Sequestration is now in place, and along with it came a good amount of uncertainty, causing many Americans to wonder how they will be impacted. By some estimates, more than one million employees of federal agencies may receive furlough notices.
Some workers are not adequately prepared to deal with a loss of income, even a short-term one. For those living from paycheck to paycheck or without significant savings, any income interruption is likely to put them over the financial edge.
For example, consider the statistics below from the National Foundation for
Credit Counseling (NFCC) Financial Literacy Survey:
• Thirty-three percent of respondents admit to not paying all bills on time;
• Thirty-nine percent have zero non-retirement savings;
• Thirty-nine percent carry debt over from month to month, and
• Sixteen percent have utilized overdraft protection in the last 12 months.
“Even if a person does not anticipate being impacted by sequestration, now
is a good time for a comprehensive financial review,” says Gail Cunningham,
spokesperson for the NFCC. “Whether due to an unplanned expense or a job
loss, no one has ever regretted being financially prepared, and preparation
starts with understanding where you stand today.”
The NFCC advises consumers to take the following steps to put themselves in
a better financial position, regardless of what the coming months may hold:
• Assess current financial situation –
The NFCC’s free financial
self-assessment tool, MyMoneyCheckUp™, is a good place to start. The tool
provides consumers with a means of evaluating four key areas of personal
finance: budgeting and credit management, saving and investing, planning for
retirement, and home equity. After answering a series of topic specific
questions, a personalized assessment of the individual’s overall financial
health and associated behaviors is generated. With areas of concern
identified, the analysis suggests changes that consumers are encouraged to
implement in order to become more financially independent. The traditional
green, yellow and red traffic light colors signal whether the consumer
should continue on their current money path, proceed with caution, or stop
and make a change. Individuals can also complete an optional budget to
further help them assess their financial health. The tool is available in
English at www.MyMoneyCheckUp.org and in Spanish at
• Face the financial facts –
After completing the financial discovery step,
consumers may find the results surprising. Don’t ignore them. Financial
problems rarely resolve themselves, particularly in emergency situations.
Take action sooner rather than later, as delaying only makes the problem
harder to resolve.
• Take control –
Admittedly, some things are beyond a person’s financial
control, but some aren’t. Control what you can by doing the following:
- Review your credit report and score, both necessary to fully understand
the current financial situation, and provide a framework for next steps.
- Create a cash-flow calendar listing all sources of income. Next, plug in
the dates all bills are due. This will ensure that bills are paid on time
and protect the credit report and score from future damage.
- Commit to paying down debt, and if necessary, suspend all charging,
consistently moving toward solid financial ground.
- Reach out to a legitimate credit counseling agency for help creating a
“If there is a quick resolution to the sequestration, nothing has been lost
by implementing the above steps,” continues Cunningham. “If not, consumers
will be better prepared to face whatever comes their way financially.”
For more information, visit www.DebtAdvice.org