Financial Help for Those Facing Furloughs
Eileen St. Pierre, The Everyday Financial Planner
We are all sick of hearing the word sequestration, which is now in effect due to Congress’ inability to come to an agreement on how to reduce the budget deficit. According to the Random House Dictionary, sequestrate means to seize and hold a debtor’s property until legal claims are satisfied. In order to make mandated budget cuts, federal agencies have announced worker furloughs. However, the news regarding how many of these workers will be furloughed is constantly changing. Originally, the 800,000 members of the Department of Defense’s civilian workforce were told they would be furloughed up to 22 days (the maximum a federal agency can impose without initiating complex layoff procedures), but that number was reduced to 14 days. All of this uncertainty can take a toll on a family. Even just one furlough day a month can have a profound effect on a family’s budget.
For those of you facing furloughs, here are some tips on how to adjust to a lower level of income:
- Review your current income and expenses. For help use this Spending Plan Worksheet or Excel Template to create a new spending plan based on your reduced income.
- Identify expenses that can be reduced or eliminated altogether. Contact businesses such as your cell phone, internet, and cable providers to inquire about reducing services. Talk to your car insurance provider to see if there are any add-on services you really don’t need such as towing and rental car assistance; increase your deductible to lower your premiums if you feel comfortable doing this.
- Suspend voluntary payroll deductions until the furloughs end. Adjust Thrift Savings Plan (TSP) contribution amounts.
- If you have trouble making your mortgage or any other loan payments, contact your lender to work out a debt repayment plan. Don’t wait until you have already missed payments. You do not want to damage your credit score.
- Employees holding security clearances who run into financial problems due to these furloughs should bring this issue to their agency’s attention to protect their status. Keep clear and written documentation of your communications with your creditors.
- Seek out assistance. If you are a member of a federal credit union, it may offer special low-interest loans with flexible repayment terms and may allow extensions to existing loans. TSP hardship loans and withdrawals are available, but make sure you understand their consequences – a hardship withdrawal will permanently reduce your TSP balance and triggers income tax consequences.
- For a more comprehensive look at your finances, the National Foundation for Credit Counseling offers MyMoneyCheckUp® at www.mymoneycheckup.org. After answering a series of questions, you will find out where you stand and receive tips on how to improve your financial situation.
There is a silver lining. Furloughs are not as bad as layoffs. Employees still keep their jobs and their benefits. Furloughs also provide something that many people have in short supply today – time. Create a plan on how you will spend this time.
- Take that class at the local Extension office or tech center you have been thinking about for years.
- Go through your closets and learn how to sell stuff on eBay.
- Spend more time on your hobby – it may develop into a part-time business.
- Cook and freeze a few meals on your furlough day so you can have more family dinners together the rest of the week.
- Be a parent volunteer in your child’s class.
- Pick your kids up after school and do something fun (and free). You never know, they may just enjoy it as much as you do.