In NZ the average weekly household expenditure is around $1300 a week.
- Housing and household utilities make up the largest chunk (25%),
- followed by food (17%)
- and transport (15%).
Have you thought about what your family spends each week just to live? If you don’t know it’s worth taking the time to find out. Either keep track for a few weeks of your spending or jump online and go through your transactions. Categorise them, at least, into housing, bills, food and transport, but also think about whether they are costs you can control or are fixed. For example, you can’t change your rent but you might be able to spend less on food and transport if things were tight.
Once you’ve got a number, work out how many weeks you could go with reduced or no income coming in.
An FSC (Financial Services Council) survey showed that once sick leave and annual leave ran out:
- 20% of households would be able to continue their expenses for only 1 week
- 14% of households could last for 2 weeks
- By 4 weeks an overall 55% would be unable to pay all their expenses and maintain their lifestyle.
Which means that most of us would not have enough money to pay rent (or the mortgage), buy enough food, or pay the bills (like power) after 4 weeks of being unable to work. Talk about stressful.
In NZ we’re lucky enough to have ACC. ACC covers accidents and will help in many situations, but it may not replace all your income and it can’t help if you become ill. For example, if you have a heart attack or stroke, or you need treatment for breast cancer, then that is not covered by ACC.
Just like you prepare your civil defence kit, prepare your financial survival kit and consider your options before you need it. This might include:
- Get income protection - Income Protection pays you a monthly amount if you are unable to work, due to illness or injury, which you can use for whatever you need. That might include bills, groceries, rent or mortgage or even alternative treatments.
- Set up savings accounts for a rainy day – if you can set money aside to get you through a few weeks of no income that’s a good start. Also, work out what you would do if you couldn’t work for longer than that. Every year over 50,000 New Zealand households have someone in the family who is unable to work for 3 months or more (that’s like every household in Invercargill).
- Talk to your family (or friends) about how you could support each other if one of you needed it. Relying on borrowing from friends or family can put a strain on relationships given your inability to pay the money back, so think this one through carefully.
- Consider life insurance – life insurance will pay out if you die or if you are diagnosed with a terminal illness. So if you can’t work because you’re very ill and expect to live less than 6-12 months you can have your lump sum amount pad early.
- Get critical illness cover – critical illness can be added to your life insurance policy. It won’t help if you’re off work with a bad back but it will pay a lump sum if you suffer from one of the conditions specified in the policy, which includes stroke, heart attack and cancer.
Don’t put your head in the sand and hope it won’t happen to you. Work out a plan for how your family would cope with no income and then you can relax knowing that they’ll be ok if you’re off work.
You can get a no-obligation quote for income protection here, so take a moment and get started thinking about it.