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Dealing With Company-wide Pay and Benefits
Cuts
Even as the economy shows a few glimmers of improvement, most
economists expect some continuation of job, pay and benefits
cuts to continue throughout the year. What can you do about
these moves, even if they're still in the rumor stage?
Hold a family meeting. Talking about money issues is a
delicate balancing act between teamwork and fear, but there are
already plenty of TV commercials showing Dad or Mom losing their
jobs and kids rising to the occasion. As awful as economic
circumstances have gotten, there's a spirit of teamwork in the
air, and families should harness it. Sit down, discuss what's
going on, and solicit suggestions equally on the best ways to
conserve excess and luxury spending, save more money on
essential spending and find an appropriate treat for everyone
when trouble lifts. And if your kids are working age, let them
get a job to help with their expenses as long as it doesn't
affect their schoolwork.
Get some advice. Don't wait until a crisis descends to
get some useful strategic advice. A Certified Financial Planner™
professional will be able to help you with spending issues, but
they will also be able to help you shore up your retirement
investments if your company decides to alter its traditional
pension plan or cut or eliminate matching contributions to your
401(k).
Create a budget and stick to it. Whether you build one
in a family meeting or in front of a computer screen by
yourself, it's time to budget. Analyze every cent of spending,
build a budget of mainly essentials and a few scheduled treats
and swear to live by it to the letter until your employer
restores pay and benefits or you find a new job. And when happy
times come back, do one more thing — see if you can still stick
to that budget so you can accumulate an emergency fund and
additional savings. You'll be in a much better position when the
next downturn occurs.
Boost cash flow through simple withholding changes.
Talk to your tax professional about whether it makes sense to
boost your withholding allowances to make up for that percentage
of lost pay. If you find you're claiming too many allowances,
you can send in an additional tax payment later.
Renegotiate what you're paying for insurance. If you
have an emergency fund, raise your deductibles on home and auto
insurance so you can save on premiums. If your car is old,
consider dropping that collision coverage and make sure you have
your policies consolidated with one carrier because that can
save you money. One more thing to consider — do you absolutely
need that extra car? Selling it and car pooling or shifting to
public transportation can save you thousands a year.
Start haggling over bills and fees. Sick of that cable
bill? Either cancel it or tell your provider you're going with a
competing satellite or phone-based TV network and see if you can
get a lower rate. Start pre-shopping all purchases online, and
if you buy online, use discount codes to save money on your
purchase and on shipping. Start asking about pricing on elective
medical procedures among a range of doctors. Wherever you buy a
product or service, make it a policy to see if there is a
cheaper way to do the transaction. The worst thing the merchant,
company or professional can say is "no," and you can
choose whether to stick with them or go elsewhere.
Refinance your mortgage. While rates are low, lock in
a rate cut of a percentage point or more and lop at least $200
or more off your monthly payment. You might gain some tax
advantages from that move as well as cover a good portion of
your pay cut. And if you find your company will be cutting its
match to your 401(k) plan, that might not be a bad place for the
surplus funds to go either.
Downsize your home. If you can sell your current
residence, this might be a good time to downsize into a smaller
home that gives you more equity and a lower mortgage payment.
Start buying used. Can you really tell whether someone
wore that blouse that originally cost $300 that you picked up
for $15? Are used DVDs that much harder to watch than new? Start
getting familiar with Internet auction sites, local flea
markets, consignment shops and thrift stores to find ways to
stretch a budget farther.
Plan a job search. You might absolutely love where you
work and are willing to be a team player toughing out the
downturn. But fortunes can deteriorate as well as improve at
companies with severe cutbacks, so it's wise to spruce up that
resume while you have time to think about it and start
networking just to see what's going on in other parts of your
industry, your city, or possibly in other cities. And if you can
do it quietly, start lining up respected professionals to
provide references.
July 2009 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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