Living with less: the family shows that households can survive a large drop in income

Roughly 185,000 workers expect to lose their jobs in the coming months, and another 475,000 think there is a “medium” probability that they will suffer the same fate.

The scale of worker pessimism and the threat to household finances, revealed in a Stats NZ statement this week, shocks Mark Diehl, who lost his retail job in Timaru during the March / April national shutdown.

“It’s crazy isn’t it?” he says.

But Diehl’s recent experiences of living on a very low income may offer some comfort and advice for households preparing for the worst, while hoping for the best.

“You adapt,” says Diehl, who learned how to budget from Christians Against Poverty, which provided training and support to get out of debt and eventually be debt free.

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* 185,000 workers expect to lose their jobs next year, says Stats NZ
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“We are surviving on very little to be honest. When I had a full job, there would be between $ 250 and $ 300 of what we have now, ”he said.

He finds it sobering to think about how the family would have handled the loss of income resulting from his termination from Covid without the training he received through CAP.

“If we hadn’t been through what we went through, it would have been a completely different story,” he says.

Don’t leave it too late

Diehl says that people who think they will lose their jobs should start preparing now, including learning to live with much, much less.

But phoning a free estimate service like he did is a step that many struggling families haven’t yet taken during the Covid economic crisis.

“A lot of people think they can only have a budget advisor if they are benefited, but that’s not true,” said Christine Liggins, founder of DebtFix, a service that helps people negotiate with lenders.

Despite desperate times, with banks and insurers having made nearly 160,000 deals with borrowers to reduce or postpone repayments, Nicola Eccleton of interest-free loan provider Good Shepherd says: “We still have some capacity right now, Which is great, but the more people improve their skills now, the more influence they can have on their families and larger communities. “

Budgeting services are bracing for an avalanche of demand. “We are looking forward to it in the next few weeks,” he said.

Finding hope and mana in the dark

Diehl asked for help because he did not believe he could cope with his debts alone.

“I felt powerless. It was very, very difficult, ”she says.

His relationship was suffering and he saw no way out of a cycle of endless debt.

Michael Ward, CAP’s social policy advisor, says it is not unusual for people to separate themselves from others and find themselves in a lonely and hopeless place.

“They have often isolated themselves from society and their family relationships, and their trust in organizations has been broken,” he says. “They don’t know where to go for hope.”

“We know from experience that it’s never just about finances. What people really need is hope and the belief that things can get better, ”he says.

“It really improves mana. It gives them something to hold onto, ”she says.

“Our message to people would be to get there now, rather than take actions that could make things worse,” he says.

Avoid new debt

The top of the list of things that can make things worse is going into more debt.

Eccleton says there has been an increase in people using debt services such as buy now, pay later to buy staples like meat and vegetables.

But, she says, “They’re still paying for that long after they’ve finished eating it. Once you accept one of those loans, you are in a recovery cycle. This is how it starts “.

Trying to get money out of KiwiSaver can also be a poor choice, Ward says, something that budgeting and negotiating with lenders can help avoid.

Free services like Fincap and CAP can help borrowers negotiate with lenders, and often the lenders will accept lower payments or agree to reduce the amount owed, he says.

Paying debts vs stocking the pantry

People waiting to be laid off cannot always be advised to spend as much money as they can now to pay off debt, Liggins says.

“If you’re going to lose that job, start cutting it right now,” says Liggins.

“But in my experience, debt is not the priority. It can be stocking the pantry, putting more on the electricity bill and saving something for the rent, ”he says.

Families with cash flow now, waiting for the cash flow to stop, may be better at stocking up on long-lasting staples, similar in some ways to panic buying things like rice, canned food, pasta, flour and powdered milk when Covid-19 first arrived in the country.

These are forms of “savings” that can be combined with taking the knife to luxury spending and looking for all means to cut costs, including researching if there are cheaper power, insurance, and phone plans that households could to be.

“Everything saves a few dollars,” he says.

People struggling financially are often caught in short-term cycles of despair and often need a lot of support to plan and make changes, Ward says.

“They often come from a really dark place where they can’t see past the end of the week,” he says.

“Often the barrier (to making positive changes) is mental space and overwhelming stress and anxiety,” Ward says.

Sometimes when CAP mentors visit families in their own homes, they bring them some food to ease despair and allow parents to think more clearly.

Know the job and income now

Ward recommends that people who think they may lose their jobs put aside their preconceptions and learn about the wellness system.

“It can be incredibly scary for people who are unfamiliar with or have not had to commit to Work and Income,” says Ward.

“One of the huge barriers is the fear of stigma for receiving benefits,” he says.

It was a stigma that had even less justification in a job crisis triggered by a pandemic, he says.

Work and Income has a helpful anonymous calculator that people can connect to their current or expected circumstances and see what payments they may qualify for.

Prepare for the difficult, but not impossible

“Just tighten the belts. She doesn’t spend more than she needs to, ”says Diehl.

“You do it without frills. We are existing, not living, ”he says.

But the situation is improving, and the family, who rents with the help of the Work and Income accommodation supplement, has no debts that take a bite out of their income.

Diehl remembers the day he got out of debt like yesterday.

“Being debt free took a great burden off my shoulders. There is no desire to do it, ”he said.

Diehl has started a heat pump maintenance and waterjet cleaning business. He has landed a part-time job with CCS Disability Action.

Guilt for the children

Diehl, like all parents, would like to give more to his children, but takes comfort in the thought that he and his wife have been able to meet all of life’s needs despite their challenges.

And the children continue to live a good and happy life.

“In fact, they managed very well. They took it all in stride, ”says Diehl, who doesn’t smoke or drink.

They realize that the family is not “financially brilliant,” he says.

“Our children run out of things, but they still have all the necessary things; food on the belly, clothes on the back. “