This post certainly has nothing to do with food, and I was in two minds about whether to write it or not. But maybe it will help someone. I am not a financial adviser, legal expert, or psychologist. All my advice is based on nothing except my arrogance in having a belief that my opinion is worth sharing and some personal experience.
There are at least a couple of hundred thousand people in Ireland today who are now on social welfare of €203 a week. They may have been earning many times that last week. They might have savings or they might not. They might have a few quid in the bank or not. They may or may not have family who can help. There are also people who were running a successful or a "not so successful but getting by" business a few weeks ago. They are now running absolutely nothing and bringing no money in.
I have been in this position before. Lots of us in Ireland have. During the recession from 2008 on lots of us lost everything. People started losing their sanity and doing uncharacteristic things like driving into the gates of government buildings, faking their own kidnapping, or hanging themselves. People ruined their own lives out of desperation and anger.
You need to act now if you want to protect yourself from long term damage to your finances as a result of Covid-19. You need to prioritise, and you need to start taking drastic measures. You also need to talk to family and friends whom you trust and talk to the professionals who have your back such as Citizens Information and MABS.
Step 1: Be Informed
Make a list of your outgoings
Open your bank accounts online and credit card statements. Work out how much you spend and write it all down. Categorise as direct debit bill, standing order, savings, essentials, etc.
Work out how much you have at hand
How much money do you have in the credit union, bank, etc. Only count it if you can get at it – ignore money locked away in bonds or property that you can't sell fast.
Work out how much is going to come in
This will be social welfare, residual earnings, maybe tax back, anything you can really depend on. Forget about money you are owed or invoices outstanding – assume they will never be paid.
Now work out your burn rate
If you are spending €800 a week and you have €6000 in the bank and €200 a week income, then your burn rate is €600 a week (€800 spent - €200 earned = €600). You are spending €600 more than you are earning. If you have €6000 in the bank, then you have 10 weeks (€6000 / €600 = 10) before you are out of money. That assumes no unexpected urgent expenses such as car repairs.
Now ask yourself will this crisis be over in 10 weeks? Can you ride it through?
What if you have no money. What if you live from hand to mouth? All these financial advisers seem to assume people have some savings. But what if you don’t. Maybe you are not a saver, maybe you just used your rainy-day fund during a recent rainy day, maybe you just don’t earn enough. In that case if your burn rate is not relevant – you are broke from week 1 - today.
So, what do I do?
In my opinion the only thing you can do is slow your burn rate down as aggressively as you can. Consider spending to be diseased money, and income to be healthy money. You need to isolate your income from being spent.
Before you take any more of my advice now is the time to engage with MABS. Do it.
Step 2 – Prioritise – Aggressively
Income is your number 1 priority. If you earn money on a computer, then broadband and somewhere safe to work are required. If you drive for a living you may need to find a way to keep your motor on the road. Unless you have a certain and secure income get on the dole now – don’t wait.
You will need somewhere to live. If you rent, and you have lost your job, and you have an alternative (like moving home) then this is the biggest saving you can make. If you have a mortgage look for a mortgage holiday. But I would suggest if those options are not available then this is your second priority.
You will need some money for food but be tight about this. You can get a lot of food for not a lot of money. See Jack Monroe's blog for inspiration, but if all else fails you can buy a hell of a lot of oats, potatoes, and rice for €20. Food may become your number 1 priority at some point, but right now income and shelter are more important in my opinion. Stop smoking and drinking right now.
Household bills such as electricity, gas, telephone, cable, etc. Call them and make sure you are on the cheapest rate, but do not take the direct debit discount. I would advise you cancel all direct debits. From now on you decide who gets paid and when. You do not want the telephone company taking money from your account and that causing your rent or mortgage to bounce. You need to control your money from now on. Turn down the central heating as low as you can cope and be miserly with electricity. Some people may have court ordered outgoings such as child maintenance or fines – these should be managed also. You may also need to maintain health insurance depending on your circumstances.
If you have paid all the above and you still have money, then put fuel in your car. In desperate times you may not have money to service or maintain the car and you may not be able to tax it. I would never drive without insurance – no matter how many problems you have I would suggest that being in jail is not another one you want. You don't need me to say stupid things like "consider if you can take the bus". You know if you need a car or not - if you don't then sell it, give it back to the HP company (see the half rule), or just lay it up for a while.
Step 3 – Cancel, Postpone, Delay
Cancel everything. Spotify, Netflix, motor rescue, Sky, Virgin, subscriptions, beer club, travel insurance, anything that comes out of your bank account, gets taken from PayPal, or is debited from your bank card. Cancel the direct debit mandates before you bother engaging with the companies. They are not going to be paid no matter what contract you have so cancel the mandate. Call your car loan company and tell them you are utterly broke and that they will not be getting another payment. Call your credit union and tell them you need to work with them – even if you don’t have a loan – they will help you. Cut up your credit card and pay the minimum each month – it will cost you loads more in the long run, but that is not relevant right now. Cancel your gym direct debit. Cancel EVERYTHING that costs you money and doesn’t keep you alive. You CANNOT pay any of these if your burn rate is higher than your income rate. You need to eat.
Step 4 – Engage – But on Your Terms
Now you are in control. Yes, your phone will start ringing and letters will start arriving. Thanks to the Corona Virus I suspect it will take a long time as lots and lots of us will be in this situation. But it will happen. Remember that the person on the other end of the phone is just doing their job, but their job is to get money from you. It’s not going to happen right now so learn fast how to talk to them. Stick to phrases like these…
“I understand the contract I signed, but my circumstances have changed, and I do not have the means to pay right now.”
“I hear what you are saying, but unfortunately nothing you can say will alter the fact that I do not have the money to pay right now.”
“I am not refusing to pay; I just do not have the money to pay right now”
“I do not know when I will have the money, but I promise to call you when my circumstances improve”
“I appreciate you need to call me, but I am working from 9 to 6 each day and this is my work phone number. I am going to get in trouble and lose my job if you keep calling me.”
“I appreciate you need to call me, but 6pm onwards is my family time and this is causing stress to my children/wife/dog.”
“Please do not call me again. I am happy to receive posted correspondence only.”
If all else fails, this will work – refuse to answer their GDPR check:
“I am sorry, but I am unable to confirm my address or date of birth over the phone as I have been subject to a number of phishing attempts, can you please use postal correspondence from now on”.
Do not stop answering the phone. It won’t solve anything. Always be polite. Don't get frustrated. Record your calls if you can.
Step 5 – When it Goes Legal
Court, Collection Agencies, Revenue Sheriff, etc.
This will take a long time to happen and if you prioritised properly then hopefully you are still eating and have some shelter. Hopefully you even got your spending under control and got back to work.
I can’t tell you what will happen in the end, but I can tell you that at this stage you will have accepted that you had no choice but to fight for your financial survival. Now let the legal process take over – they can’t get blood from a stone, so one likely outcome (eventually) is that debts will be written off or you will have to go insolvent.
You will probably not get another loan for a long time, but at least you didn’t drive your car into government buildings, fake your own kidnapping, or hang yourself. Life goes on and really your financial problems don’t need to be a huge black cloud hanging over you. Be in control and keep them in the box they belong in.