Are you financially vulnerable? Here are 10 ways to check, including credit score, savings

You probably don’t live in poverty, you probably have a job, maybe a savings account and even a 401(k) retirement plan at work.

But could you survive a shock such as going four weeks without a paycheck, like many federal workers did during the recent government shutdown? How would you fare in case of a job loss or large unexpected expense?

Below are 10 ways to assess your level of affluence, including some unconventional ones. Many were evaluated as part of a new report on financial vulnerability from Prosperity Now, a progressive group in Washington, D.C., That aims to improve opportunities for struggling Americans.

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1. Your income fluctuates a lot

Roughly 10 years into the economic recovery, unemployment rates have fallen across the board. Yet holding a job by itself doesn’t tell the whole story: Many positions pay poorly, and unstable income can put workers at financial risk.

One in five households faces moderate-to-significant income fluctuations from month to month, according to the Prosperity Now report. People with income fluctuations said they were twice as likely as the general population to be falling behind on bills. They also often must rely on costly payday-type loans to make ends meet.

2. Your credit score isn’t great

Late payments, delinquent accounts and other borrowing-related problems show up in credit reports, and this information goes into credit scores. Nearly half the nation, 48 percent of Americans, have mediocre or poor scores, according to Prosperity Now.

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People in this category face higher interest rates or other poor terms, if they can get loans. They also might need to pay more for utilities and other services.

Debt is a doubled-edged sword, as too much borrowing can take you down. But access to credit plays a role in helping people build wealth through home purchases, financing college, starting a business and even buying a vehicle to commute to a better job.

Definitions of prime credit scores vary, and there are different scoring models. But anything above 720 on the popular FICO range of 300 to 850 is considered excellent.

3. You don’t even have a credit score

Roughly one in six Americans doesn’t have a score because they can’t be scored, according to a new report by the company behind another model called VantageScore. An estimated 40 million adults can’t be scored because they don’t use credit much, if at all, and often don’t have any relevant accounts.

Without a credit score, it’s much less likely that you could receive a conventional loan, the VantageScore report warns. If you tried, you could face costly, even unfair, terms.

4. You’re feeling priced out of a home

The nation’s homeownership rate has inched up to 64.4 percent yet remains far below the high near 69 percent reached in 2005. Housing costs are rising faster than incomes, keeping the homeownership rate down, Prosperity Now said.

You don’t need to own a home to prosper, but this is the largest asset for many Americans and a good source of tax savings. Mortgage interest and property taxes are deductible, and most homeowners avoid taxes on housing profits when they sell.

If you don’t own a home, you’re also vulnerable to rising rents. Roughly half of all renters spend more than 30 percent of their monthly income on rent and utilities – a threshold that Prosperity Now considers important.

5. You lack even modest savings

Everyone should strive to accumulate long-term investments, but the first step is stockpiling enough cash to meet big expenses or patch over a period of income volatility.

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“When households have a financial cushion, even a modest one, it can make them more resilient to these financial shocks,” said the Prosperity Now report.

Financial planners typically suggest building up enough liquid assets to meet three to six months of expenses. But even households with as little as $250 to $750 are more likely to keep up with key payments and avoid shocks, said Prosperity Now.

Homeowners should strive to accumulate savings equal to several months of mortgage payments.

6. You’re dependent on dollar stores

Stores featuring especially low-priced items, often without a lot of fresh fruit and vegetables, are concentrated in moderate-income urban areas, African-American neighborhoods and rural communities, according to Prosperity Now.

The prevalence of these stores can be an indicator that a neighborhood has a high proportion of lower-income residents. If you depend on these outlets, it could mean your shopping dollars don’t stretch as far as you think.

Despite low prices, dollar stores don’t necessarily offer better bargains than competitors such as Walmart, the report added.

7. You put off medical care due to money

If you have skipped doctor visits or failed to buy medications on schedule, it could be a symptom of financial stress. Nearly one in seven Americans skipped doctor visits because they couldn’t afford them, according to the Prosperity Now report.

The high cost of health care, including inadequate insurance, can take a toll on families in many ways and can quickly mushroom into unpaid bills, delinquent accounts and bankruptcies – assuming people seek treatment.

Avoiding or reducing medical attention also can be risky and can worsen your finances.

“A person’s ability to work, save and build wealth is heavily influenced by their physical health – and vice versa,” said Prosperity Now.

8. You depend on your tax refund

For many families, income-tax refunds represent a once-a-year opportunity to pay down debts, purchase a big-ticket item or save money. But if this is your single largest source of funds, that could be an indication that you’re living on the edge.

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Keep in mind that refunds might be lower this filing season than the nearly $2,800 average for tax year 2017. Tax-reform changes lowered tax rates, but paycheck-withholding amounts also were adjusted, generally lower.

Many taxpayers thus could receive lower refunds and might owe taxes, the Internal Revenue Service has warned.

9. You’re a member of a racial minority

Prosperity Now changed its assessment from prior years. Previously, the focus was on measuring household financial health overall, across the nation and in the various states.

But a new format incorporates race in a significant way, by gauging how well or poorly blacks, Latinos, Native Americans and Pacific Islanders achieve affluence.

As an example, for every $1 in wealth accumulated by white households, Latino households have 13 cents and African-American households a mere 6 cents.

“Financial vulnerability is all too common in the United States, particularly for people of color who were by and large left out of the economic recovery,” wrote the report’s authors.

“Race and ethnicity have an outsized impact on economic well-being.”.

10. You’re out of the stock market

The last couple of months have provided a bumpy ride for investors who own stocks individually or through mutual funds and the like. But despite providing occasional bouts of unease, if not terror, stocks have been a great way to build wealth over time.

How many other assets have quadrupled in value over the past decade or so? That’s what the Wilshire 5000, the broadest measure of the U.S. Market, has done since bottoming in March 2009, including dividends.

Stock-market participation, or the lack thereof, is one of the main reasons the wealth divide has widened. Rich people typically own stocks; poor people don’t.

Reach Wiles at [email protected] or 602-444-8616.

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