We all like to think that we are invincible, that nothing will ever happen to us, but what if it does?
Every year over 50,000 New Zealand households (a Napier-sized city) lose the main income earner's salary through illness. More than half of those lose it for six months or more. If your income stopped today could you still provide for your family?
We are lucky that we can rely on ACC to provide cover should we suffer an accident. But what most people fail to understand is that ACC doesn’t cover you for illnesses such as cancer or a heart attack which would prevent you from working.
Let’s put up some numbers, think about the actual dollars you will need if your income stopped. The average household expenditure in New Zealand is $1,200 per week, or $5,160 per month. If you have a bigger home and a bigger mortgage, this expenditure could be closer to $6,000. If you are off work for 6 months, you’ll need $36,000 (after tax). So, what are your options?
- Borrow from friends and family? Do you think you can put that strain on them? Would they have that kind of money to help you?
- Borrow from the bank? Do you think taking on more debt would add more stress to an already stressful situation?
- Selling assets? Even if you sell property, your boat, or any other assets you’ll need to be able to cover your expenses until the time you can sell those assets
- Live on your savings? Do you have this kind of money tucked-away for a rainy day? Can you easily access it?
- Rely on the sickness benefit? The sickness benefit entitlement is around $343 a week. However, entitlement to this benefit is affected by your partner’s earnings and is only available if your other household income is below a certain figure. This means that many families find themselves too well off as a household to qualify for a sickness benefit, but too poor to pay the mortgage and food bills.
Are you comfortable with any of the options above? So, if you get sick and are unable to work, are you prepared to put your family through these grueling options? Or is it time to have a plan should something happen to you?