiate with other partners. Our experience has been not an easy one to put it mildly,” Mairead McGuinness, who is negotiating post-Brexit financial services terms with Britain, told Irish broadcaster RTE on Thursday.
“We have to be very clear that when something happens that is not appropriate and indeed in our view breaches both trust and an international agreement, then we have to call it out. It wasn’t a good day yesterday but this morning we have to work for practical solutions, with the UK, not separately.”
(Reporting by Padraic Halpin; editing by John Stonestreet)
The Benefits of Starting A US Non-Profit: The Latest Tax Regulations
Starting a nonprofit organisation can be a very effective way of significantly improving your society’s welfare, and truly assisting those in need. Ultimately, however, understanding all the prerequisite steps mandated to start a nonprofit– as well as the legal obligations and privileges that can be associated with such a process, is crucial before fully committing to and moving forward with your business plan.
Growing a prolific, successful, and impactful non-profit can be a very tedious process and can commonly involve years of consistent effort, diligence, and determination. Consequently, this article will take a deep dive into the relative statutory and federal legislation and critically analyse the plethora of economic, monetary, and social benefits that starting a nonprofit can bring in for you.
Non-profit Organisations: A Quick Overview
Regardless of whether your goal is to address a particular societal issue, form a trade organisation or perhaps create a social club, if you are looking for the opportunity to earn a profit on top of accomplishing your stipulated goals, forming and operating a nonprofit organisation may be the way to go.
Contrary to most social clubs- which are formed to solely provide benefits for their specific members, nonprofits are generally created to provide benefits to the general public. These can include corporations created for educational, scientific and charitable purposes and- as we will further analyse below, are commonly exempt from paying corporate income taxation in accordance with Section 501(c)(3) of the Internal Revenue Code.
The Financial and Structural Benefits of Starting a Non-profit
As briefly touched on above, forming a nonprofit organisation can provide a plethora of benefits for you, these include:
- Tax Exemptions- companies that are categorized as ‘public charities’ in accordance with section 501(c) of the Internal Revenue Code are generally exempt from paying corporate income tax on a state and on a federal level. Additionally, after a company has obtained their aforementioned ‘tax exempt’ legal status, a person’s or company’s monetary donations to them is tax-deductible.
- Grant Opportunities- There’s a prolific amount of both public and private bodies that unilaterally limit their charitable donations and grants to public charities only. This is because nonprofits can- and commonly do, offer tax deductions to such individuals or corporate entities on an exclusive basis.
- Unique Corporate Structure- A nonprofit organisation operates as its own unique legal entity- completely separate from its owners and founders, and consequently is in a position to place its own interests and corporate ethos above the interests of the persons that may be associated with it.
- Limited Liability & Perpetual Existence- On top of having a statutory right to exist in perpetuity, nonprofits also have limited liability under the law. Therefore, any damages that may arise from potential legal disputes are limited to the real assets of the actual nonprofit, and not the assets of its founders and/or owners (subject to specific legal exemptions).
Final Overview: The Potential Disadvantages of Forming a Nonprofit
Despite all the advantages laid out above, it should be duly noted that there are a couple of potential disadvantages to forming a nonprofit that you may want to consider before moving forward with your plan.
Firstly, the process of forming a nonprofit can take a significantly long period of time and this is commonly associated with a great deal of both effort and capital. Moreover, in order to apply for some of the benefits listed above- including federal tax exemption, a monetary fee is required and the process also often needs a present attorney or corporate accountant to serve as a corporate consultant.
Furthermore, there are a couple of practical disadvantages to starting a non-profit organisation. These include: a) excessive paperwork- as all nonprofits are legally required to keep detailed analytical records of their practices and submit them to their relevant state de[artment and to the IRS, and b) limited personal control over the organisation- this is particularly the case in states that require nonprofit organisations to have more than one director.
Finally, nonprofits are commonly subject to prolific levels of public scrutiny- especially in relation to their finances, which may act as a disincentive for some private individuals.
Overall, starting a nonprofit can bring in a plethora of economic, monetary, and social privileges for the individuals involved, and- although the process can come with a few potential inconveniences, they are arguably a small price to pay. Companies like TRUiC advise on the varying benefits of different states when it comes to US formations. It is worth conducting thorough research before making your next move.
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