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How To Survive A Furlough Or An Unpaid Leave

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The US government has been on a partial shutdown for a week now with no end in sight. The bozos running the country are still bickering AND they are getting paid while 800,000+ people deal with having no income. Hopefully, Congress will get their act together soon and pass a budget before the US debt default date on October 17th. The economy will grind to a halt and we’ll all be feeling the pain then.

Being on a furlough or an unpaid leave is not necessarily a bad thing. I’m a huge advocate of taking some time off so you can test drive your retirement. This is a great opportunity to see how ready you are for early retirement. If you are prepared financially, it should not be difficult to weather a short furlough.

  1. Emergency Fund – Most families should have 1 to 3 months of their living expense in an easily accessible account. This fund is for financial emergencies such as fixing a car or getting furloughed. This fund will prevent you from sliding into debt when there is a big bill to pay.
  2. Multiple Income – Don’t depend on one paycheck to provide for the whole family. Each able-bodied family member should bring in some income to help with the expenses. This recent furlough shows us that it’s no longer practical to rely on just one income. We all need to figure out how to generate more income from different sources such as dividend stocks, P2P lending, rental properties, and maybe a part time job.

These two things are essential to surviving a short disruption in pay. I’m sure a large percentage of the 800,000+ people don’t have these financial safety nets though. What if you’re living paycheck to paycheck? This will be a much larger setback, but you can still survive it.

How to survive a furlough or an unpaid leave

Don’t go to the pumpkin patch. It’s so hard to avoid spending money there.

Cut your expense

This shutdown could easily last another 2 weeks and you will need to reduce your expenses as much as possible. Get all your bills together and call to see who will give you a break. For example, Hyundai is deferring car payments for furloughed workers. You can probably get a discount from your cable company or just reduce it down to basic service for the duration of the furlough. Now is the time to see where you can trim the fat. Cutting back on entertainment isn’t always easy, though.

People tend to spend money when they have free time, but you have to be conscious of that and avoid it. If you don’t have money to spend, then you need to avoid shopping, entertainment, eating out, and other expensive activities.

Now is your chance to try my favorite hobby – unearthing free stuff. They are out there and you just need to find them. Here are just a few ideas.

  • Books and movies from the library
  • Free lectures from local universities and clubs
  • Free days at the zoo, museums, gardens, and other local destinations
  • Free concerts and other local festivals. It’s actually hard to avoid spending money, especially on food, at these local festivals. Consider packing a lunch or eating before you go if money is tight.

The furlough could be a blessing in disguise. This is the opportunity to reduce your monthly expense for the long term. It’s easy to keep spending money when you have a paycheck coming in. I bet a lot of people can cut their expense quite a bit and adapt to a simpler lifestyle.

Generate some income

No matter how much expense you cut, you’ll be in trouble if your family doesn’t have any income. You need to raise some short term cash.

  • Sell some crap. US households probably have the most crap per capita in the world. Even a frugal family like ours has a bunch of stuff lying unused around the house. Gather all these things up, take some photos, and sell them on Craigslist or EBay. I just listed a bunch of toys that are taking up space and hopefully they will be gone soon.
  • Get a part time job or two. The local pizza joints always need a delivery person. Amazon is hiring 70,000 seasonal workers this year. See if you can get a seasonal part time job at your local department stores. Search Craigslist for your local episodic “gigs.” You have to be pretty selective on Craigslist, though. There are a ton of part time jobs out there. Who knows, you might find a good part time job that you can keep doing even when the furlough is over. It’s a great way to pay off debt or to generate more income for investments.
  • Rent out a room/parking spot. You can rent out a room through airbnb.com or find a roommate locally. If you have a desirable parking spot, see if you can rent it out for a month or two.
  • Become a robot – Amazon mechanical turk. The pay is terrible and the job is deathly boring, but if you have too much free time and need money, then why not try it out?
  • Sell some plasma. There is always the last resort of selling some blood and other bodily fluids… (Yuk!) You can also sign up to do clinical research, but I think that takes a little time. Besides, many of the research organizations are not accepting any new patients for their clinical trials for the duration of the government shutdown.

Borrow some cash

Ugh! I hate recommending this, but sometimes you just need a little hand to get over a rough spot. Hopefully the furlough will be over soon, so it’s just for a short term.

  • Hit up family and friends. Write up a contract and promise to pay them back with a minimal interest when the paychecks start up again.
  • Peer to peer lending. If you have good credit and investors like your profile, then you can get a loan funded in about a week. The rate can be pretty high though so you should pay it back as soon as possible.
    • Apply for a loan at Prosper.com
    • Apply for a loan at Lending Club
    • Sign up for more credit cards… [I thought this would be a bad idea!]
    • Bring some stuff to the pawn shop. Actually, I think it’s better to sell them online on  your own than bringing them to the pawn shop, but it is a bit more hassle.
  • Apply for some credit cards. Another terrible idea, but this should get you over a short furlough.
  • Pawn some stuff. You won’t get much for your stuff and the rate is pretty high. You can get your stuff back once the paycheck come in.

Borrowing money to pay the bills is a terrible idea that can lead to a downward spiral. It’s best to avoid borrowing more money unless it’s really the last resort. This illustrates the necessity of the emergency fund.  Everyone should have some liquidity stashed away to avoid being in this situation.

Stay sane

Being furloughed through no fault of your own is tough. One day you are working and the next, you’re cooling your heels at home. You have to keep upbeat and stay busy so you don’t give in to the negative emotions. The financial impact is difficult, but the psychological impact is also real. Just tough it out for a couple more weeks and hope the shutdown will be over soon. Call your congressman and tell them to do their job!

It’s not all bad though. Treat this as a preview to early retirement and you’ll see if it is for you. Some people aren’t cut out for early retirement. Those people should continue to work or find other opportunities until they are really ready to stop working completely.

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{ 35 comments… add one }

  • Frihetsfonden October 7, 2013, 12:35 am

    Hi Joe,

    great post as always. I find your blog really inspiring and motivating for me.

    I’ve just started my own blog in Swedish but you can find a translate button to the left. It would be great to have you visit if you find the time.

    Best Regards

    • retirebyforty October 7, 2013, 10:59 am

      Thanks for the complement. Good luck with you blog!

  • Justin @ RootofGood October 7, 2013, 1:02 am

    Joe, good tips as always. For those furloughed workers that are in good financial shape, this will probably be looked back on as some time off from work and a (hopefully) short break from the day to day stresses of working.

    For those that spend all their income and are living paycheck to paycheck, it might be a good idea to take all the new found free time to try to streamline your finances a bit. Look at ways to cut your expenses without hurting your lifestyle much. Joe, your suggestion to seek out free things to do is a great idea.

    • retirebyforty October 7, 2013, 11:02 am

      Mrs. RB40 knows some furloughed people who are living paycheck to paycheck. It’s going to be tough on October 15th with no paycheck coming in.

  • moneystepper October 7, 2013, 1:23 am

    As you say, borrowing cash should be the last resort, but is all too often the easy way out for people. This is why people get, and stay, in debt!

  • Maverick October 7, 2013, 5:23 am

    The government furloughed workers will ultimately GET PAID. The private industry furloughed workers will NOT GET PAID. No wonder the general public looks down on government workers.

    • Chris October 7, 2013, 6:30 am

      Why would anyone look down on a government worker? These are all normal people with families and aspirations just like the rest of us. They get up everyday just like you and do their best to serve their country. I’m thankful for those who inspect my food, work to keep me safe, and make sure that we enjoy one of the highest standards of living in the world. The majority of the country would agree with me, Maverick, sadly you just don’t seem to get it.

      • Maverick October 7, 2013, 10:01 am

        Chris, you may have missed my point. The general public, most of whom is in private industry, can’t relate to government workers who get paid for not working (post furlough), get better 401k programs, pensions, more holidays, sick time, etc. I didn’t say the role they play is not important. In theory, government workers should always be providing a service that is cheaper than private industry as there is no profit on their labor like in private industry. If their service is not cheaper, then it should be outsourced to private industry. Make sense? I hope that clears it up on Joe’s financial blog.

        • Chris October 7, 2013, 10:59 am

          No, that doesn’t make sense at all. And I’m loving all the claims you make without anything to back it up. No seriously, keep it coming. Such good stuff!

      • Moon October 9, 2013, 9:34 am

        I agree with you Chris. Federal workers are the same as you and me and have a family to feed. I understand that they are often be perceived as overpaid inefficient workers, but also we have to keep that in mind there are policies and bureaucracy that are beyond their control. My main issue here is that no one deserves to get furloughed or lost their job simply because someone else (i.e. Congress) didn’t do theirs.

    • retirebyforty October 7, 2013, 11:03 am

      I don’t know about definitely. They still have to pass the bill so they’d get back pay, right? I don’t think most people look down on government employees. Somebody has to do the job. Our government could be smaller though.

      • Steve October 8, 2013, 3:28 pm

        I don’t know how likely it is they’ll get back pay, but many of the mentions I’ve heard of it have portrayed it as a foregone conclusion. So anyone with a sufficient emergency fund faces nothing more dire than a free, paid vacation. But for all those living paycheck to paycheck, like the shutdown itself, the effects will have a cost far higher than the amount of missed pay.

  • insourcelife October 7, 2013, 5:33 am

    I work with the Federal Government and so far it’s business as usual, but I’m certainly not sitting around waiting for the work/income to stop. While we do have about a year worth of living expenses sitting in easily accessible funds, I’m hoarding cash this month by not prepaying mortgage principal. When the budget is passed I will send the extra to the bank, but for now I’ll hold on to that money!

    • retirebyforty October 7, 2013, 11:04 am

      It’s great to hear you are prepared. Hoarding cash is a good idea too. Hopefully, the congress will get it done by next week.

  • Great tips!
    I admit that I tried to sell plasma once and backed out. I pulled up and saw a giant line of people waiting and we just kept on driving. Ha!

    • retirebyforty October 7, 2013, 11:05 am

      I’ve never needed money that badly… I really hope I never had to sell any bodily fluid.

  • Ashley October 7, 2013, 6:22 am

    great tips! I was furloughed last week (called back in today, boo) but didn’t get too stressed because I have a good emergency fund. Cutting your expenses is very important- with so much free time we definitely fell victim to spending money to entertain ourselves. oops 🙂 I wish I had thought of selling stuff while I had the time off last week! we’re moving this weekend and i could have sold some good stuff last week. bummer! 🙂

    • retirebyforty October 7, 2013, 11:05 am

      Heh heh, I hope you enjoyed your time off. It’s so easy to spend money when you don’t have anything to do. 🙂

  • The Warrior October 7, 2013, 6:37 am

    My BIG suggestion for non-furloughed folks is to play out the next month as if you ARE furloughed.

    Sure, you will still be going to work, but act like you know you’re going to be furloughed next month. Act like you know NO PAYCHECK will come in next month. How would things change for you if you were of the mindset of not having a paycheck next month?

    Obviously, this gets into the whole emergency fund approach, but it puts a different, realistic spin on it. You could wake up and not have a job. Might as well act like you don’t and plan accordingly. At least when you do have your job next month, you have that backup now established.

    The Warrior

    • retirebyforty October 7, 2013, 11:07 am

      That’s a great idea. They can see how much trouble they’d be in if they get furloughed.
      It will be a chance to review their finance.

  • Pretired Nick October 7, 2013, 6:50 am

    “US households probably have the most crap per capita in the world.”
    Heh – totally!
    These short-term disruptions are good lessons in keeping your monthly expenses down below your passive income level. Everyone should always be very aware of how long they can go with no working income.

    • retirebyforty October 7, 2013, 11:08 am

      Sadly, most people can’t get by very long with no income. Hopefully the shutdown will be over soon.

  • FFdividend October 7, 2013, 7:52 am

    enjoyed the post.

  • Done by Forty October 7, 2013, 9:35 am

    While it’s too late to pre-plan for this particular furlough, I’m hoping that the silver lining for the shutdown is that government workers (and others) use this as motivation to do as you recommended: establish an emergency fund, cut expenses & generate income, so that when life throws us another curveball, we’re better prepared.

    • retirebyforty October 7, 2013, 11:09 am

      It’s a wake up call. I didn’t think they’d let it go this far. The previous furlough threats fell though and I just ignored this one. I’m sure many people did the same.

  • Debt and the Girl October 7, 2013, 10:12 am

    It sucks that this is happening. I wish the government would get a clue and stop punishing its citizens like this. An emergency fund is so important in times like these!

  • wallet engineer #1 October 7, 2013, 10:26 am

    I definitely agree that this situation is a good, smart use of an emergency fund. You also mention gathering bills and cutting costs – this would be a great time to use that free time to start and stick to a budget. Give Mint.com for a spin. If you have to “round up” the proverbial bills, this may be something that is not a large part of your life.
    Also, as you mentioned in a part article and I agree- you can’t overspend in the furlough if you spend cash!

  • Mom @ Three is Plenty October 7, 2013, 12:09 pm

    I have friends (who ironically work at the Navy Yard) who have been furloughed all summer, and now she’s out of work with the shutdown. They’re pretty financially fit if not financially independent, and they took last week off to go to the beach with their daughter. It’s a bit of a social minefield around here since so many people work for the government directly or indirectly and you never know if the shutdown is a sore topic for them or not.

    • retirebyforty October 8, 2013, 9:11 am

      I hope your friends find a new job soon or maybe just retire early? 🙂

  • Ankit | Getting Money Wise October 7, 2013, 12:40 pm

    It sucks that an entire nation’s government shuts down! But then again, it is times like these that financial discipline is tested. There is never a better example to start thinking about planning for an emergency fund. Also, the idea about multiple income is great irrespective because it not only provides additional income, it allows individuals to hone their craft and get rewarded for it.

    I am still not sure about Credit Cards though unless there is a strong sense of financial discipline because otherwise more credit cards can actually hurt in the long run.

    • retirebyforty October 8, 2013, 9:12 am

      Borrowing money is a bad idea, but what can you do if you need cash? It’s tough. Hopefully, everyone will get back to work soon.

  • Lance @ Money Life and More October 7, 2013, 2:55 pm

    I feel bad for all of the furloughed employees who didn’t have emergency funds or multiple income streams. It must be super stressful and they can’t even enjoy their time off.

  • krantcents October 7, 2013, 4:58 pm

    For the last 3-4 years, I had to take furlough days. Last year, it cost me roughly $1,500 in lost income. It was not enough to change my lifestyle, but it still hurt. You mentioned some good ideas to make up the difference.

  • Bryce @ Save and Conquer October 7, 2013, 6:09 pm

    We have a bunch of stuff we could sell in a pinch. Luckily, we have not been furloughed.

  • John S @ Frugal Rules October 8, 2013, 11:14 am

    Lol, I just finished writing a post about the furloughed employees that I am running on Friday. I like a lot of your tips here and have done a number of them myself in the past. I think the lowest point was selling plasma for several weeks. That said, I do feel for those employees who do not have an EF or a good way to try and make some money quickly.

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