How to Survive as a Furloughed Employee
NEW YORK ( MainStreet) Employees who have been furloughed and are facing weeks without getting paid have several options to pay their bills and other expenses this month.
For consumers who do not have an emergency cash savings fund that they can tap, they can still cope with this financial setback by setting up a budget, said David Flores, a counselor for GreenPath Debt Solutions, a non-profit credit counseling and education organization based in Farmington Hills, Mich.
Tracking both your income and your expenses, even discretionary spending for lunch or a coffee, will help you make sure you can pay your bills. Some consumers believe that if they have money left in their checking or savings account at the end of the month, they do not have to worry even though not all vendors expect payments at the same time.
"While this may work in some cases, individuals who may see a drastic cut in their income will need to prepare ahead to make sure their expenses are covered," he said. "Years ago we taught our clients to place cash each month in an envelope system for a certain expense. Nowadays, we teach the envelope system as a budgeting concept with the idea that you only spend what has been allotted. Once it's gone, you stop spending."
Furloughed workers should resist the urge to put current expenses on a future credit card bill, said Jake Loescher, a financial advisor at Savant Capital Management, a fee-only wealth management firm headquartered in Rockford, Ill.
"If the shutdown lasts longer than expected, the interest accruing on a credit card balance can be difficult to keep up with once a regular paycheck begins again," he said.
Consumers should put off any "frivolous and extraneous expenses until there is more certainty around when you may get back to work," Loescher said. Instead, consumers should spend their money only on necessities such as housing, debt payments, groceries, utilities and gas.
Avoid the option of tapping into retirement assets such as IRAs, Roth IRAs or thrift savings plans, he said.
"This will help from a tax perspective, but is also important in keeping the retirement assets untapped," Loescher said. "A nest egg of safe money will be important in helping a furloughed worker get through a several day or several week government shutdown, especially when it comes to longer-term retirement planning.
Consumers can temporarily cut their cable or cell phone bill by using only the minimum services, he said.
"Trim any excess fat out of your budget," Loescher said. "Consider cooking more often, as eating out frequently can be a budgetary strain but also a strain on your health and energy level."
If you are not able to pay all your bills this month, examine them to see which ones must be paid first, said Kelley Long, a CPA for Shepard Schwartz & Harris in Chicago.