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Millions of Americans face the financial hardships of losing a job, not being able to work due to a disability or supporting a family on a small salary each year. The struggle to put food on the table, pay bills and support a family can be incredibly harsh, which is why the United States has a series of welfare programs to help those in need.
Federal welfare programs first started in 1935 during the great depression. With widespread poverty, starvation and unemployment, a series of programs were created to help Americans place food on the table and help those unable to support themselves and their families.
Today, the means-tested welfare system consists of government programs that offer cash, food, social services, education, training and housing for low-income Americans. As welfare programs are funded through local, state and federal taxes, programs are often a topic of political debate.
With some misconception surrounding the Americans receiving welfare and effectiveness of the program, we’ve compiled important welfare statistics you should know in 2021. Explore the costs, effects and various demographic statistics in our study of the welfare programs in America.
Cost of welfare programs
The total cost of poverty assistance programs in America can add up to a shocking $1 trillion a year when combining both federal and state level program budgets. Because of the large total price tag on helping the poor, welfare programs are often an area of policy and budgetary debate.
- In 2020, a total of $9.88 trillion was spent on welfare programs in America. [Source: US Government Spending]
- In 2021, $8.30 trillion is projected to be spent on welfare programs in America. [Source: US Government Spending]
- $4.83 trillion of that total is budgeted for Federal spending specifically in 2021. [Source: US Government Spending]
- $2.09 trillion of the total is estimated to be budgeted for state spending specifically in 2021. [Source: US Government Spending]
- $2.18 trillion of the total is estimated to be budgeted for local spending specifically in 2021. [Source: US Government Spending]
- 8 percent of total government spending in 2019—$361 billion—went towards welfare programs in 2019 (excluding Social Security benefits.) [Source: CBPP]
- The average SNAP recipient in 2020 earned $136.36 a month in assistance. [Source: USDA]
- Around 38,066,477 million people participated in SNAP in 2020. [Source: USDA]
- Total U.S. spending on SNAP in 2020 amounted to $36,335,896,388 billion. [Source: USDA]
2021 federal welfare budget
- In 2020 the poverty threshold for a couple with two children was $17,240. [Source: ASPE]
- Mississippi has the highest number of people living in poverty in 2020—20.6 of the state’s residents. [Source: World Population Review]
- In 2019, 10.5 percent of Americans lived in poverty. [Source: US Census Bureau]
- The poverty rate of Americans decreased by 1.3 percent in 2019. [Source: US Census Bureau]
- In 2020, 9.2 percent of Americans lived in poverty. [Source: Urban Institute]
Top 10 states with the highest poverty rates in 2021
|Puerto Rico||49.31 percent|
|New Mexico||19.57 percent|
|West Virginia||17.74 percent||Kentucky||17.2 percent||Alabama||16.90 percent||Arkansas||16.79 percent||Oklahoma||15.37 percent||Washington D.C||15.19 percent|
[Source: World Population Review]
Welfare program results
Following the Welfare Reform Act of 1996, government spending on welfare programs decreased as additional requirements and restrictions were put in place. Despite having less budget to pull from and more restrictions, the welfare programs in America have successfully lowered poverty rates over the past decade. Some issues with the current welfare program are its performance during years of economic downturn and recession.
- For every 100 families in poverty in 2019, only 23 were provided cash assistance by Temporary Assistance for Needy Families (TANF.) [Source: CBPP]
- The Supplemental Poverty Measure (SPM) in 2019 was 11.7 percent, 1 percentage lower than it was in 2018. [Source: US Census Bureau]
- Between 2018 and 2019, all major age categories saw a decline in SPM rates: children under age 18, adults aged 18 to 64 and adults aged 65 and older. [Source: US Census Bureau]
- Since its first publication in 2009, the SPM rate of 11.7 in 2019 is the lowest it’s ever been. [Source: US Census Bureau]
Social Security benefits lifted 26.5 million people out of poverty in 2019. [Source: US Census Bureau]
Average spending of welfare recipients
Compared to the average American household, welfare recipients spend far less money on all food consumption, including dining out, in a year. As families with welfare assistance spend half as much on average in one year than families without it do, there are some large differences in budgeting. Families receiving welfare assistance spent half the amount of families not receiving welfare assistance in 2018.
Welfare fraud statistics
Welfare fraud is the act of improperly stating or withholding information in order to receive higher payments. Most welfare programs’ eligibility is handled on a local level and detecting fraud is the responsibility of the state. The United States Government Accountability Office estimates that around 1 out of 10 welfare payments are fraudulent or improperly filed.
- Fraudulent and improper welfare payments were around 10.6 percent of total federal welfare payments made in 2019. [Source: Federal Safety Net]
- A total of $99.1 billion in payments were found to be improperly filed or fraudulent in 2019. [Source: Federal Safety Net]
- An estimated 6.8 percent of SNAP payments were made fraudulently or in error in 2019. [Source: Federal Safety Net]
- An estimated 10.5 percent of Child Nutrition payments were made improperly in 2019. [Source: Federal Safety Net]
- The $99.1 billion of improperly filed or fraudulent payments in 2019 amounts to more than the budgets of TANF, Child Nutrition, Head Start, Job Training, WIC, Child Care, Low Income Home Energy Assistance Program and the Lifeline programs combined. [Source: Federal Safety Net]
- For SNAP households receiving SNAP benefits in 2019, around 41.2 percent had at least one member over the age of 60, and 29.9 percent had a child aged 18 or younger. [Source: United States Census Bureau]
- 47.5 percent of households receiving SNAP benefits in 2019 included a married couple. [Source: United States Census Bureau]
68,826,573 people were enrolled in Medicaid in 2020. [Source: Medicaid]
- 11.3 percent of all American households received SNAP benefits in 2018. [Source: United States Census Bureau]
- Households receiving SNAP benefits received an average of $251 per month in 2018. [Source: United States Census Bureau]
- The states with the highest rates of SNAP participation in 2018 included New Mexico at 17.3 percent and West Virginia at 16.6 percent. [Source: United States Census Bureau]
- Wyoming had the lowest SNAP participation rate in 2018 at 5 percent. [Source: United States Census Bureau]
Welfare in the workforce
Although welfare programs are commonly argued to support the lazy, data does not show this to be true. In the current state, welfare programs predominantly help Americans who receive low wages. The U.S. Government Accountability Office discovered that the top employers of Americans enrolled in welfare programs were Walmart and McDonalds—companies who have historically paid their workers low wages.
Although the $1 trillion a year budget may seem large at first glance, the current welfare program supporting the 9.2 percent of Americans in poverty for 2020 puts the large problem of poverty into perspective. Without any government safety nets, those living in poverty would not have the proper help to survive or tools to get back on their feet. With a rise in credit card debt across America it is still important to find a solution to pull the citizens living paycheck to paycheck out of poverty.
If your credit has been damaged and you’re looking to improve your situation, contact Lexington Law. We can work with you to remove the negative items on your credit report that could be holding you back.
Does Getting Joint Credit Cards Have an Impact on Both Spouses’ Credit?
While marriage can help you improve your financial situation, it does not automatically mean that you and your spouse will share a credit report. Your credit records will remain separate, and any joint accounts or joint loans that you open will appear on both of your reports. While this can be advantageous, it’s critical to remember that joint account activity can effect both of your credit scores positively or negatively, just as separate accounts do.
Users Who Are Authorized
An authorized user is a user who has been added to an existing credit account and has been granted the authority to make purchases. Authorized users are typically issued a card bearing their name, and any purchases made by them will appear on your statement. The primary distinction between an authorized user and a shared account owner is that the account’s original owner is solely responsible for debt repayment. Authorized users, on the other hand, can always opt-out of their authorized status, although the principal joint account owner cannot.
If your credit score is better than your spouse’s as an authorized user, he or she may benefit from a credit score raise upon account addition. This is contingent upon your creditor notifying the credit bureaus of permitted user activity. If your lender does report authorized users, the activity on your account may have an effect on both you and your spouse. However, some lenders report only positive authorized user information, which means that late payment or poor usage may not have a negative effect on someone else’s credit. Consult your lender to determine how authorized users on your account are treated.
Joint Credit Cards Have an Impact on Your Credit Score
Opening a joint credit account or obtaining joint financing binds both of you legally to the debt’s repayment. This is critical to remember if you divorce or separate and your spouse refuses to make payments, even if previously agreed upon. It makes no difference who is “responsible,” the shared duty will result in both partners’ credit histories being badly impacted by late payments. Regardless of changes in relationship status or divorce order, the creditor considers both parties to be liable for the debt until the account is paid in full.
Whether you’re happily married or divorced, you and your spouse may decide to open separate credit accounts. Most creditors will enable you to transfer an account that was previously joint to one of your names if both of you agree. However, if there is a debt on the account, your lender may refuse to remove your spouse’s name unless you can qualify for the same credit on your own. Depending on your financial status, qualifying for financing and credit on a single income may be tough.
While creating the majority of your accounts jointly with your spouse may make it easier to obtain financing (two salaries are preferable to one), reestablishing credit independently following a divorce or separation is not always straightforward. To make matters worse, your spouse may wind up causing significant damage to your credit rating following the separation, either intentionally or through irresponsibility – making the financial situation much more difficult.
Before you rush in and open accounts with your spouse, take some time to discuss the shared responsibility of these accounts and what you and your husband would do in the event of a worst-case situation. These types of financial discussions can be difficult, especially when you rely on items lasting a long time, but a mutual understanding and respect for each other’s credit can go a long way toward keeping your score when sharing an account.
Should you pay down debt or save for retirement?
While establishing a comprehensive, workable budget is undeniably one of the most important factors in maintaining a healthy financial life, it can also be one of the most difficult. For those who are struggling with personal debt, building a budget can be particularly challenging. When the money coming in has to stretch like a contortionist to cover expenses, it can be hard to determine where to focus — and where to trim.
Sometimes, the battle of the budget can come down to a choice between dealing with the present — and thinking about the future. When your income is running out of stretch, do you pay off your existing debt, or do you start saving for retirement? At the end of the day, the solution to that particular dilemma depends on the type of debt you have and how far you are from retiring.
If you have high-interest debt, pay it down
When considering how to allocate your budget, it’s important to understand the different kinds of debt you may have. Consumer debt can be categorized into two basic types: low-interest debt and high-interest debt, each with its own impact on your credit (and your budget).
In general, low-interest debt consists of long-term or secured loans that carry a single-digit interest rate, such as a mortgage or auto loan. Though no debt is the only real form of good debt, low-interest debt can be useful to carry. For instance, purchasing a home with a low-interest mortgage can actually save you money on housing costs if you do your homework and buy a house well within your price range.
High-interest debt, on the other hand, typically has a hefty double-digit interest rate and shorter loan terms, such as that of a credit card or payday loan. High-interest debt is the most expensive kind of debt to carry from month to month and should always be priority number one when building a budget.
To illustrate why you should focus on high-interest debt above everything else, consider a credit card carrying the average 19% APR and a $10,000 balance. If the balance goes unpaid, that high-interest credit card debt will cost $1,900 a year in interest payments alone. Now, compare that to the stock market’s average annual return of 7%, and it becomes clear that you’ll see significantly more bang for your buck by putting any extra funds into your high-interest debt instead of an investment account.
If you are having trouble paying off your high-interest debt, there may be some steps you can take to make it more manageable. For example, transferring your credit card balances from high-interest cards to ones offering an introductory 0% APR can eliminate interest payments for 12 months or more. While many of the best balance transfer cards won’t charge you an annual fee, they may charge a balance transfer fee, so do your research. You’ll also want to make sure you have a plan to pay off the new card before your introductory period ends.
Most balance transfer offers will require you to have at least fair credit, so if your credit score needs some work, you may not qualify. In this case, refinancing your high-interest debt with a personal loan that has a lower interest rate may be your best bet. Make sure to compare all of the top bad credit loans to find the best interest rate and loan terms.
If you’re nearing retirement, start to save
The closer you get to retirement age, the more important it becomes to ensure you have adequate retirement savings — and the more pressure you may feel to invest every spare penny into your retirement fund. No matter your age, however, paying off your high-interest debt should always remain the priority, as it will always provide the best rate of return (as well as likely provide a credit score boost).
Indeed, no matter how tempting it becomes, you should avoid reallocating money you’ve dedicated to paying off high-interest debt to save for retirement. Instead, the focus should be on re-evaluating your budget to find any additional savings you can. To be successful, you will need to make a strong distinction between want and need — and, perhaps, make some tough lifestyle choices.
Though simply eliminating your daily coffee drink won’t magically provide a solid retirement fund, saving a few bucks by homebrewing while also eliminating a pricey cable bill in favor of an inexpensive streaming service — or, better yet, free library rentals — can add up to big savings over the course of the year. The ideal strategy will involve overhauling every aspect of your lifestyle, combining both large and small cuts to develop a lean budget structured around your long-term goals.
Of course, while you should never allocate debt money to your retirement savings, the reverse is also true. It is almost always a horrible idea to remove money from your retirement account before you hit retirement age — for any reason. Withdrawing early means you will be stuck paying hefty fees for withdrawing money early and, depending on the type of account, you may also have to pay significant taxes.
Aim for both goals by improving income
As you take the necessary steps to pay off debt and save for retirement, you may have already stretched the budget so thin it’s practically transparent. In this case, it is time to consider ways to improve your overall income. Increasing the amount you have coming in not only provides extra savings to put toward your retirement, but may also speed up your journey to becoming debt-free.
The easiest solution may be to look for ways to increase your income through your current job; think about taking on additional shifts or overtime hours to earn some extra cash. Depending on your position — and the time you’ve been with the company — consider asking for a pay raise or promotion, as well.
If you do not have options to make more money at your day job, it may be time to find a second job. Look for opportunities that provide flexible schedules that will accommodate your regular job; many work-from-home positions, for example, can easily fit into most work schedules. Doing neighborhood odd jobs, such as babysitting and dog walking, may also provide a solid income boost without interfering with your existing job.
For some, the need to pay off debt and improve retirement savings can be more than just a source of stress — but a hidden opportunity to begin a new career adventure. Instead of being weighed down by yet more work, use the desire to better your budget as a reason to explore the profit potential of a passion or hobby. Starting a small online store, part-time consulting service, or other small business can be a great way to improve your income and your overall happiness.
While it may sound intimidating, starting a side business can be as simple as putting together a professional looking website and doing a little marketing legwork to spread the word. And no, building a website isn’t as scary — or expensive — as it seems, either. A number of the top website builders now offer simple drag-and-drop interfaces perfect for putting together a professional-looking web page in minutes (without breaking the bank).
How does a loan default affect my credit?
Nobody takes out a loan expecting to default on it. Despite their best intentions, people sometimes find themselves struggling to pay off their loans. These types of struggles happen for many reasons, including job loss, significant debt, or a medical or personal crisis.
Making late payments or having a loan fall into default can add pressure to other personal struggles. Before finding yourself in a desperate situation, understanding how a loan default can impact your credit is necessary to avoid negative consequences.
30 days late
Missing one payment can further lower your credit score. If you can pay the past due amount plus applicable late fees, you may be able to mitigate the damage to your credit, if you make all other payments as expected.
The trouble starts when you (1) miss a payment, (2) do not pay it at all, and (3) continue to miss subsequent payments. If those actions happen, the loan falls into default.
More than 30 days late
Payments that are more than 30 days past due can trigger increasingly serious consequences:
- The loan default may appear on your credit reports. It will likely lower your credit score, which most creditors and lenders use to review credit applications.
- You may receive phone calls and letters from creditors demanding payment.
- If you still do not pay, the account could be sent to collections. The debt collector seeks payment from you, sometimes using aggressive measures.
Then, the collection account can remain on your credit report for up to seven years. This action can damage your creditworthiness for future loan or credit card applications. Also, it may be a deciding factor when obtaining basic necessities, such as utilities or a mobile phone.
Other ways a default can hurt you
Hurting your credit score is reason enough to avoid a loan default. Some of the other actions creditors can take to collect payment or claim collateral are also quite serious:
- If you default on a car loan, the creditor can repossess your car.
- If you default on a mortgage, you could be forced to foreclose on your home.
- In some cases, you could be sued for payment and have a court judgment entered against you.
- You could face bankruptcy.
Any of these additional consequences can plague your credit score for years and hinder your efforts to secure your financial future.
How to avoid a loan default
Your options to avoid a loan default depend upon the type of loan you have and the nature of your personal circumstances. For example:
- For student loans, research deferment or forbearance options. Both options permit you to temporarily stop making payments or pay a lesser amount per month.
- For a mortgage, ask the lender if a loan modification is available. Changing the loan from an adjustable rate to a fixed rate, or extend the life of the loan so your monthly payments are smaller.
Generally, you can avoid a loan default by exercising common sense: buy only what you need and can afford, keep a steady job that earns enough income to cover your expenses, and keep the rest of your debts low.
Clean up your credit
The hard reality is that defaulting on a loan is unpleasant. It can negatively affect your credit profile for years. Through patience and perseverance, you can repair the damage to your credit and improve your standing over time.
Consulting with a credit repair law firm can help you address these issues and get your credit back on track. At Lexington Law, we offer a free credit report summary and consultation. Call us today at 1-855-255-0139.
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