While the employment picture is clearly improving, the specter of furloughs stemming from Uncle Sam’s automatic spending cuts threatens to disrupt the finances of federal workers.
If you’re a federal worker and haven’t been furloughed yet, it would be a good idea to shore up your finances now in case you get a furlough notice.
“The only way to prepare for a furlough is to have an emergency fund,” said Thomas Murphy, certified financial planner at Murphy & Sylvest in Dallas. “Those in professions which are prone to furloughs, such as the airline industry, need at least six months of living expenses, and the longer, the better.”
Under a law passed in 2011, $85 billion in automatic spending cuts for this fiscal year were set in motion on March 1. The spending cuts are likely to lead to layoffs in some areas of the government and furloughs in others.
A furlough is a temporary “nonduty, nonpay status” for nondisciplinary reasons, according to the U.S. Office of Personnel Management. In other words, you won’t get paid for the days you don’t work.
Being furloughed one day a week is the equivalent of a 20 percent pay cut, he said.
The amount of time — and pay — workers stand to lose is not set in stone, said Eleanor Blayney, consumer advocate at the Certified Financial Planner Board of Standards.
“There is the possibility that a budget resolution will emerge this year, and/or that government agencies will find less drastic workarounds for their employees, other than slashing 20 percent of their pay across the board,” she said.
One note of caution if you’re thinking about taking another job during your furlough:
“While on furlough time off, an individual remains an employee of the federal government,” said the Office of Personnel Management’s guide to furloughs. “Therefore, executive branch-wide standards of ethical conduct and rules regarding outside employment continue to apply when an individual is furloughed.”
There are “specific statutes that prohibit certain outside activities, and agency-specific supplemental rules that require prior approval of, and sometimes prohibit, outside employment.”
Before taking another job, check with the federal agency you work for to see if that would be a problem.
One comfort for furloughed employees is that they will keep receiving health benefits as long as they continue to pay the insurance premiums.