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The sequester is looking more likely, so what are you doing to adapt if your paycheck is cut 20%? Here are a few things you can do:

  1. Revisit your budget. Develop a new budget baseline. Include the things you absolutely must have. This means your rent/morgage, utilities, groceries and transportation budgets. Track them with Mint. What you can't track, you can't cut.
  2. Cut your luxury expenses. Calculate the amount of money you spend on wine, beer, and/or cigarettes per month. You will be very surprised how much you probably spend.
  3. Find a part-time job. Work at part-time at Starbucks, McDonalds, whatever. If you think this too low of work for you, too bad. What is more important to you -- Your pride or providing for your family? That should answer your question. If it doesn't, you have no business having a family.

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Tags: budgeting, sequester

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Comment by Trish Bachman on March 5, 2013 at 10:23am

Ruthanna Gordon's post is perfection.  

Amount I spend on wine, beer, or ciggarettes a month?  0 dollars.  I suspect that for those of us already living paycheck to paycheck, the furlough means deciding which bills to put off for another month based on whether or not they're listed on a credit report.  Or taking out a TSP loan or a new credit card.  Those of us living paycheck to paycheck are already well-versed in minimizing luxury goods and services.

 

And I have to say, and please excuse me for being harsh, but the advice in number 3 sounds very condescending.  Are you implying that ANY of us in this situation are really too proud to take on a service job?  Is that really your impression of us, as a whole or as individuals?  Wow, that's just very, very hurtful.  I'm staggered by that. I feel that perhaps you may be speaking from a bit of a high horse - if that's not your intention, then maybe you should rethink how you word things.

 

 And yes, I've applied to all of the local restaurants and so far no one has wanted me because my education and my current federal employment mean that I am statistically not as likely as other employees to stick around, even though I don't believe that to be true in my particular case.  That said, there are other ways to earn extra money in a community - I recommend looking around on the frugal sub-reddit (reddit.com/r/frugal) - there are a lot of posts there on how to earn extra cash in non-traditional ways.  Just be sure to check out your HR's guidelines on outside employment to stay on the right side of the law. 

Comment by Janina Rey Echols Harrison on March 3, 2013 at 9:00am

Wow Julie.  I have planned on the possibility of my son moving home with his family.  They keep cutting his hours and he keeps fighting with them to get them back.  Someplace along the line as this economy tanks, they will have to do something. 

We were in the last crunch where mass layoffs were happening, kids at home, caring for my husbands elderly parents, my grandparents and working full time.  Looks like it is happening again, except this time it is my parents and they are fading fast.  I feel for you but love your attitude.

My brother just came back from North Dakota looking for jobs. He will have to live away from home but he got calls and will probably go there end of March to start work. Lots of construction  building housing and stuff for the fracking industry.  He has had to do this before and arranges to rent a house with other workers to cut expenses (I guess they make it like a bording house with as many beds in each room as resonable.)  My Son-in-law works away from home and comes home on weekends. 

This is going to tear lots of families apart.  Fathers not seeing their children growing up.  Missing out on big family moments, balls games, and such.

Comment by Julie Chase on March 2, 2013 at 9:46am

Down here at the bottom of the food chain and outside the beltway, I plan on dropping my TSP down to 5%.  My husband retired a year ago CSRS, thank God or there would be two of us.  Our tax returns have been banked.  Both cars have been paid off for about 3 yrs now.  We only have liability insurance on both cars.  We are paying our sons student loan, because he hasn't found a job in two years.  He has applied to fed jobs, state jobs, private sector (he has two degrees) and just recently, in Jan., he applied for a fed job, only to have the door slammed into his face as the hiring freeze "suspended" that billet, as he was told, it was "unfunded".  So basically, he has no health insurance, wonderful, eh?  My son in law got out of the service fall of last year and as a vet one would think he would be a shoo-in for a fed job, guess again, hiring freeze...viola!  My daughter is working retail and her hours have been cut to avoid the Obamacare that is coming up. Our household is getting ready for the boomerang kids to return home, which is fine, as we had all discussed this last spring.  If my daughter and son in law, can no longer afford to stay in their apt., they will move in with us. Obviously, my son can't afford to move out.  My 84 yr old mother is doing fine at the moment, but we are ready to step in and care for her if the need should arise.  I am a GS5, yep, bottom of the food chain here.  Blue-collar girl born and bred.  We will survive.  No jumping out of corporate building windows for us.  We will hunker down and blend our family and work through it with the little we have.  I have been to several retirement parties in the last 6 mths., about 2-3 a month.  Those positions are not being filled.  This is reality.  Once can sugar coat it all they want, but this is reality.  Our Marines, Soldiers, Sailors and Airman will not be getting the support they need by the civil service organizations that keep them flying, floating, rolling and maintaining their housing/barracks.  Planes will parked along the fence, ships/subs will be dry-docked, fleet vehicles and MHE will be parked, and if a the heating goes out in the barracks every Friday, no one will be there to fix it.  Union rules, "feds cannot be subject to call back on furloughed days."  The day to day "support" will dwindle. The NAF support for morale/welfare of our Marines will be silenced one day every week, as they too are affected.   This isn't a chicken little scenerio, this is came to us in the form of a memo, detailing what the impact "will be", not what it "could be".  Now that all the i's have been dotted, the "t's" crossed, here, in our little corner of the fed world, we will hold on to each other tight and whether the storm together.  

Comment by Janina Rey Echols Harrison on February 27, 2013 at 10:48am

OK, it is hard enough to hit the magic number for retirement.  If you stop or even drop your TSP saving rate, you could be in deep trouble later.   

If you are not a member of a credit union, join.  $5-10 a paycheck gives you great rates on personal loans and car loans.  My parents started accounts for my children putting in the minimum allowed so when they reached an age where they needed a car, they had a down payment and great rates.  My son still does all his banking through the CU.

I live in a rural area now, but when I lived in the city I grew a lot of vegetables and herbs mixed in with my decorative plants.  There are a lot of dwarf fruit trees, fruit vines and vegies you can grow in pots and will produce the first year.  Kids will eat more fruits and vegies if they grow them and there is a lot of science involved in growing plants.  You can plant hibiscus that you can use for tea.  You can prune citrus trees into hedges instead of planting only ornamental bushes.  In France they have hedges of hazelnut bushes.  There are a lot of edible options, why waste real estate on ornamental only?

More municipalities are allowing chickens.  2-3 can provide about a dozen eggs a week.  You don't need a huge elaborate chicken coop.  The coop can be quite small, just a place to lock them up safe for overnight and nest for each hen.  They will keep bugs out of your garden and eat most all your kitchen scraps.

Everyone else hit the more obvious options, so these can save you a lot of money and give you quite a feeling of accomplishment.  

Comment by Terrence (Terry) Hill on February 26, 2013 at 1:38pm

Good point on the matching of TSP contributions.  Another option is to borrow from TSP.  The loan rate is the rate of the G fund, which is very low, and there is a low fee (versus a home equity loan).  It is also pretty quick. Also, you pay yourself back.  For the details, go to

https://www.tsp.gov/planparticipation/loans/loanBasics.shtml

Comment by Jeffrey Levy on February 26, 2013 at 1:24pm

Good post.  I agree with both Ruthanna and Terrence, and I've done the things Terrence suggested.  My one caution re: TSP is don't drop below 5% so you get the max 5% match.

I also suggest looking at whether you can cut back on:

  • college savings - borrowing now to avoid borrowing later might not be a good idea
  • cable vs. Netflix (do you need both, or either?)
  • cell phone - can you use a $20/month prepaid plan instead of a $50-$100 smartphone?

Then there are a few ideas for borrowing at the current very low rates to get you through the challenging times (disclaimer: I'm just identifying options, not recommending anyone do anything or giving financial advice):

  • refinancing your home. It's easier than you'd think, and rates are still crazy low. Not only might you reduce your monthly payment, but you can finance the prepaid costs like the first month's mortgage, so you don't have a mortgage payment one month.
  • taking out a home equity line or loan (learn about the differences between those before you commit!). Rates are low and your bank might even be able to set it up over the phone.
  • getting a new credit card with 0% interest rate and a 0% balance transfer for up to 18 months (read the fine print to understand the details of each offer).  Just search for "0% card" or "0% balance transfer card." Two points: 1) You'll usually pay a 2-3% balance transfer fee (but at least out there right now has no fee, so it's literally free to borrow money for a year), so just think of that as the yearly interest if the 0% transfer rate holds for a year, and 2) don't use the card for purchases because many times your payment will go to the 0% stuff and you'll accrue interest at the normal high rate on the purchases.  Just get the card, transfer the money, and stick the card in your filing cabinet. Then remember to either transfer it again to another 0% card before the promotional period ends or pay it off.

Also, set up your mortgage and credit cards to be paid automatically from your bank account.  You don't want to accidentally forget to pay something.  Many credit cards are set to radically increase your rate if you miss a payment on other debts.

Finally, think about selling some investments.

Good luck, everyone!

Comment by Terrence (Terry) Hill on February 26, 2013 at 10:33am

Good idea to post cost-savings techniques Sterling.  I have personally been saving to compensate for the furlough for the last year, and plan to save money otherwise dedicated to commuting, but some other ideas may include:

  • Reduce your TSP allotment until after furloughs resume.
  • Reduce your financial, HSA, or other allotments.
  • Reduce expenses, where you can, especially entertainment/restaurants.
  • Invest the extra time in your family, health/exercise, and volunteer activities
  • Save your tax refund.
  • Use the "extra pay period" in April to invest in savings.

I'd love to hear other ideas for saving money during the upcoming furloughs.

Comment by Ruthanna Gordon on February 26, 2013 at 10:09am

Please excuse my being critical, but these suggestions don't seem well-suited to the current situation.

I'm toward the higher end of the pay scale, and I'm quite certain I don't spend 20% of my budget, or anything close, on luxuries.  Most months I buy a couple of books, and go out for dinner once or twice--the rest goes to rent, car repairs, and rapidly growing kids.  Most of my colleagues seem to me to be very practical people, and I suspect very few are blowing their budgets at happy hour.  Especially those with families.  Yes, we can all cut back a little, but for most people 20% inevitably eats into savings and/or necessities.

Likewise, I think we're all willing to do what we must to provide for our families.  However, times are tough everywhere, and Starbucks, McDonalds, etc., are already overwhelmed by applications from people who aren't just waiting for their primary job to return to full time.  If I were a McDonald's manager, I wouldn't hire a furloughed government employee when I could have someone experienced in food retail who'd stick around a few years.  Freelancing in something that uses your skills, or checking whether your favorite non-profit would like a temp worker with government experience, seem both more pleasant and more plausible.

A 20% pay cut is not a simply-addressed budgeting problem, particularly at a time when every sector is going to be hit hard. Now that I've used up my criticism quota, here are a couple of ideas for other people to tear down:

-Being surrounded by other people in the same position is actually a resource.  Let's talk about how we can share expenses.  For those who drive, carpooling or even car-sharing might be worth the extra inconvenience now, if they weren't before.  Renting out spare rooms to those who can't afford to keep their own studio after the cuts, likewise.  We can help out fellow feds with moving, yardwork, car/house repairs, and other services that normally cost money.  We've all got some of these skills, and are going to have more spare time than usual.

-Go part-time vegetarian--if you want to feed your family good, nutritious meals, it's much cheaper than meat.  (And if, like me, you're really attached to your free-range organic animals, buying in bulk from a farm and sticking a side of beef in a Craigslist chest freezer is *much* cheaper per pound than Whole Foods.)

And none of this, of course, is helpful to those already living the vegetarian, public-transit-mediated, sharing economy lifestyle.  This kind of cut is actually, legitimately a problem regardless of how good you are at trimming expenses.

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