As the two political parties reach another impasse in budget negotiations, the budget cuts known as the sequester are starting to take effect. And for many government employees and contractors, this stalemate can result in their eventual layoff.
The prospects of loosing one’s job are very scary, especially when it is due to circumstances out of one’s control. But rather than focus on the negative aspects of the situation, it is best to take constructive action to manage the consequences.
Fortunately, there are three things that can be done to prepare for a possible loss of income.
1. Reduce current expenses immediately to boost savings. Those who are faced with the threat of a furlough should take immediate action to cut back on discretionary spending. For example, eat out less often, limit entertainment expenditures, and don’t schedule vacations. Defer any expensive home improvement projects until after the budget crisis has been resolved.
2. Look into unemployment benefits. Furloughed workers will be entitled to receive unemployment benefits, although these can vary state by state. Now is the time to research these options and be prepared to make further adjustments to a reduced income. Know how long you will have to wait before apply for benefits, and how much money you are entitled to.
3. Shield yourself from interest expenses. Once employees know what they can expect to live off of from their savings and unemployment benefits, they should immediately consider applying for a new credit card with a 0% APR offer on new purchases and balance transfers. Those who have debt will be able to transfer the balance to the new card and take a break from paying interest. At the same time, those who have no debt can make new charges to the card with 0% APR on purchases. This will give them additional time to pay off their necessary purchases before incurring any interest. Doing this now will allow them to avoid balance transfer fees that are usually incurred when moving an existing balance to a new card with a promotional financing offer.
It is disturbing that these draconian budget cuts may affect workers who work hard and depend on receiving a steady paycheck. But by planning to absorb these cuts with the least economic hardship, workers can survive this event and recover quickly when a budget deal is eventually reached.