Food, rent or health care?
Many families are forced to rethink where money goes
More and more families are being forced to rethink where their money goes.
Two days before learning that she would lose her job, Lissa Gilliam spent hundreds of dollars online on baby products.
A 37-year-old expectant mother, Gilliam had planned to ask local parents in Seattle for used strollers and secondhand onesies in a bid to reduce waste. But as the coronavirus pandemic ravaged the area, new items delivered in boxes seemed a safer bet.
She figured she could afford the splurge, earning $50 an hour as a full-time contractor designing educational curriculums for a nonprofit. But then, on
April 2, her employer slashed her hours and told her that her contract would end in early May — a few weeks before she is to give birth.
Suddenly, like many others, Gilliam became hyperaware of her expenses. She and her husband, a high school physics teacher, now take a painful daily tally of their financial priorities: Is that $5 monthly web magazine subscription really necessary? How much does watering the garden cost? When will they need to tap their paltry savings?
“We’re OK for now,” she said. “But the bottom may fall out from under us.”
As millions of Americans lose jobs, take pay cuts, close businesses and absorb family members into their homes, they are being forced to rethink where their money goes. Even before the scramble for new jobs can begin, people are cajoling creditors, looking for gig work or simply cutting back to get through the first few disorienting weeks.
To save money, heaters have been turned down, clothing sales ignored and auto insurance policies canceled. Retail sales tumbled 8.7 percent in March, by far the largest monthly decline ever recorded. Rents are going unpaid as people spend weeks waiting for government aid to arrive.
“An economic shock like this could have a long-term impact on people who have traditionally felt like they were being cautious, that they weren’t profligate with their money, but didn’t have to worry about paying for rent or affording food,” said Stephanie Aaronson, director of economic studies at the Brookings Institution. “They might have more debt, which will make it harder to spend in the future, or they might just feel less secure, which could boost savings and potentially dampen the recovery.”
Gilliam and her husband are waiting for Washington state to make jobless benefits available to contractors through a federal assistance program, and hope to take advantage of a state program for maternity aid once their daughter is born. A $15,000 construction project planned for the rear of their house is on hold. They canceled their gym membership, their Hulu streaming service, multiple newspapers and even the Adobe Acrobat software that Gilliam uses for design work.
“We’re trying not to spend money,” she said. “At a minimum, we need to hold on to our house.”
Even when the economy was strong, many Americans were in a precarious financial position, ill prepared to weather even minor disruptions and often weighed down by debt.
On the whole, Aaronson said, household finances “were in relatively good condition as of six weeks ago — they were actually pretty healthy.” Now, she said, “a much broader swath of households are experiencing a complete loss of income compared to what we typically see in a recession.”
Those people are now relying on goodwill from strangers and programs from corporations and the government to stay upright. Foreclosures and related evictions have been suspended. Borrowers have been offered student loan relief. Banks, automakers, utilities and other companies have set up payment deferral programs.
Before the pandemic, Carol Cruz’s private health insurance plan cost her
$840 a month — up from less than $500 four years ago. The bill ate up most of her $1,200 monthly paycheck, exceeding even the $600 monthly payment on the house she shares with her husband and their 17year-old granddaughter in Tulare, Calif.
On March 29, she was furloughed from her parttime job as a mental health therapist. Other than the state unemployment benefits she hopes to receive soon, Cruz, 62, no longer has an income.
“I don’t know about my future,” Cruz said. “I’m not letting myself think about tomorrow, just about whether we have food today and money in the bank.”
More than half of lowerincome adults in the United States say they will struggle to pay bills this month, compared to a quarter of their middle-income counterparts and 11 percent of those in the upper-income tier, according to a survey of nearly 5,000 adults by Pew Research Center. Researchers defined a three-person household earning $37,500 to $112,600 annually as middle-income. Overall, more than half of those who expect a federal stimulus infusion will use most of the money to cover essential expenses, while 1 in 5 say they plan to save the funds.