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As federal employees, there is a risk of being furloughed or facing a government shutdown, which can cause financial strain. We hope we can provide guidance on how to build and maintain an emergency fund to prepare for unexpected expenses or loss of income. It will also discuss strategies to maximize savings and manage cash flow.
As a federal employee, there are many benefits to your job, such as job security, competitive pay, and excellent benefits. However, one risk that federal employees face is the possibility of being furloughed. A furlough is a temporary unpaid leave of absence that an employer may require employees to take due to budget constraints, economic downturns, or other reasons. The longest furlough in US history was the 35-day shutdown of 2018-2019, which led to 380,000 federal workers being furloughed, and an additional 420,000 workers were required to work without any known payment dates during this period, forcing many to find other paid work or protest against the extended period of the deadlock.
Furloughs are a common practice in private and public sectors, and federal employees are not immune to this risk. In fact, federal employees have experienced furloughs in the past, including during the government shutdowns in 2013 and 2018-2019. During a furlough, federal employees may be required to take unpaid leave for a specific period, and they may not be able to perform any work-related duties during this time.
There are several risks associated with being furloughed as a federal employee. The most obvious risk is the loss of income. When federal employees are furloughed, they are not paid for the duration of the furlough. This can be particularly challenging for employees who are living paycheck to paycheck or who have significant financial obligations, such as a mortgage, car payments, or student loans.
Another risk of being furloughed is the potential impact on employee morale. Federal employees are dedicated to their jobs, and they take pride in their work. Being furloughed can be demoralizing and can make employees feel undervalued and unappreciated. This can lead to decreased productivity and motivation, which can have long-term implications for the organization.
In addition to these risks, being furloughed can also have an impact on an employee's career prospects. When an employee is furloughed, they are not able to work, and their opportunities for professional development may be limited. This can make it difficult for employees to stay up-to-date with changes in their field or to acquire new skills that could be valuable for their career advancement.
There are also potential risks associated with furloughs for the organization itself. When employees are furloughed, there may be delays in the delivery of critical services, which can have serious consequences for the public. This can lead to decreased public confidence in the organization and may even impact the organization's reputation.
To mitigate the risks associated with furloughs, federal employees can take several steps. One important step is to establish an emergency fund of 3-6 months. Having a financial safety net can help employees weather the financial impact of a furlough. This does not need to necessarily be cash in a savings account but assets that can be liquidated quickly such as stocks or ETFs in a brokerage account. Be mindful of market losses or taxes that may due if you need to liquidate quickly. In some cases, a Roth IRA can be suitable as well under the right circumstances. This is where good financial planning comes into play.
Then make sure you have a good budget. A budget that shows areas that can be cut in an event of a furlough. Cut the cable or television streaming services. Lower your cell phone bill. Get rid of subscriptions. Start meal planning so you can slash your grocery budget.
Get to the bare bones of your required expenses. Things that need to be prioritized are food, utilities, shelter, healthcare, and transportation. Another step is to stay engaged with the organization during the furlough period. This can involve keeping up-to-date with organizational news and staying connected with colleagues.
For further ready about furloughs visit www.opm.gov or read their 51-page pdf Guidance for Shutdown Furloughs.
In conclusion, being furloughed as a federal employee can be challenging and stressful. Make sure you have an emergency fund of at least 3-6 months on hand along with a clear budget. It can have a significant impact on an employee's finances, career prospects, and morale, as well as on the organization itself. However, by taking proactive steps to prepare for a furlough and staying engaged with the organization during the furlough period, federal employees can mitigate these risks and come out stronger on the other side.