Navigating tough times: What are we learning from sequestration?

| August 19, 2013

Disclaimer up front, this article is not a commentary on the value of civil service workers nor is it intended to be a discussion of the political worth of civil service furloughs.  There is certainly no shortage of commentary regarding the origin and necessity of sequestration.  Let me say also that I am not condemning any individual for their past decisions.

What I have found to be very interesting is how federal civil service furloughs have been portrayed in the media as well as by our political leaders and civil service managers. Having worked with many civil service employees, it is interesting to see the varying reactions of these civil servants who, for the most part, are just trying to do the most effective job that they were hired to do.

The prevailing commentary in the media and our politicians is that furloughed civil servants are suffering a 20% pay cut. Obviously, this is true when one looks at pay as a “paycheck” event. When one lives paycheck to paycheck, then obviously it is indeed a 20% pay cut if one only works 4 out of 5 days. But who wants to live paycheck to paycheck? If one takes a longer-term view, however, and views pay as an annual event, then a 10-day furlough causes a pay cut of about 3.5% (10 of 280 annual working).  That’s far less than the discretionary portion of most family budgets.

So what’s the point here? What I have found is for those individuals who, before the current furlough crisis began, prepared for the unseen storm are doing just fine. They may be upset that they’ve got a pay cut. They may have an important job that isn’t getting done. But their family remains financially secure. These people had a plan on how they were going to live on less than they make and set aside some emergency savings.  These emergency savings, typically equal to 3-to-6 months of emergency expenses, are sufficient to see these families through far more than 10 days of furlough.

It is interesting to note that there are financially disciplined and successful individuals in every pay grade and there are individuals with better financial behaviors in every pay grade. It is the decision to be financially disciplined when times are good that leads to successful navigation through the storm when times are bad.

I suppose that it is understandable why so many federal employees may have been unprepared for a furlough. After all, when your employer is Uncle Sam, isn’t your job completely secure? The federal government isn’t going away. Federal employee layoffs just don’t happen. Right? The mentality that I could lose my job at any time which is so prevalent in the private sector has just never existed in the federal sector.

It is my hope that sequestration and the furlough mess will be a siren call for all of us to adopt better financial habits. Live on less than you make – – setting aside 20% of your gross income for your savings, investments, and insurance is a good rule of thumb.  Depend on yourself, not on your employer, regardless of how stable you think that employer might be.  Develop the same discipline in your own finances that you are expected to display on the job.  Let adversity be your call to action!

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