Being furloughed is an unsettling feeling. Although there is precedence that you will eventually get paid based on previous government shutdowns, during the time when you're sitting at home, wondering when you'll ever get back to work with a steady paycheck can be unnerving.
Last year, I got something worse than a furlough. I freelanced the entire month of October but didn't get paid because the company I partnered with decided to shut down. In other words, things could always be worse.
As someone who has gone through plenty of ups and downs as a finance professional since 1999, let me share some financial advice for those of you who've been furloughed.
Financial Advice If You've Been Furloughed
1) Do A Thorough Audit Of Your Finances. Most people set it and forget it when it comes to their finances. They wake up 10 years later and wonder where all their money went. Use this time to discuss your budget, your expenses, your savings rate, and your financial goals with your partner or family members.
The best free financial tool you can use to manage your net worth is by Personal Capital. They allow you to track your cash flow, analyze your investments, and project your retirement situation using real data you link on their platform. I've used them almost daily since 2012 and have watched my net worth grow by 5X since.
After a tremendous recovery since 2009, you may want to spend more time protecting your capital. The key to creating great wealth is to make it last for generations.
2) Build Alternative Income Streams. A furlough is a good reminder of how dangerous it is to depend on only one source of income. The key to financial security is to create as many income streams as possible so that if one goes down, your team of other income sources can keep you afloat.
Below are some passive to semi-pass investments you can make to help boost your income diversity.
The average financially independent person has at least five different sources of income. Further, no one income source accounts for more than 40% of their entire income.
3) Brand yourself online with a website. During times of uncertainty, you want to plant your own flag on the internet. The law of attraction dictates that if you put yourself out there, other people with similar interests will come.
Don't let the big social media sites own your brand. They've already gotten filthy rich off you in the process. Build your own internet brand and get rich off yourself.
In the past, it use to cost thousands of dollars and days to create your own website. Now you can follow my step-by-step guide to creating your own website like this one in under 30 minutes. Further, it costs less than $50 to start.
4) Aggressively job hunt. If you're furloughed or your company is going through financial difficulties, you should aggressively start looking for new work before things get worse. A furlough of any kind means there is serious dysfunction. You just never know how long the furlough will last.
Getting ahead of the curve will likely increase your chances of finding new work. If you work at a private company, I suggest you use this opportunity to negotiate a severance instead of quit. If you quit your job, you are left with no. But if you negotiate a severance, you not only get a severance, you get any deferred cash and stock, healthcare, and become eligible for unemployment benefits.
In 2012, I negotiated a severance that provided for six years of comfortable living expenses. During this time, I worked on building this site into a 1 million pageview a month site that now generates some healthy income to boost my financial income streams. u a bigger severance and more job choices.
You can learn how to negotiate a severance with my 150-page ebook called, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye. It has plenty of strategies and case studies to allow you to break away with money in your pocket.
5) Bullet Proof Your Finances With More Savings. Most people shouldn't feel too much anxiety during a furlough because most last no more than one or two months. Further, if you're going to get your pay eventually, covering a couple months worth of expenses shouldn't be that excruciating.
However, if you are feeling anxious, then it's important to not only build new income streams, but also boost your savings so you won't feel the same level of anxiety during the next furlough. At the minimum, always shoot to have at least six months of liquid living expenses at any given moment.
Improve Your Financial Health
You can either feel bad and do nothing about a furlough, or you can do something and take action to improve the quality of your life.
The average American has less than $10,000 in their retirement savings account. Meanwhile, 40% of Americans can come up with a $1,000 emergency.
Be better than average. Nobody cares more about your money than you. It is an inevitability unfortunate financial situations will happen again. Therefore, we must do our best to bolster our finances to withstand life's twists and turns.
There is no rewind button in life. Stay on top of your finances at the very least with a free tool like Personal Capital. You'll be glad you did decades down the road.
About the Author: Sam started Financial Samurai in 2009 as a way to make sense of the financial crisis. He proceeded to spend the next 13 years after attending The College of William & Mary and UC Berkeley for b-school working at Goldman Sachs and Credit Suisse. He owns properties in San Francisco, Lake Tahoe, and Honolulu and is always on top of finances. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $220,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.