It’s the first of the month, and Regina drops her $700 rent check in the mailbox. After paying for her housing, she has less than $100 in the bank to get her through the week until her next paycheck comes in. That money will need to cover food and gas for herself and her 10-year-old daughter Simone. She's worried about money all of the time.
Regina drops Simone off at the YMCA before school program at 6:30, and then drives to her job at a local senior living community. As part of the housekeeping staff, Regina earns $12/hour. If she works a full 40-hour week every week, she typically brings home just under $1500 per month. Nearly half of that is taken by the rent on her one-bedroom apartment. The remaining $800 must cover food, gas, car insurance, cable, electricity, and her cell phone, among other expenses.
While money is tight, she can typically make things work every month, but last month her car broke down. She missed a shift at work getting it to the shop, which nearly caused her to lose her job, and the cost to repair the car was $1200. With no savings, Regina had to use her credit card to pay the shop, and now she can only afford to pay the minimum balance every month. At this rate it will take her over 8 years to pay off that debt, and the interest will exceed the original payment amount.
Credit card debt is one of several factors that result in low-wage workers paying more than they should to get by. It is the most visible, but definitely not the only cost of living paycheck to paycheck. Regina’s lack of savings is costing her directly through the high cost of credit, but she’s also fortunate that she has enough credit to be issued a credit card at all. Many others in her situation are forced to resort to payday loans or other gray market credit solutions, which can be far more expensive.
In addition to the cost of credit, Regina’s need to stretch every dollar to meet her basic needs means that she’s unable to set aside any of her paycheck for retirement. While her company offers a 401K with a match, the 3% she would need to contribute in order to receive that match is around $45 per month.
Between gas, insurance, and repairs, the car is a large expense that has driven her into debt. But without it she would be unable to go to the supermarket and buy fresh, healthy food at a reasonable price. Many of her neighbors who don’t have cars shop at the local convenience store, where they pay nearly twice as much for necessities like bread and milk. They also have little or no access to fresh fruits and vegetables.
If she didn’t have the car, she would have to walk 20 minutes to the nearest bus stop, and then take a bus to the hub before connecting to the bus that would drop her off near work. That would add over an hour to her commute and cost her more money to have Simone in an after-school program since she wouldn't get home in time to meet the school bus.
Regina’s company recently announced a generous tuition reimbursement benefit that would give her up to $2000 per year to take classes at the local community college and potentially train for a skilled nursing job. While she would love to take advantage of the program, she won't receive the reimbursement until she passes the course, and she doesn’t have the $450 to pay for each class up front.
Even for those making enough money to tread water, the knowledge that you're just one unexpected expense away from being in trouble means you're under perpetual stress, worrying about what might go wrong and how you will handle it if it does. And that's where the business cost comes in: On average, workers spend approximately 150 hours per year thinking about their finances while at work. That distraction equal three weeks of lost productivity per year.1
Forward-thinking employers are looking for ways to support their workforce so they can bring their best to work. While higher wages can help, one of the biggest issues for low-wage workers is the lack of available financial planning resources. Rather than taking out credit card debt to solve her problem, Regina might have been able to work with a bank or credit union for a shorter-term loan with more favorable rates, or she might have had access to an emergency savings program. But without awareness of these types of solutions, many lower income households are left with few options for unexpected expenses.
The challenge of supporting employees with these challenges is that every household is different. Some individuals need help managing debt, while others have no access to transportation or have medical issues that impact their ability to work consistently. In colder climates, the cost of heating a home in the winter can wreak havoc on an otherwise stable budget.
A wide variety of solutions and services exist, from fuel assistance to subsidized public transportation, but finding and accessing those resources takes time and research that low-wage workers can rarely spare. Human Resources staff are often put in the position of hearing about people's difficult situations, but without any way to help. Many companies rely on EAPs in these situations, but most are designed to provide counseling resources, rather than tailored local solutions.
All of that is why so many employers have realized the value of Resource Navigation as an employee benefit. Resource Navigators work side-by-side with your employees to guide them through life challenges. They connect them to a wide network of local resources to address immediate concerns, then together they develop a long-term plan to work toward their goals so they're better prepared to handle future challenges. Because Resource Navigation is a personalized, problem-solving approach, it has the adaptibility to address complex situations and find the right solution for each individual employee. Collectively, that means a healthier, more stable workforce that can spend less time worrying about money and more time focused on their career.