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ACS - Planning for Furloughs
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ACS - Planning for Furloughs

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  • Today’s object is First, I would like to quickly go over what are sequestration and furlough. Then, what is the impact of furlough.Lastly, I am going to give you some tips to prepare for furlough.
  • Found this cartoon. It says the definition of furlough is mandatory time off.
  • Ok. Some facts about furlough is…
  • Ok, so Sequestration is happening. What should we do now?1,2,3,4I am going to tell you more details about each step.
  • Simplist way to calculate your pay after furlough is multiplying 80% by your take home pay for 11 pay period.
  • Adjusting or stopping fancy habits - How many of you go to Starbucks to buy a coffee? In financial field, There is something called “latte factor”. If you go to Starbucks and buy $5 latte 5 days a week, it will cost you $25. for month, $100, for year $1,200. It’s a lot right? You don’t realize this since is it just a few dollars. –if you are smoker and thinking about quitting, quit now..it is good time to quit.Eating out less – when I do the budget with clients, eating out is the one of biggest spending category. Bring lunch..Cook more..all common sense, right?Getting a second/part-time job – instead of spending less, you have a choice of making more. Have a second job or part time job while you are off.Selling something – It’s spring clean-up time, take a look at your closet or garage. Post things on line, do garage sale, or take some to consignment stores.Keeping a good health, home and car maintained – the reason I put this here is during this furlough period, we can’t really afford to have a big unexpected expenses. Therefore, maintaining good health, home and car is very important.
  • Buy used – if you need to buy things, consider thrift shops.. JBM-HH thrift shop has a great selections. We even have a separate boutique shop.Reviewing insurance policies- Remember GeicoCommericial. This lizard guy? 15 minutes can save you 15 percent or more on car insurance. I don’t work forGeico, but it may be true. Spend a few minutes to shop around, you may save some $. Homeowner’s insurance too. Or review actual policies too. Adjust deductibles or liabilities if you need to temporarily.Reviewing cell phone plans – last year, I was looking at my phone bill and I realized I was only using half of the plan minutes and so many roll over minutes. Some of roll over minutes were even starting to expire. I changed my minutes plan. I saved a few hundreds dollars right then. And, if you have expensive text plan, consider to get ride of them or at least reduce it, there are so many free apps out there you can text each other for free. I don’t have text plan. Even if I am charged for a few txt msg by accident, it is still much cheaper than paying $10 -15 per month. Take a close look at your cell phone bill. When I do the budget with clients, it is amazing how much they spend for their cell phone plan.
  • That means you may get less tax return, but..we need to live today to live tomorrow, right?When you don’t have a money, what people do is using a credit card. Indeed it is really easiest thing to do, however using credit card will only make the situation worse. If you’ve been good with credit card company, been paying at least minimums on time, call them, explain your situation and ask to lower interest or freeze or do something for you. They will listen to you. Be nice, though. There are two ways to contribute to TSP. By certain percentage or by specific $. If you set it as specific percentage like 5%, you don’t need to do anything, since it will adjust based on your reduced income. However, if you set it as specific amount such as $500 per pay period, you may want to adjust it.
  • Transcript

    • 1. Financial Planning for Furlough Jin Lim, CFP® Financial Counselor Army Community Service(ACS)
    • 2. Objectives What are “sequestration” and “furlough”? How does furlough affect us? How can we prepare for furlough?
    • 3. Sequestration Mandatory reduction in federal budgetary resources of all budget accounts that have not been exempted by statute. DoD expects to receive $46 billion less than it expected through the remainder of fiscal year 2013. DoD has determined that planned furloughs of civilian employees is required should sequestration occur. By law, sequestration will last 10 years and cut a total $1.2 trillion (half from defense, half from non-defense).
    • 4. Furlough
    • 5. Furlough Places an employee in a temporary non-duty, non-pay status The six-month DoD FY13 civilian furlough is estimated to save nearly $5 billion. Fed employees may lose 22 days of work overall, or 20% of their pay for up to 22 weeks if losing one day of work per week, likely starting late April. For more information www.opm.gov/furlough/ click on "Guidance for Administrative Furloughs" and "Supplemental Guidance for Administrative Furloughs."
    • 6. What should we do now?1. Identify how much income you are going to lose as a result of furlough.2. Set up a budget that will let you know (1) what expenses to cut temporarily and (2) what expenses to cut back on now so that you can save “furlough fund”.3. Find quick ways to raise money to help cover your bills.4. If you can’t cover the bills, choose to pay the most import bills first.
    • 7. 1. Identify impact of “furlough”Furlough impact estimate One work year = (26 pay periods * 80 hours /pay period) = 2080 Hours 22 days of furlough = (22 days * 8 hours/day) = 176 hours Impact of furlough = Total FY2012s Pay * (176 furlough Hrs/Total 2080 Hrs) Estimated FY2013 payroll = Total FY2012 pay - Impact of furlough<Example> Joe, annual pay $50,000 Impact of furlough to Joe = $50,000 * (176/2080) = $4,231 Estimated FY2013 payroll = $50,000 – $4,231 = $45,769 Bi-weekly pay before furlough = $50,000/26 weeks = $1,923 Bi-weekly pay after furlough = {$1,923 * (8/10 days, or 80%)} = $1,538 Impact of furlough to Joe (bi-weekly before tax) = $385
    • 8. 2. Set up a revised budget
    • 9. 3. Find ways to raise moneyStart by: Saving immediately before furlough starts Adjusting or stopping fancy habits Eating out less Getting a second/part-time job Selling something Keeping a good health, home and car maintained
    • 10. 3. Find ways to raise moneyStart by: Postponing large purchases or big vacation plan Buying used Filing tax now if you are expecting tax return Reviewing insurance policies Reviewing cell phone minute plans
    • 11. 3. Find “more” ways to raise moneyTemporarily:1. Adjust W-4 (withholding) – temporarily increase # of exemptions to withhold less tax.2. Pay minimum on credit cards and watch out using credit cards. • Call credit card companies to reduce interest rates or do something for you3. Review/Adjust TSP contributions. • Specific dollar amount vs Percentage contribution • If contributed more than agency matching %, reduce to matching% • Consider loan – only for emergency (interest rate, processing fee)
    • 12. 3. Find “more” ways to raise moneyTemporarily:4. Review/Adjust ROTH IRA contributions. • Stop automatic contribution or reduce contribution amount • Partial withdrawal - only for emergency (tax-free withdrawal up to contribution amount)5. Review/Adjust funding for college education. • Stop automatic contribution or reduce contribution amount6. Cash value from permanent life insurance policies. • Take a loan out of cash value - only for emergency (interest charge, no tax penalty)
    • 13. 4. If you still can’t cover the bills,Choose most important bills first: • Always pay family necessities first. • Food, utilities, prescriptions, gas.. • Secured debts are high priority. • Mortgages(rents), car loans, or any debt that has collateral • Unsecured debts are low priority. • Credit cards, medical bills…
    • 14. Remember Keep a positive attitude during this time. You still have benefits. Take advantage of extra time (update job skills, resume) Find free (or low-costs) events or resource to enjoy yourself
    • 15. Preparation is the key!
    • 16. Any Questions?

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