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Sequestration Explained: Five ways the sequester could impact you

by Jessica Horton on
3/7/2013
in Personal Finance

I'm going to go ahead and assume that you've at least heard the term "sequestration" at least once over the past few weeks. 

And if you're anything like me, you may have heard it and thought to yourself:

"Wait a minute — did he just say Seacrest Nation? Why does everyone care so much about Ryan Seacrest?!?!..."

Once you realized that sequestration, in fact, has absolutely nothing to do with Ryan Seacrest, you probably started thinking, "Ok, but how will this sequester thing affect ME?"

What exactly is sequestration?

If you’ve heard the term before, it’s likely been in the context of a court case (or on an episode of Law and Order).

Technically, the term means to “remove or withdraw.” And that’s the purpose of sequestration as is stands in this case.

When Congress approved the increase in the national debt ceiling, there were conditions put in place to ensure we wouldn't default on our loans. So essentially, the $1.2 trillion in federal cuts over the next 10 years is the government’s way to “remove” (or “sequester”) some of the funds that had initially been released.

How does it affect me?

Because these automatic cuts are across the board, there will likely be a number of significant implications. However, it's not immediately clear what kind of impact sequestration will have on the average American.

That said, the White House did release an outline of potential consequences of sequestration — and they're not pretty. The following are six key areas that have potential to have widespread impact:

  1. Education programs will take a big hit — from programs like Head Start to special education (IDEA). More than 31,000 teachers and teachers’ aides could be laid off.
  2. FEMA could see its budget cut by as much as $1 billion — which would affect the response-to and recovery-from natural disasters like Hurricane Sandy.
  3. U.S. Department of Agriculture furloughs and layoffs would mean fewer inspections at food processing plants. In addition, about 600,000 women and children would be dropped from the WIC (Women, Infants, and Children) nutrition program.
  4. Law enforcement agencies, including the FBI and Border Patrol, would lose more than 1,000 agents.
  5. Emergency Unemployment Compensation benefits could be cut by as much as 9.4 percent. And if the proposed cuts take effect, the Congressional Budget Office estimates 1.4 million jobs will be lost.

While we certainly hope there's a quick resolution to the sequestration dilemma, it's important — especially when it comes to your money — that you prepare for the worst-case scenario. Whether it’s setting up an emergency savings account or taking control of your debt NOW in order to lessen the blow LATER — there are steps you can take today.

We know that it's always easier said than done, which is why we're here to help! We have the resources, tools and experts available to help you create your very own financial survival kit. Give us a call at 866.412.2227 to learn more about how your finances will benefit from our services.  

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Jessica Horton is a former copywriter and community manager at MMI.

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