Thursday, May 02, 2013

Furlough coming soon? Tips to help your finances during a furlough.

Furloughs are a topic of interest in my area of Virginia.  Virginia happens to be defense and government heavy with workers and, in fact, one of my areas largest employers happens to be a military installation.  Suffice to say, furloughs are a sore topic and a topic that has been hanging over like the Sword of Damocles.  Or an albatross about our necks, if I wanted to use The Rime of the Ancient Mariner as a metaphor for the burden of months of waiting to see if there will be a furlough (read: 20% decrease in pay for months) or if Congress and the President can get it together and fix this mess they created.

So, what can you do?  The bright side of months of furlough scuttlebutt and notices being pushed back a few times is that it has given those potentially affected a good amount of lead time to prepare for a decrease in pay.

Tax Refund... did you spend it?

If you are expecting tax refunds, hold onto that money.  Sure, it would be great to spend it on something nice like a new TV or vacay, but financial security is paramount now, particularly if your budget is tight already. Stow it away in a savings account and pretend it doesn't exist until you might need that money to cover the shortfall of your paycheck later on. 

Insurance check up?  Yes, please!

Leave no stone unturned.  Get new quotes for your homeowners' and auto policies.  You may be pleasantly surprised.  I recently switched to a different insurance company and saved hundreds of dollars on my homeowners' because the old policy had an escalating clause built in for inflation, whereas home values had plummeted during the same period.  This meant that since we purchased 8 years ago our premium literally doubled.  The $500 savings translates into a smaller mortgage payment when they recalculate escrow in a few months.  Best yet:  Our mortgage company allowed the insurance agency to bill them for the new policy.  We do, however, have to send our refund from the old policy to them, earmarked for deposit into our escrow account since it was a "mid-term change".  But this meant -0- out of pocket to replace our policy with a cheaper one.  Just don't cancel your first policy until you are 100% sure that the new policy is in effect.

For auto policies, you may get a better rate by shopping well in advance of your renewal date.  My new insurance company gave me an additional discount for shopping early vs. last minute when my old policy was set to expire.  Ask if there's a special discount for you for getting a quote before your renewal date.  Don't be afraid to go back to your original company with your new quote to ask them to match or beat it.  They may or may not.  It's worth asking though!

Another tip:  If your insurance company allows, you may be able to change the frequency that you pay your premium.  For instance, instead of paying every six months or every quarter, you could ask to pay monthly if that's a payment option.  This would give you the flexibility of stretching out the premium so that you don't have to pay such a huge chunk all at once while you are under a furlough situation.  After the furlough is over, you can always go back to your old payment method if you wish.  There may be an extra fee for using a different billing method.

Switching cable/satellite providers

Is your two-year contract up? If it is, consider shopping around at the competition.  Lately, I've been receiving some pretty enticing offers from DirecTV.  They want me back... badly.  So much so that it may be worth the switch since I don't really have a preference, having also been a Dish subscriber in the past and now present.  What they both do is drop their plans down to a lower price for the first year.  Yes, you will see a price increase next year, but it likely won't be more than what you're already now paying.  Where they really get you is for the equipment, so be sure to factor in more than just the plan price when making a decision about which option will save you money.  Ask if there are any other unadvertised discounts/offers and if your friend got an offer of a $200 VISA pre-paid card in the mail and you didn't, tell them you want that offer too.  They may give you something more to sweeten the pot.

If you do want to stay with your provider, call them and ask for their retention department so that you can talk to someone about perhaps getting a discount.  They may only offer you $10 off a month, but that's still saving!   Be sure to review their plan offerings because you may find  you don't watch as many channels as you thought.  You may be able to switch to a lesser plan and still have a good selection of channels.  Know what prices/channels competitors are offering currently and use that information to negotiate a better deal.  Don't be afraid to switch. 

Step up your savings

For those who are facing more furlough days than other agencies, a day a week is harder to absorb than one day every two, which is what some agencies are planning to do/doing now.  This will increase the hardship, so you must increase the amount that you need to save for that rainy day.  Try living without the money you're going to lose now.  Put it in a separate account and pretend that you never got it in the first place.  You may find that you can make adjustments, but you may find that you cannot.  In that case, you will want to find ways to slash your budget (clipping/printing and using more coupons, eating out rarely, packing your lunch, etc.) now to help make the transition easier when/if you are forced to lose pay because of a furlough.  

Pay off/down credit cards

One preparation tip that a friend told me that she is doing (aside from cutting back on spending) is that she is making a concerted effort to pay off one of her credit cards before her husband gets a furlough notice at his DoD job.  She was afraid that constrained finances would force her to make minimum payments only, so she was working at paying it off sooner rather than later to realize savings long-term and not just short-term.  She also wanted to make sure she would be able to use it in case of emergency if something were to come up while he was losing 20% pay each week due to furlough.  She figures it's better to pay it off now while they are better able to afford it than to keep carrying the debt, knowing that their budget is going to start feeling like a boa constrictor soon enough.

It's Yard Sale season...

Spring is here and Memorial Day is at the end of the month - the perfect time for a yard sale since it's a 3-day weekend.   Furloughs not already in progress will start this summer, probably mid-June for DoD who will lose about 14 days over the course of the summer.  Pad your savings account with money from a yard sale.  It may not end up being much... perhaps a day's worth of pay or perhaps two, but that will be money you don't have to come up with later on.  Just be sure to save every penny toward future expenses and make sure your municipality/HOA allows you to hold a yard sale.  Mine charges a $5 permit fee to hold one.

Have any other great tips to share?

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