Now that “Storm Sequester” has hit, potentially cutting billions from the federal budget, Americans are experiencing different levels of its impact. Some are right in the storm’s eye, enduring hard and immediate effects. Others are experiencing the sequester as a bout of bad weather that they need to plan around. For most Americans, however, the sequester may be just another depressing report on the evening news—creating a sense of worry and uncertainty but no local impact.
Whatever your zone, CFP Board has some advice to help you weather the storm:
Zone 1: Federal workers and contractors who could be furloughed or laid off:
- Devote your extra free time to finding ways to effectively manage your finances despite a smaller paycheck.
- Cut approximately 2 percent from your expenses for every week on furlough. Set aside what you’ll save on commuting, lunches out and child care.
- Arrange to make payments to any loans you may have from a federal Thrift Savings Plan or 401(k).
Zone 2: Consumers who are impacted by higher costs and more wait time:
- Expect upticks in food prices. Change your consumption habits and consider eating less meat and more locally grown vegetables to curb the rising costs of chicken and beef.
- Plan in advance to avoid longer security lines at the airport. For a small fee, frequent fliers can apply for a “Pre-Check” clearance to bypass the standard security process.
- Parents and college students should establish a plan for managing college costs earlier on in the process. Rising loan origination fees may result in decreased availability or more costly financial aid, and tax credits and deductions for college expenses could disappear or be pared back.
Zone 3: Those who are (seemingly) impact-free:
- Heed the overall warning that the sequester brings. Take more responsibility for your health, retirement security, and readiness to respond to a tough economy.
- Update your resume and keep your skills sharp and current in case the cumulative effect of the sequestration results in another economic recession—and necessitates a job search.
- Budget, make savings a priority, and establish an emergency fund.
Contact: Dan Drummond, Director of Public Relations, 202-379-2252, firstname.lastname@example.org, @CFPBoardmedia
The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.
Additionally, If you are looking for additional help, seek help from a CERTIFIED FINANCIAL PLANNER™ Professional that can look at your individual situation holistically