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Americans With Holiday Debt Added an Average of $1,054, a 5% Increase From 2016

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Consumers who said they went into debt over the holiday season racked up an average of $1,054 of debt, according to an annual survey conducted by MagnifyMoney. That’s not only an increase of 5% over last year, but we also found more shoppers put that debt on high-interest plastic.

As in previous years, most shoppers who took on holiday debt put their purchases on credit cards. But the percentage of consumers who pulled out the plastic for holiday gifts and other seasonal spending was significantly higher in 2017. When asked where the holiday debt came from, 68% of shoppers said that credit cards were responsible, up 8 percentage points from 2016. Store cards were the reason for 17% of shoppers, and 9% used a personal loan.

Nor were the amounts of debt accumulated trivial. Many consumers accumulated significant amounts of debt this season: 44% of shoppers racked up more than $1,000 in holiday debt, and 5% accumulated more than $5,000 in balances. Meanwhile, half of consumers admit it will take more than three months to pay off that spending.

Strong retail holiday sales — with a statement to match

Early indications from industry sources show that retail sales rose nearly 5% versus last year, according to a sales report by Mastercard. The MagnifyMoney survey appears to validate that finding: among shoppers surveyed who said they went into debt, the average amount spent this season exceeded 2016 spending by $51, or roughly 5%.

For most shoppers, going into debt wasn’t the plan. According to the survey, 64% of those who have holiday-related debt didn’t plan to incur it. And lack of planning, whether it’s for holiday spending or other types of debt, can lead to financial problems down the road.

Much of that spending won’t melt away anytime soon

Only half of those surveyed said that they expected to pay off their spending in three months or less. Of the remaining half, 29% said they’ll need five months or longer to pay off holiday debt, in most cases accruing additional interest.

An additional 10 percent of people who took on holiday debt said they would only make minimum payments. Assuming that shopper spent the average of $1,054, and paid a minimum payment of $25 each month, he or she would be paying down that balance until 2023. That is nearly as painful as the $500 in interest fees they would pay over that time, assuming an annual percentage rate (APR) of 15.9%. You can enter your own rates and balances to find out how much interest you’ll pay on credit card debt using the MagnifyMoney Credit Card Payoff Calculator.

Zero Percent APR Gotchas

Interestingly, nearly half of respondents indicated they’re paying less than a 10% APR on their balances. Although the survey didn’t ask the source of those low rates, some of these “rates” could be  special financing offers from store cards from retailers – a source of financing for 17% of holiday shoppers surveyed who said they took on debt this year.

The holiday season is prime time for special in-store financing offers, but once you read the fine print, they may cost much more than they help shoppers save. Many of store cards come with  deferred interest clauses, where the consumer pays no interest for a fixed period – often 6 months. If the consumer pays off those types of purchases within the period, he or she does indeed pay no interest. But after that period ends, any balance that hasn’t yet been paid in full will be charged interest retroactively, often at rates much higher than most bank-issued credit cards (APRs of 25% or greater are typical).

Less use of unconventional financing

Although more shoppers resorted to credit cards for holiday shopping this year, fewer used loans like payday or title loans – usually the most costly form of borrowing for consumers. Only 4% of shoppers said they used payday or title loans to finance holiday shopping, down from 6% in 2016. Similarly, only 2% said they used home equity for financing. Although home equity may provide more favorable borrowing terms, there may be additional fees you’ll incur, and in the worst case, your home is the ultimate collateral on these loans.

Getting back on track

By understanding where your finances are now, you’ll likely do a better job with managing your debt and spending in the future. For instance, just tracking your spending, whether or not it’s holiday-related spending, will help clarify which expenses might be able to be reduced or eliminated.

Finding out your what’s in your credit reports (available for free at AnnualCreditReport.com) will confirm there aren’t any unexpected surprises waiting for you should you consider refinancing with a lower-rate personal loan or zero percent balance transfer offer from a new or existing credit card offer.  Other tactics, like automated payment plans and budgeting, can be found in The MagnifyMoney Debt Guide e-book.

2017 Post-Holiday Debt Survey Questions

Methodology: MagnifyMoney surveyed 676 U.S. adults who reported they added debt over the holidays via Google Consumer Surveys from December 21 – 26, 2017. Percentages may not add up to 100% due to rounding.

Average debt among shoppers who said they went into debt over the holidays

2017: $1,054

2016: $1,003

If you went into debt, did you plan to go into debt this holiday season?

Yes: 36%

No: 64%

How much debt did you take on over the holidays?

$0-999: 56%

$1,000-1,999: 26%

$2,000-2,999: 9%

$3,000-3,999: 3%

$4,000-4,999: 1%

$5,000-5,999: 4%

$6,000+: 1%

Where did your holiday debt come from?

Credit cards: 68%

Store cards: 17%

Personal loan: 9%

Payday / title loan: 4%

Home equity loan: 2%

When will you pay the debt off?

1 month: 19%

2 months: 16%

3 months: 14%

4 months: 11%

5 months+: 30%

I’m only making minimum payments: 10%

Will you try to consolidate your debt or shop around for a good balance transfer rate?

Yes: 12%

No – Don’t want to deal with another bank: 27%

No – Too many traps: 20%

No – Rate is already low: 23%

No: – Don’t know enough about it: 10%

No – Wouldn’t qualify: 8%

How stressed are you about your holiday debt?

Stressed: 29%

Not Stressed: 71%

What interest rate are you paying on your debt?

Less than 10%: 49%

10-19%: 33%

20-29%: 16%

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Study: Rent Is Higher Than Minimum Wage Pay in these 16 Cities

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Rent prices have increased by 2% to 4% nationwide each year since 2011, according to CoreLogic. While gains in federal and state minimum wage rules have somewhat mitigated the bite for lower-wage earners in certain areas, it’s often not enough to compete with the rising cost of housing. Meanwhile, the population of renters has increased, forcing renters to compete for a finite supply of rental housing, which is already pricing out some people.

Using data from the Joint Center of Housing Studies and the Economic Policy Institute, MagnifyMoney identified 16 cities where the median rent claims all of a minimum wage worker’s take-home pay, and then some. Let’s take a look at big cities that are more affordable and ones where the rent is too darn high.

Key findings

  • Austin, Texas, is the least affordable major U.S. city for minimum-wage workers. Austin’s median rent is equal to 143% of take-home pay at the minimum wage.
    • The median rent in Austin is $1,220 per month, while the city’s minimum wage stands at $7.25 an hour.
    • Austin workers making minimum wage would need to work about 200 hours a month to be able to afford the median rent of $1,220.
  • Chicago is the most affordable large city, with a minimum wage of $13 an hour. But even there, the median rent of $1,050 per month will claim 69% of a minimum-wage worker’s take-home pay.
    • In Chicago, minimum wage workers would need to work just over 96 hours to make enough to pay the median rent of $1,050.

If you are able to save some of your paycheck after rent and expenses, an online savings account with a high APY and no minimum balance may be a good place to start.

A closer look at where minimum wage doesn’t cover rent

The table below shows the median rent as a percentage of take-home pay for minimum-wage workers in 34 of the largest U.S. cities. In the top 16 cities listed, the median rent costs more than 100% of a minimum-wage worker’s monthly take-home pay.

In 12 of the 16 cities where the minimum wage to median rent ratio is the highest, minimum wage is less than $10 per hour. Half of these 16 cities earn at the federal minimum wage of $7.25.

But a higher minimum wage doesn’t necessarily translate to a lower percentage spent on rent. In San Francisco, for example, the high minimum wage of $15.59 is overwhelmed by the high median monthly rent of $1,860.

The following map offers a geographical visual of where you can expect to pay a larger (and smaller) percentage of your take-home pay on rent as a minimum-wage worker.

Of the cities we looked at, we found that median rent tends to eat up more of a minimum-wage worker’s take-home pay in the South. The Midwest, on the other hand, may be more affordable for minimum-wage workers, at least when it comes to rent.

Methodology

In December 2019, MagnifyMoney calculated the minimum wage of workers in 34 of the nation’s largest cities — those with a population of 300,000 or more in 2018 — to determine the relative affordability of rental housing. Our findings are based on data from the Joint Center of Housing Studies for median rent and the Economic Policy Institute for minimum wages. To find estimated take-home pay after payroll tax, we assumed 16% withholding in Social Security, Federal Insurance Contributions Act (FICA), Medicare and federal income tax.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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Study: The Best U.S. Cities for Working from Home

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Working from home has never been easier. Thanks to advances in technology, many professionals can plow through their to-do lists from the comfort of their couch. However, some cities are better for remote work than others.

Cities that are more appealing to telecommuters have higher earning power for the remote workers who live there and more remote work opportunities. Additionally, cities with longer commute times also make it more appealing for residents to choose to work from home.

To determine the best cities for working from home, MagnifyMoney combed through the Census Bureau’s 2018 1-Year American Community Survey. We examined the 100 largest U.S. cities by the number of workers, classifying them by metrics related to how many people work from home, their earning power and their cost of living.

Key findings

  • Gilbert, Ariz. is rated the best place to work from home, due to a sharp rise in the number of people working from home, which indicates more remote work opportunities, as well as the fact that remote workers there make $1.32 for every dollar earned by the average worker.
  • The second best place to work from home is Atlanta, thanks to factors like a rise in people working from home from 2017 to 2018 and good pay for remote workers. Additionally, local housing costs in Atlanta were equal to just 27% of earnings for the average person who works from home.
  • Aurora, Colo. comes in third, with residents who work remotely skipping out on the 30-minute average daily commute there.
  • The worst city to work from home was Toledo, Ohio, which had a low and stagnant number of people working from home, indicating few remote work opportunities. Those who do work from home in Toledo generally earned less in comparison to average earnings.
  • The second worst city to work from home was El Paso, Texas, followed by Greensboro, N.C.
  • On average, across the 100 cities analyzed, working from home tended to pay better than not working from home.
  • Overall, the number of people working from home is fairly flat, suggesting that the so-called “telecommuting revolution” has yet to come to fruition.
  • Long commutes did not necessarily translate to more people working from home. While New York and New Jersey had the longest average commutes, they did not see much of an increase in the number of people working from home.

Best cities for working from home

Topping our study’s ranking of the best cities to work from home is Gilbert, Ariz. Gilbert, a suburb located southeast of Phoenix, measures just over 72 square miles and has a population of more than 230,000.

Our study found that the average person working from home in Gilbert makes $1.32 for every dollar the average person makes, earning it a tie for the 20th spot regarding that metric. Gilbert also ranked high for two metrics measuring the city’s overall work-from-home climate. It ranked fourth for its share of remote workers, with 4.90% of residents working from home, and sixth for the percent change in the number of people working from home from 2017 to 2018, a 1.20% year-over-year increase. Additionally, the average commute time of a typical worker in Gilbert is 28 minutes, earning Gilbert the 27th spot for that metric as telecommuters are saving nearly half an hour each way.

All of these metrics contributed to Gilbert’s overall top ranking, making it a great option for telecommuters looking for a balanced lifestyle of good pay, a remote work-friendly culture and a decent chunk of time saved from commuting.

Atlanta snags the spot for the second best city to work from home, thanks to the high earning power of remote workers and a culture friendly to telecommuting. Atlanta has a high work-from-home rate, with 4.50% of people working from home, earning it a sixth-place ranking for that metric. Remote workers in Atlanta make $1.13 for every dollar the average worker pulls in, and housing costs accounted for just 27% of a remote worker’s earnings, landing it the 22nd spot for that metric.

Rounding out the top three for our study on the best cities to work from home is Aurora, Colo. Aurora’s rankings were boosted by the fact that remote workers in Aurora make $1.41 for every dollar that the average person makes — earning the city the 11th spot for that metric. The city also boasts 3.50% of people working from home, which landed it in 19th spot for that metric. Additionally, workers in Aurora had an average commute time of 30 minutes, which means, conversely, remote workers get to skip out on a half hour long-commute, earning the city the 18th spot for the commute time metric.

Overall, the best state to work remotely seems to be Arizona — three cities, all Phoenix suburbs, cracked our study’s top 10 best cities to work from home ranking: Gilbert (first), Chandler (seventh) and Scottsdale (tenth). Another state with a strong presence in our study’s top 10 best cities to work from home is Colorado, with Aurora ranking second and Denver ranking sixth.

Worst cities for working from home

The U.S. city falling to the bottom of our study’s ranking — making it the worst city to work from home — is Toledo, Ohio. Located in the northwest region of Ohio, Toledo has a population of around 276,000.

Remote workers in Toledo pulled in far less than the average worker, earning just $0.58 for every $1 earned by an average worker and resulting in the city ranking 99th for that metric. Additionally, remote workers in Toledo spent an average of 51% of their earnings on housing, underscoring remote workers’ overall low earning power. Toledo also had a staggeringly low percentage of residents working remotely — 0.90% — which indicates the poor overall culture of remote work and opportunity in the city.

The second worst city to work from home, according to our study, is El Paso, Texas. Remote workers in El Paso also had dismal earning power, with people who work from home making just $0.81 for every dollar earned by the average worker, and housing costs accounting for 45% of remote workers’ earnings. Like Toledo, El Paso also had a relatively low percentage of remote workers overall, with 1.60% of people working from home, placing the city 87th for that metric.

Meanwhile, our study found that Greenboro, N.C., is the third worst city to work from home. Greensboro ranked last for the metric measuring the growth in the number of people working from home, with 1.90% fewer people working remotely in 2018 compared to 2017, indicating a possible decline in remote work opportunity there. Remote workers also weren’t saving a particularly significant amount of time by telecommuting, with the average commute time for residents in Greensboro being just 21 minutes.

Overall, our study found that there are bad cities for working from home nationwide, from the Northeast all the way to the West Coast.

What happened to the “telecommuting revolution”?

Roughly a decade ago, as technology became more advanced and workforces became increasingly mobile, there were predictions of a “telecommuting revolution” in which more and more employees would begin working remotely.

Indeed, a recent study from FlexJobs found that between 2005 and 2017, remote work has grown 159%. However, this massive explosion in growth in the last decade and a half slowed to just 7.9% between 2016 to 2017 — evidence that the movement is losing steam.

Our study also found a fairly stagnant remote workforce in the 100 most populated U.S. cities from 2017 to 2018. Even the city that ranked first for the metric measuring the growth of the number of people working from home from 2017 to 2018 — Irvine, California — had just a 2.40% increase in the number of telecommuters. Additionally, our study revealed a slew of cities in which there were a smaller share of remote workers in 2018 than there were in 2017, including Washington D.C., Orlando and St. Louis.

While the number of remote workers might not be completely stagnant, these are certainly signs that the telecommuting movement might be slowing down. So, what’s to blame for the seemingly slowing growth of the “telecommuting revolution”? One explanation might be linked to perceived worker productivity. In 2013, for example, Yahoo yanked its employees’ remote privileges and shortly after cited increased levels of productivity and employee engagement.

Additionally, a 2018 survey from Randstad USA found that employees might not be buying into the idea either. While 82% of workers said being able to work from home helps them maintain their work-life balance, 62% said they still prefer working in the office, a number that was even higher among younger generations.

Advantages and disadvantages of working from home

As is the case with clocking your 9-to-5 hours in a cubicle, there are both advantages and disadvantages to working from the comfort of your couch.

Advantages of working from home

  • Potentially higher pay: Our survey found that in many cities, remote workers raked in more money than non-remote workers. For example, in Norfolk, Va., the average remote worker made $1.68 for every dollar earned by the average worker. One reason for this could be that, according to the BLS, the more popular occupations for remote work include jobs in management, business and finance, all of which tend to be higher-paying.
  • Money saved on transportation: The cost of commuting is not something to overlook. Depending on the state in which you live, you could spend between $2,000 to $5,000 a year on commuting costs. Working from home enables you to save thousands of dollars a year.
  • Money saved on childcare: One of the biggest incentives for working from home is the flexibility it allows — especially for parents with kids to care for. For working parents, the cost of childcare can add up to hundreds of dollars a week. If a parent works from home, they might be able to avoid paying for a daycare service or nanny.

Learn how you can maximize your savings with the best online savings account offers. 

Disadvantages of working from home

  • Strain on relationships with colleagues: Working from home could have a negative effect on your relationships with your colleagues. At least one study has found that remote workers were more likely to report that their co-workers treat them poorly and exclude them.
  • Lack of work-life balance: When your home doubles as your workspace, it can be difficult to unplug. Indeed, one survey from Remote.co found that unplugging after work hours is the biggest challenge among telecommuters. Achieving a healthy work-life balance when you work from home can certainly be a challenging obstacle to overcome.

Methodology

For our study, we looked at data from the 2018 Census Bureau’s 1-Year American Community Survey. Metrics analyzed included:

  • The percentage of people who work from home.
  • Earnings for people working from home relative to average earnings of local workers.
  • The percentage point change in the share of workers working from home from 2017 to 2018.
  • The percentage point change in earnings for people who work from home from 2017 to 2018.
  • Housing costs as a percentage of income for people working from home.
  • Average commute time.

To create the final rankings, we ranked each city in each metric. Using these rankings, we created a final index based on each city’s average ranking. The city with the best average ranking received the highest score, while the city with the lowest average ranking received the lowest score. The cities were then indexed based on the best possible score.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Berger
Sarah Berger |

Sarah Berger is a writer at MagnifyMoney. You can email Sarah here