Paychecks will be a lot lighter over the next few weeks as the Market Basket employee protest continues. Now more than 25,000 employees will be feeling even more wallet pain as their hours get reduced and quarterly bonuses shrink. As a loyal customer, former part-timer (Store #18 in Methuen) and now financial planner, I’m offering these financial planning tips for Market Basket employees to help them make ‘more from their dollar’ during this crisis. Market Basket, the family-owned regional grocery chain, known for its motto of ‘More for Your Dollar’ is a mess. As employees protest the management shakeup and customers continue to boycott the store, sales have plummeted. This has led management to drastically reduce hours and pay. The impact on employees and their families will be sure to follow.
Here are some tips to help out the Market Basket employees. Anyone faced with a sudden drop in income may want to consider them as well.
This is why financial planners are always harping on folks to have a rainy day fund. Sometimes you need it to cover a shortfall. At other times, you’ll need it to bail you out when you’re in over your head. If you don’t already have cash or stuff that can be quickly converted to cash, resolve yourself to build up a reserve after the storm has passed and use these tips to help you through now.
Tighten the Belt
It’s time for employees to put their wallets on a diet if they haven’t already. At this point, everything is fair game. Sure, there are some things that you can’t change quickly like your mortgage or rent, property taxes and student loan payments but everything else should be considered ‘discretionary’ and subject to cut.
Borrow Stuff for Free
You can start by looking at subscriptions to newspapers, Netflix, and cable TV. Your tax dollars support a great resource – your local library – where you can borrow most of this stuff. For cable and cell phones, check your usage and see if you can temporarily shift to a lower-priced plan. If you can’t borrow it, you may find you can do without it. While Shakespeare may have said don’t be a borrower, you can’t afford not to consider this option.
I know that America runs on Dunkin’ (and Starbucks for that matter) but now’s the time to try making your own cup o’ Joe – at least a few times each week. At the going rate, you could save at least $30 each week which may be needed to pay for your groceries or to fill your gas tank.
The same can be said for lunches. Instead of you, your spouse or kids buying lunch, it’s time to start brown-bagging it if you’re not already. Sure, the prices at the other stores around are certainly higher than those at MB. But you’ll find making your own much cheaper – and probably healthier – than eating out.
During the 1970s we had our first taste of an OPEC-led oil embargo. I remember my mom running around the house putting blankets over windows and doors, turning down the heat and shutting off lights even in rooms we were in. Now, things aren’t that bad – and at least the weather is on your side now – but consider conservation measures for your heat, lights and water. This is something you can have an impact on pretty quickly and it will add up. (And you’ll be doing good for the environment as well as your wallet).
Call Your Lenders and Creditors
Call your credit card companies and other lenders. If you expect that you’ll be short of cash flow to make your regular payments, you really need to get on the horn and let these companies know. They will usually try to accommodate you. At the very least ask if they’ll lower your credit card interest rate. You can also search out 0% transfer options. If you have something in hand, you can even show that to your credit card company. If you have to mention that you may need to file bankruptcy, you may find that they’ll be more receptive since some payment is better than never getting any. They may match the other offer you find since it’s cheaper to keep a customer than find a new one. And you’ll save yourself the transfer fee that you would otherwise need to pay.
Tap Your Home Equity
If you have a home and you have equity, you may be able to qualify for a home equity line of credit assuming you and your spouse have good credit and sufficient income from your spouse to qualify for it. If you already have one in place (a good thing to have before an emergency), then consider tapping it. The interest is lower than any other option typically and you can get by making interest-only payments which may even be tax deductible.
Money Moves You Don’t Want to Make
As important as it is to know what to do, you may want to avoid these potential missteps as well.
Credit Card Advances
While not nearly as bad as borrowing from that shady character down the street, you’ll find that credit card advances can put you deep in a hole that’s just hard to dig out of later. The same can be said for car title loans. Or payday loans if you happen to have a spouse who’s working.
Your company-sponsored retirement plan is not a piggy bank. Yes, it may be a tempting pot of money but ‘just say no’ as Nancy Reagan would say. If you take a distribution and you’re under age 59 1/2, you’ll end up losing about 30% to taxes and penalties.
And if you have a kid going to college, it will hurt you in the long run when it comes to financial aid. Each year you have to file a Federal Application for Federal Student Aid (FAFSA). And if you take a distribution, it will be reported as income on your tax return. And your tax return is what is used for determining your Expected Family Contribution (EFC) and ultimately your qualification for financial aid. A higher income means less financial aid. And you or your student will possibly need more loans and paying more interest over time. So you get hit now when you take the money and later when you have to pay more student loans back.
If you have to, arrange for a loan from your 401(k). It doesn’t impact your income or your chances at financial aid.
Don’t skimp on your insurance. While it may be tempting to let renter, life or health insurance coverage lapse, this is simply penny-wise and pound foolish. These coverages are in place to cover emergencies for which you don’t have the cash to cover. And if you let them go and find yourself with a triggering event like a burglary, a sudden death of a loved one or a medical emergency, you’ll end up deeper in a financial hole from which it will be even harder to recover once this crisis passes.