How to Prepare for a Furlough
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Last week I posted about saving money during a government shutdown. This is to help the many people that are struggling to make ends meet currently while not being paid. The reality of our government is that a furlough can happen at any time and with little notice. Not enough to prepare at least.
That’s why I’m sharing with you how to prepare for a government furlough because realistically, it’s going to happen again. Why not take this experience and learn from it. Make sure that you’re never in a situation that you are struggling again.
Yes, this is the longest government shutdown we have ever had, but it definitely is not the first. This means that we can and should prepare for this because it’s going to happen again.
Realistically, everyone should follow this advice because it makes for financial security in the event of something unexpected happening. Anyone can have a situation arise that throws their world upside down leaving them scrambling, not just from a furlough.
1. Track your expenses & make a budget.
The very first thing you need to do is track your expenses for a month and create a budget. By tracking your expenses, you are seeing exactly where your money is going. This allows you to easily see your expenses in a given month. It also makes it much easier to determine your expenses that are not fixed, like groceries.
Once you have tracked your expenses, you need to create your budget. Start with your income and then list your fixed expenses, followed by your other expenses like groceries. I recommend a zero based budget, you can find a post that outlines how to get this set up here & how to budget on a variable income here. I also have created some easy templates on Google Sheets to track your expenses and create your budget, with the formulas all done for you!
2. Save your emergency fund for a furlough.
Once you have created your budget, all of your leftover money needs to be heading towards your emergency fund. This is why I recommend a zero based budget, at the end of the month, you zero out your budget by sending all left over money to whatever money goal you are working on. This will allow you to quickly save your emergency fund because you have budgeted every penny in your budget.
Any extra money you have come in during this time, like refunds or bonuses, goes to your emergency fund. This should be kept in an account that is somewhat easy to get to in the event of an emergency, I keep mine in a savings account with Ally. I recommend at least 3 months of expenses in your emergency fund, but you can find out more information about it here.
3. Lower your minimum expenses for a furlough.
The best part about budgeting is that you can easily see exactly where your money is going every single month. The goal is to get your required minimum expenses to be as low as possible. The reason this is important is because when you are in another furlough situation, you don’t want to need to use your emergency fund. By having low or no required payments each month you are allowing yourself to go longer without using it.
There are many ways to lower your expenses, I wrote all about it here, but I also recommend finding ways to have low housing costs and minimum to no debt. Paying off your debt means that you won’t owe money when another furlough happens, you’ll be able to stretch your money much further.
Paying off debt obviously doesn’t happen over night, I’m still paying off my $201k after over 3 years, but I am down to $88k now. It takes time, but with a plan in place, you can do it. I recommend creating a debt payoff plan using undebt.it, this will allow you to create a plan and help you execute it. Another recommendation would be to refinance your student loans for a better interest rate, you can use my referral link to get $200 when you refinance!
We know that another government shutdown will happen and I want you to be prepared for it! By executing these steps, you will be prepared for when you experience another furlough and won’t be put in a terrible situation. I’d love to hear from those impacted by this government shutdown and how it has affected you.