Most media and analysts of Congress and the White House believe that budget cuts set to go into effect on March 1 will hurt the economy. Tens of thousand of government workers will have to take unpaid days off. Funding to states will be cut sharply enough that many governors recently said they expect a new recession. Almost everyone agrees that the worst impact will not happen immediately, but that real damage will be evident in a matter of weeks.
The economic and employment experts at 24/7 Wall St. tapped their years of experience to make several critical suggestions that should be used by most Americans, particularly those who are middle class.
1. Stop spending. The odds of job loss, reduced benefits or fewer hours of work for those with part-time jobs has not been this bad since the depth of the recession. Assume a 20% chance you will lose your job and be on unemployment for at least six months. Therefore, you need to cut all but the most crucial expenses.
2. If you own a new car, sell it. This assumes that you own the car outright or have very little balance on your car loan. Used car prices are at all-time highs, so you may make some money that you can use as a buffer for the troubled economic time ahead. If you need a car, buy a junker and hope it runs for a few months. If you can take public transportation, that is your best option — unless budget cuts cause the elimination of bus and train service.
3. Sell your home. With the real estate recovery, many fewer homes are underwater, home inventory has dropped and house prices are up. “Flippers,” who buy homes in the hope of selling for a quick profit, are back. If you have any home equity, use whatever profit you make as another buffer as the economy implodes.
4. Go back to college or graduate school. The federal government continues to offer student loans at tremendously low interest rates. Many loans include payments for room and board. The government expects that you will not pay the loan back, so your obligation is only on paper.
5. Ask your employer to cut your salary and lower your benefits. When the time for layoffs comes, you will look attractive next to all of your overpaid coworkers. You also can ask to work longer hours without an increase in compensation.
6. Commit a crime. If it is severe enough, and you refuse a bail arrangement, you can live in prison right away. A solid felony will keep you in prison for at least 10 years, enough time to weather an economic storm. The risk in this route is that budget cuts may mean many prisons will be closed and felons released prematurely.
7. Join the Catholic Church. It is short on qualified priests. The pay is low, but room and board are included.