COPING WITH AN NEXPECTED FINANCIAL CHALLENGE...financial challenge in the past year. Yes, 47% No, 51% Don't know, 2%. Experienced a Financial Challenge in the Past 12 Months? 8. Among

AARP.ORG/RESEARCH | © 2019 AARP ALL RIGHTS RESERVED DOI: https://doi.org/10.26419/res.00343.001 AARP RESEARCH

November 2019

COPING WITH AN UNEXPECTED

FINANCIAL CHALLENGE

AN AARP SURVEY OF ADULTS 30+

AARP.ORG/RESEARCH | © 2019 AARP ALL RIGHTS RESERVED AARP RESEARCH 2

Table of Contents

Introduction 3

Key Findings 4

Financial Challenges Experienced 7

Coping Strategies and Actions Taken to Resolve the Financial Challenge 15

Summary and Implications 21

Methodology 24

Appendix 26

AARP.ORG/RESEARCH | © 2019 AARP ALL RIGHTS RESERVED AARP RESEARCH

Introduction

For too many Americans, a single car repair, pay cut or medical bill can severely disrupt a household’s finances. A

growing body of research illuminates how common and destabilizing such unexpected financial challenges can be.1,2

Unexpected financial challenges can negatively impact a household’s finances for months or even years. And, research

has shown that few are immune to them. Unexpected financial challenges cut across income levels, racial/ethnic

backgrounds, gender and age groups.

Building on past research, AARP conducted a national survey of 1,697 adults ages 30 and older to better understand

the financial and emotional impact of unexpected financial challenges. Specifically, this study examined, in their own

words, the emotions people experienced when they encountered an unexpected financial challenge, the strategies they

used to cope with it, and the concrete actions they took to help resolve their financial situation.

This survey has a margin of error of ± 3.51 percent.

3


KEY FINDINGS


Key Findings

The incidence of unexpected financial challenges is significant and impacts many U.S. households.

Nearly half of adults ages 30 and older experienced an unexpected financial challenge in the past year—and more than

half of those experiencing an unexpected financial challenge had more than one during that same time period.

Unexpected financial challenges can happen to anyone, regardless of their income level, generation, gender or

race/ethnicity.

However, some groups have a greater propensity to experience an unexpected financial challenge (e.g., Millennials,

Gen Xers, women, communities of color, and those with household incomes of less than $40,000).

A medical expense, a necessary repair and a loss of income are the most often reported types of unexpected financial

challenges.

The median cost of an unexpected financial challenge ranges between $3,000 and $4,000. Higher median costs,

however, are seen among those with household incomes of $75,000 or more.

Recovering from an unexpected challenge can take months or even years.

Two in five who experienced an unexpected financial challenge in the past year recovered (or expect to recover)

following more than six months from when it began.

5


Key Findings (Continued)

To help resolve their unexpected financial challenge, a majority made financial tradeoffs but fewer negotiated a

lower bill.

In addition to cutting back on expenses and drawing down savings, three in five delayed paying some of their bills to

help pay for their unexpected financial challenge; and half worked more hours or took other actions to supplement their

income. However, fewer than half asked for an affordable payment plan or reduction in the amount they owed.

An unexpected financial challenge often triggers a wide range of emotions—stress, anger and sadness are the most

common. One in five also report experiencing depression, anxiety, frustration and/or worry.

Many cope with an unexpected financial challenge by regulating their feelings and keeping the matter private;

fewer seek social support.

Making a plan of action and concentrating their efforts on one step at a time are frequent problem-focused coping

strategies used by a majority of those dealing with an unexpected financial challenge.

Additionally, keeping their feelings to themselves, not letting their feelings get in the way, and keeping others from

knowing how bad things were are frequent emotion-focused coping strategies used by about half of those dealing with

an unexpected financial challenge.

Only about two in five, however, talked with someone about how they were feeling; and fewer than three in ten asked

someone they respected for advice or talked to someone who could do something concrete about their situation.

6


FINANCIAL CHALLENGES

EXPERIENCED


Nearly half of adults ages 30 and older have experienced an unexpected

financial challenge in the past year.

Yes, 47%No, 51%

Don't know, 2%

Experienced a Financial Challenge in the Past 12 Months?

8

Among them, more than half say it wasn’t their only one during the past year.

Q1. In the past 12 months, did you, an immediate family member or someone else in your

household experience an unexpected financial challenge that caused a significant strain in your

budget or your ability to pay your bills? (n=3,613)

56%

44%

More than one

Only one

Number of Financial Challenges Experienced in the Past 12 Months

Q2. In the past 12 months, how many unexpected financial challenges have you

experienced that caused a significant strain on your budget or your ability to pay your

bills? (n=1,697)


Unexpected financial challenges can happen to anyone, regardless

of their income, generation, gender or race/ethnicity.

62%

48%

37%

58%54%

38%42%

50%

39%

61%55%

Less than$40,000

$40,000-$74,999

$75,000or more

Millennials Gen Xers BabyBoomers

Males Females Non-HispanicWhites

Non-HispanicAfrican

Americans/Blacks

Hispanics

Experienced an Unexpected Financial Challenge in the Past 12 Months

9

However, certain groups have an increased likelihood of experiencing one. Household incomes of less than $75,000,

Millennials, Generation Xers, women, and communities of color are more likely than their counterparts to experience an

unexpected financial challenge.

Q1. In the past 12 months, did you, an immediate family member or someone else in your household experience an unexpected financial challenge that caused a significant strain in your budget

or your ability to pay your bills? [Less than $40,000 (n=1,149); $40,000-$74,999 (n=1,082); $75,000 or more (n=1,212); Millennials (n=772); Gen Xers (n=1,183); Baby Boomers (n=1,413);

Males (n=1,562); Females (n=2,051); Non-Hispanic Whites (n=1,994); Non-Hispanic Blacks (n=690); Hispanics (n=730)].


An expense and loss of income were the two most common types of

unexpected financial challenges.

61%

46%

13%

20%

Expense Loss of income Household member separated,divorced or was widowed

Other

10

Q3. What was the reason for your financial challenge? (n=1,697)


Those with household incomes of $40,000 or more are more likely than those

with lower incomes to have an unexpected financial challenge resulting from

an expense.

55% 52%

14%

23%

65%

39%

14%18%

66%

44%

11%15%

Expense Loss of income Household member separated,divorced or was widowed

Other

Less than $40,000 $40,000-$74,999 $75,000 or more

11

Q3. What was the reason for your financial challenge? (Less than $40,000 (n=708); $40,000-$74,999 (n=516); $75,000 or more (n=443))

Those with household incomes of less than $40,000, on the other hand, are more likely than those with higher incomes

to have an unexpected financial challenge resulting from a loss of income.


Medical expenses and necessary repairs top the list of types of expenses

causing an unexpected financial challenge.

33% 32%

7% 7%5%

3%

13%

Medicalexpense

Necessaryrepair

Caregivingexpense

Educational expense

Tax bill Legalexpense

Other

12

Q3. Specifically, what was the large expense that caused your financial challenge? (n=1,065)


Overall, the median cost of the unexpected financial challenge ranged between

$3,000 and $4,000.

$3,000-$3,999

$1,000-$1,999

$3,000-$3,999

$5,000-$9,999

$2,000-$2,999

$3,000-$3,999

$3,000-$3,999

$3,000-$3,999

$3,000-$3,999

$3,000-$3,999 $2,000-

$2,999$2,000-$2,999

Overall Less than$40,000

$40,000-$74,999

$75,000or more

Milennials Gen Xers BabyBoomers

Males Females Whites AfricanAmericans/Blacks

Hispanics

13

The median amount was higher among those with household incomes of $75,000 or more.

Q5. Approximately, how much, in total, did your financial challenge cost your household? [Overall (n=1,697); Less than $40,000 (n=708); $40,000-$74,999 (n=516); $75,000 or more (n=443);

Millennials (n=451); Gen Xers (n=644); Baby Boomers (n=543); Males (n=663); Females (n=1,034); Non-Hispanic Whites (n=782); Non-Hispanic Blacks (n=418; Hispanics (n=400)].


Two in five who experienced an unexpected financial challenge in the past year

recovered or expect to recover after six months or more.

14

Q9. How long after your financial challenge did it take your household’s finances to get back to usual? (n=1,511)

Q9a. [If household finances had not recovered] When do you think your household's finances will get back to usual? (n=746)

51%

44%

15%

6 months or less

More than 6 months

Don't know


COPING STRATEGIES AND

ACTIONS TAKEN TO RESOLVE THE

FINANCIAL CHALLENGE


Among the wide range of emotions often felt by those dealing with an

unexpected financial challenge, stress, anger, and sadness top the list.

25%3%3%3%3%

4%5%5%5%

6%6%

7%8%

10%13%

20%20%20%20%

25%25%

27%

Other*Defeated

BrokeFearful

AwfulDetermined

NervousConcerned

TiredEmbarrassed

HopelessOverwhelmed

HelplessUpset

ScaredWorried

FrustratedAnxious

DepressedSad

AngryStressed

(Multiple responses were permitted.)

16

Q7. How did the financial challenge make you feel? (Please include up to three emotions or feelings that you experienced because of your financial challenge.). (n=1,650)

*NOTE: ‘Other’ includes: betrayed, vulnerable, disappointed, lost, disparate, shocked, confused, alone, struggling and other emotions and feelings.


About half of those dealing with an unexpected financial challenge frequently

coped by regulating their feelings and keeping others from knowing how bad

things were.

17

Q16. Below is a list of strategies people may use when dealing with a tough situation. Please think about your feelings, thoughts and actions during your financial challenge and indicate the

extent to which you have used any of these at any time in dealing with your financial challenge. (n=1,697)

EMOTION-FOCUSED COPING STRATGIES

%used

quite a bit/

a great deal

SELF-CONTROLLING (i.e., efforts to regulate one’s feelings and

actions)

Tried to keep my feelings from interfering with other things too much. 53%

Kept others from knowing how bad things were. 49%

Tried to keep my feelings to myself. 47%

Tried not to act too hastily or follow my first hunch. 38%

Thought about how a person I admire would handle the situation and

used that as a model.20%

POSITIVE REAPPRAISAL(i.e., efforts to create positive meaning by

focusing on personal growth)

Looked for the silver lining; tried to look on the bright side of things. 47%

Rediscovered what was important in life. 42%

Changed something about myself. 25%

DISTANCING(i.e., cognitive efforts to detach oneself and to

minimize the significance of the situation)

Didn’t let it get to me: refused to think about it. 22%

Went on as if nothing happened. 22%

Made light of the situation; refused to get too serious about it. 16%

ESCAPE/AVOIDANCE(i.e., wishful thinking and behavioral efforts to

escape or avoid the problem)

Hoped a miracle would happen. 41%

Avoided being with people, in general. 23%

Tried to make myself feel better by eating, drinking, smoking, etc. 22%

*SOURCE FOR COPING STRATEGIES: Folkman, S. and Lazarus, R. S. (1980). An analysis of coping in a middle-aged community sample. Journal of Health and Social Behavior, 21, 219-239.


Concentrating on one step at a time and formulating an action plan were

frequent coping strategies; fewer sought emotional or material support from

others.

18

Q16. Below is a list of strategies people may use when dealing with a tough situation. Please think about your feelings, thoughts and actions during your financial challenge and indicate the

extent to which you have used any of these at any time in dealing with your financial challenge. (n=1,697)

PROBLEM-FOCUSED COPING STRATGIES

%used

quite a bit/

a great deal

PLANFUL PROBLEM SOLVING (i.e., efforts to alter the situation through analysis

and planning)

Just concentrated on what I had to do next--the next step. 67%

Made a plan of action and followed it. 53%

Came up with a couple of different solutions to the problem. 44%

Drew on my past experiences; was in a similar situation before. 34%

ACCEPTING RESPONSIBILITY(i.e., acknowledging one’s role in the situation)

Made a promise to myself that things would be different next time. 40%

Criticized or lectured myself. 31%

Realized I brought the problem on myself. 23%

CONFRONTIVE COPING(i.e., aggressive efforts to change the situation)

Did something which I didn’t think would work. 19%

Took a big chance and did something very risky. 10%

Expressed anger to the person who caused the problem. 13%

MIXED-FOCUSED COPING STRATGIES

%used

quite a bit/

a great deal

SEEKING

SOCIAL-SUPPORT(i.e., efforts to seek emotional, informational

and/or material support)

Prayed 44%

Talked with someone about how I was feeling. 27%

Asked a relative or friend I respected for advice. 26%

Talked to someone who could do something concreate about the problem. 21%


Nearly half worked extra hours to cover the cost of their unexpected financial

challenge; fewer asked for an affordable payment plan or reduction of their bill.

Actions Taken to Help with a Financial Challenge% taking

this action

Cut back on expenses 91%

Withdrew money from a bank checking or savings account 64%

Delayed paying one or more bills 62%

Used a credit card 51%

Paid some or all of the cost with cash 51%

Worked extra hours or took other actions to increase or supplement your household income 49%

Sold something 42%

Borrowed from a friend or family member 40%

Asked for an affordable payment plan or a reduction in amount owed 37%

Used money from a long-term savings or investment account 31%

Used a bank loan or line of credit 22%

Sought the aid of a charity or non-profit organization 16%

Used a payday loan, auto-title loan, or pawn shop loan 14%

Asked your employer for a loan, pay advance, or other assistance 7%

Tapped home equity (e.g. refinanced mortgage, took out a home equity loan or line of credit) 7%

Other 6%

Sought financial assistance using a crowdfunding site (e.g., GoFundMe) 5%

Filed for bankruptcy 3%

19

More than half withdrew money from their bank accounts, delayed paying some of their bills, and/or used credit cards.

One in seven took out a payday loan.

Q12. Did you do any of the following to help with your financial challenge? (n=1,697)


Grouping the various concrete actions taken by those experiencing an

unexpected challenge into three broad categories shows about nine in ten used

cash and/or took on debt to help with their unexpected financial challenge; while

nearly one in five sought help from a charity or crowdfunding source.

92% 87%

18%

Used Available Cash/Increased Income*

Took on Debt* Sought Help via a Charity/Crowdfunding

20

Q12. Did you do any of the following to help with your financial challenge?. (n=1,697)

NOTE: Used Available Cash/Increased income includes: withdrew money from a bank checking or savings account, paid some or all of the cost with cash, used money from a long-term

savings or investment account, and sold something. Took on Debt includes: used a credit card; used a bank loan or line of credit; borrowed from a friend or family member; used a payday

loan, auto-title loan, or pawn shop loan; asked employer for a loan, pay advance, or other assistance; tapped home equity (e.g. refinanced mortgage, took out a home equity loan or line of

credit); and delayed paying one or more bills.


SUMMARY AND IMPLICATIONS

Summary

• Unexpected financial challenges can happen to anyone, regardless of their income level, generation, gender or race/ethnicity.

• The majority who experience an unexpected financial challenge are likely to make financial tradeoffs to resolve their situation, including cutting back on expenses, drawing down their savings, using credit cards, and/or delaying payments on one or more bills. However, fewer are likely to ask for an affordable payment plan or reduction in the amount they owe.

• An unexpected financial challenge often triggers a wide range of emotions—most commonly stress, anger and sadness.

• Many cope with the stress of an unexpected financial challenge by regulating their feelings and keeping the matter private. However, fewer seek social-support from others.

• Recovering from an unexpected challenge can take months or even years, which can make a household vulnerable to having additional ones.

22

Implications

Money is inevitably emotional. Unexpected financial challenges can magnify feelings of stress, anger, and sadness. While many people try to ignore these emotions to cope with a financial challenge, feelings often influence one’s decision-making. For instance, to alleviate their stress, people may look for the quickest solution to a problem while discounting the consequences.

Despite how common unexpected financial challenges are, many people tend to conceal their financial challenges from others. Relatively few turn to friends and family for emotional support. A sense of shame or stigma around finances may prevent people from accessing helpful resources or even material support.

In the face of an unexpected financial challenge, people are more likely to make consequential financial sacrifices, such as skipping paying a bill, yet they are less likely to negotiate to lower their bill or ask for an affordable payment plan. If more people were aware of this option or felt empowered to negotiate their bill, they could possibly avoid having to take more drastic financial measures.

Those facing an unexpected expense, job loss or other financial challenge would benefit from trustworthy, confidential assistance. An empathetic guide could help them confidently consider their options and make decisions that are in their best interest.

23


METHODOLOGY


MethodologyThis survey was conducted by NORC at the University of Chicago on behalf of AARP. The data were collected using the

AmeriSpeak® Panel, a probability-based panel developed by NORC at the University of Chicago. AmeriSpeak is designed

to be representative of the U.S. household population.

Interviews for this survey were conducted in English and in Spanish between September 4, 2019 and September 19, 2019,

with adults ages 30 and older, representing the 50 states and the District of Columbia. Respondents were randomly

selected from the AmeriSpeak Panel using area probability and address-based sampling. A total of 1,697 adults completed

the survey.

Once the sample was selected and fielded, and all of the study data collected and made final, weighting was used to adjust

for unequal sample selection probabilities under the sample design, survey nonresponse, and frame coverage. Frame

coverage was adjusted through raking to align the weighted sample to the population by age, gender, education,

race/ethnicity and Census Division. Post-stratification weighting benchmarks were obtained from the 2018 Current

Population Survey. The weighted data reflect the U.S. population of adults ages 30 and older. The margin of error for the

survey is ± 3.51 percent at the 95 percent confidence level.

25


APPENDIX


About AARPAARP is the nation’s largest nonprofit, nonpartisan organization dedicated to empowering Americans 50 and older to

choose how they live as they age. With nearly 38 million members and offices in every state, the District of Columbia,

Puerto Rico, and the U.S. Virgin Islands, AARP works to strengthen communities and advocate for what matters most

to families with a focus on health security, financial stability and personal fulfillment. AARP also works for individuals in

the marketplace by sparking new solutions and allowing carefully chosen, high-quality products and services to carry

the AARP name. As a trusted source for news and information, AARP produces the nation's largest circulation

publications, AARP The Magazine and AARP Bulletin. To learn more, visit www.aarp.org or follow @AARP and

@AARPadvocates on social media.

https://www.aarp.org/


Citations

1. The Pew Charitable Trusts. How do families cope with financial shocks? Washington, DC.: The Pew Charitable

Trust. (Oct. 2015). Retrieved from https://www.pewtrusts.org/~/media/assets/2015/10/emergency-savings-report-

1_artfinal.pdf.

2. Hamel, L. Norton M. K. Pollitz, L., Claxton, G. and Brodie, M. (Jan. 2016). The burden of medical debt: Results from

the Kaiser Family Foundation/New York Times Medical Survey. Retrieved from https://www.kff.org/wp-

content/uploads/2016/01/8806-the-burden-of-medical-debt-results-from-the-kaiser-family-foundation-new-york-

times-medical-bills-survey.pdf.

3. Folkman, S. and Lazarus, R. S. (1980). An analysis of coping in a middle-aged community sample. Journal of

Health and Social Behavior, 21, 219-239. http://dx.doi.org/10.2307/2136617.

28


For more information about the survey:

Alicia R. Williams, Ph.D. ([email protected])

For media inquiries:

Mark Bagley ([email protected])

For more information on the issue:

Catherine Harvey ([email protected])

This research was designed and executed by AARP Research.

29

Documents

COPING WITH AN NEXPECTED FINANCIAL CHALLENGE...financial challenge in the past year. Yes, 47% No, 51% Don't know, 2%. Experienced a Financial Challenge in the Past 12 Months? 8. Among