Tips for Managing Money During a Work Stoppage
At the moment, the Federal government is in the midst of its longest shutdown ever. During a prolonged work stoppage, when paychecks stop coming in, but the bills won’t slow down, it can be hard to keep your financial house in order.
If you are impacted by a significant work stoppage, there are things you can do to keep the damage to a minimum, while focusing on the things that matter most to you and your family. Here are a few expert tips to help you through a potentially trying time.
Once your primary paychecks stop coming, one of your top priorities should be finding income to help keep you afloat.
- Use emergency savings. This is what you’ve been saving for. It may hurt to tap into your savings, but those funds can be a lifesaver and may go a long way toward keeping you out of debt or creating other challenges that hang around even after the work stoppage is over.
- Access unemployment benefits. Many states will allow you to apply for unemployment benefits during a work furlough. Keep in mind, however, that if you receive back pay once the stoppage is over, you’ll have to pay back your unemployment benefits.
- Reduce withholdings. “If you have other members of the household who are working, consider having them temporarily reduce their tax and retirement withholding amounts on upcoming paychecks to increase take home pay,” suggests Amy Lins, a financial educator at MMI. It may not add much, but every penny counts. Just make sure to update those withholdings back to the correct amount once the stoppage is over.
- Take side gigs. If you’ve got a car, start driving for Uber or Lyft. If you’ve got valuable skills, use tools like Fiverr, FlexJobs, and SolidGigs to make money off those skills. Be open to any part-time or one-off job that pays a fair wage. “It may not be glamorous,” says Lins, “but it can bring in needed income.”
- Sell your stuff. If you’ve been thinking about putting together a yard sale, there’s no better time than now. Use online marketplaces like eBay, Amazon, Facebook, and Craig’s List to find buyers for any possessions you don’t need.
- Take a loan. “Many credit unions and banks are offering low or no interest loans to furloughed workers,” says Lins. “Check with yours to see what options are available for temporary cash flow relief. Also, if you are a member of a union, check to see what benefits might be available, such as loans and grants.”
- Ask for help. Don’t be too proud to ask for help when appropriate. Leaning on friends and family members during a crisis can help save you from falling into deep debt or some other form of catastrophe.
Understand your priorities and create a spending plan
What are your needs and what are your wants? A financial crisis like a work stoppage really requires that you understand the difference and act accordingly.
If it’s not a need it probably needs to go until things settle back down. That means barebones living. No eating out and no entertainment spending. Focus on keeping your most important debts (mortgage, car) current, while leaving room for food, utilities, and insurance. Anything else may need to be deferred, depending on your temporary income situation.
Connect with your creditors
Many credit card companies, mortgage companies, banks, and credit unions are implementing programs to help those on furlough during the current government shutdown. Those impacted may be eligible for payment forbearance, with monthly payments either reduced or stopped outright during the work stoppage. Some creditors may also be willing to waive or refund any overdraft or late fees you accrue during your furlough.
In order to access these benefits, you’ll need to contact each creditor and see what they can do for you. Meanwhile, you should also contact your utility providers and see if they’re able to offer any assistance while you’re temporarily without pay.
“Be sure to keep good notes,” suggests Lins. “Keep track of who you talked to, the date, and what they offered you as a concession.”
Begin recovery as soon as the stoppage ends
Once your furlough is over and life begins returning to normal, it’s important that you take time to assess any damage you sustained during the stoppage and start creating a plan for recovery.
Begin by contacting all of your creditors to discuss your accounts and make a plan to bring any delinquent accounts current. If you entered into any hardship programs during or after the stoppage, be sure that you understand the terms of those programs and fulfill your end of the deal.
Many creditors have committed to not reporting delinquencies for furloughed workers, but you should still review your credit report to see where you stand. Use annualcreditreport.com to pull a report shortly after returning to work, then again about three months after that. Contact your creditors if you find any discrepancies. You can also place a consumer statement in your credit report if your creditors do report you as delinquent.
Finally, if you dipped into your emergency savings fund, don’t put off replenishing that account. You never know when the next emergency may strike, so make savings a priority in your new budget. If it helps, set up an automatic payroll deduction into a savings account to ensure you’re saving money consistently.
If you’re not prepared, losing your income, even if it’s temporary, can potentially throw your finances off for years. If you’re in the midst of a work stoppage, or are trying to navigate through the recovery stage, and you need a little extra help and guidance, don’t hesitate to connect with a certified budget counselor. Counseling is free, confidential, and can help you figure out the best plan to meet your unique goals.