Planning ahead when poor: impossible! Many people are of the opinion that if you’re poor you learn to budget better and that will solve everything. You plan your expected income and outgoings and cut your cloth accordingly… Poorer people are just bad at planning, apparently.
Not true. Or at least not necessarily true.
Poor people are bad at planning how to allocate their money because they have no money. It’s not rocket science, but is also not obvious to those with ample funds. There’s levels and levels of poverty. There’s a short-term blip, there’s living on a tight budget, there’s skint, there’s frugal and then there’s living below the poverty line longer-term. It’s this last version that I’d like to talk about with regards to financial planning.
While living on a shoestring and knowing there is not enough to go round, all you can do is make sure whatever money you do have is well spent. For me this meant always making sure that what we did have was spent on feeding my child. Things like free school meals on Pupil Premium and the School Voucher system, which offers supermarket vouchers for the holidays, were a lifesaver.
Having recently gone from famine to feast with the sale of my rental property, I began thinking about all the things I hadn’t bought to save money. I’m really lucky to have had a property to sell and to have been able to eek out my income due to the rental money; very few have that option. I realised I not only deprived myself of things I wanted to save money, but things I really needed too. In the last few month’s after my tenant departed I totally changed even my morning coffee, reducing my habit to one proper coffee from a cafetiere instead of my normal instant. Ironically it’s cheaper to drink higher quality coffee less often, who knew?! It sounds trivial but I even started taking it black not white, as milk was a stretch and therefore became a ‘luxury’. It’s amazing what you start to think of as not entirely necessary when strapped for cash, whereas before it was easily achievable and so not even considered as optional.
When talking of the sacrifices of those in poverty, we often hear about switching off the heating or the parents giving up a meal so their kids can eat. We don’t think of not being able to afford toothpaste (even knowing our children’s teeth could suffer), or visiting a supermarket with £3.00 total and working out how to spend it most wisely, or feeding our guinea pigs only grass and dandelions as any vegetables are a stretch for humans let alone small animals… In the end I decided it was a good food budgeting lesson for my daughter, and a real challenge, to decide between us how to spend our £3.00!
Switching off the heating in January was surprisingly easy as long as we had hot water, and few blankets plus a hot water bottle to sit and watch T.V. with. With the energy price rise, even hot water may become unattainable for some and that’s worrying to give up basic hygiene and the ability to cook properly. One thing I heard recently was that those on pre-pay meters are charged more which seems scandalous! Surely they should be on the lowest available rate; as it’s pre-paid they literally cannot fall into arrears… I did not reach this point, but did make some arrangements with energy suppliers. Ultimately, this felt pointless as all that happens is bills are pushed further away. This then resulted in effectively double payments later which I still could not afford. Debt payment arrangements assume your income will rise, however this is not often the case. How else can we assist those in arrears with even the basic utilities? Arrangements assume that planning your income and budgeting spend is attainable.
What I found was that increasingly I spent any income immediately to avoid it being taken by extortionate overdraft charges, now 39% since 2020 for most. This meant I lost around £80 a month at one point which would have fed us for over a week! I realise the banks need to need to recoup some of the interest on overdrafts but 39% is effectively payday loan level. It’s simply eroding what little income the cash poor have, and means that the likelihood of getting out of the red proves impossible. Could we make an arrangement where those struggling to cope are put back ‘in the black’ albeit artificially, and the interest otherwise charged goes to paying off the overdraft? Once the overdraft is redressed, then that customer could simply return to a zero overdraft account. Something to think about.
At my most desperate, I would know exactly how many days there were until my child benefit would be paid and set my mind to last out without a pint of milk until then! It’s a weird form of stress and that mindset also erodes your ability to plan effectively. I read last year that without good nutrition and while under stress, your cognitive ability decreases and that combined with time consumed acquiring essentials while in poverty, locks people into a vicious cycle of desperation.
Now I have money in the bank, I can actually plan. I have cleared my debts, booked in some social occasions and am planning how and where to work. I would now be successful at interview, where previously I may have come across as desperate as I felt and therefore would have been unlikely to succeed.
I don’t have a simple solution to the challenges I faced while cash poor, but one thing that could help is a series of confidence rebuilding techniques for those in longer-term poverty. When you’re poor it starts to feel like a life sentence very quickly. That combined with managing the expectations of others is exhausting. I’ll come to claiming benefits, the consequences of finding work, and advisory services in a later blog…
Meanwhile please excuse the ramblings of the relieved.
Love Ruth x