Preparation is Key to Survive a Labor Strike

by David Diesslin, CFP

For members of trade unions, the possibility of a strike or management lock-out is a reality of your job. In the past two years, grocery, sanitation and airline workers, professional hockey players-even Broadway musicians-have made news because of work stoppages, initiated either by their unions or by management and business owners. A prolonged strike that outpaces a union's ability to provide emergency funds to its members can be stressful. But sound personal financial planning can lessen a strike's impact, and careful planning of your time away from the job can actually enhance your lifestyle.

Many workers fail to prepare. CFP Board's 2004 CFP Board Consumer Survey (www.CFP.net/2004survey) asked participants to list important life events that would be likely to trigger financial planning. Respondents listed reasons such as retirement and building an emergency fund, but the possibility of a labor strike was noticeably absent.

Anticipating a Strike
To prepare for a possible strike, take inventory of your fixed expenses-bills that must be paid no matter what, such as your rent or mortgage payment, utilities, car loan and insurance premiums. Identify potential savings. For example, would the cost of a tune-up now save on repair bills later? Would a higher deductible make sense for your family car or health insurance? Next, examine ways to cut other costs. Perhaps you can use more discount coupons, get you hair cut less frequently or forego that daily latte.

Check your credit report, correct misinformation and try to improve your credit before a strike. If you anticipate being unable to make a mortgage or other payment on time, contact the creditor immediately.

"Be sure you understand your union benefits long before any strike," says David Diesslin, CFP®, who chairs Certified Financial Planner Board of Standards' Board of Governors. "How much income can you count on from your union and for how long? Set aside savings equal to at least three months' worth of your regular income; six months' worth would be even better. The time to save is when your job is going well."

You might wish to apply for additional credit cards or, if applicable, a home equity line of credit, while you are still receiving wages. Tuck the extra credit cards away in a drawer so as to avoid high-interest charges unless absolutely necessary. If the strike is cancelled, cancel the extra credit cards and pay off the home equity line of credit.

Using Resources Effectively
If there's enough advance warning, consider taking care of major medical needs while your health insurance is in force. Take stock of friends, family members, community services and other resources that could help in an emergency. Talk to your financial planner to understand which of your financial assets should be liquidated first, if it becomes necessary to sell.

What striking workers often overlook is the opportunity a strike provides to explore neglected interests and life goals. "In the event of a strike, use time away from your job productively," says Diesslin. "Invest your time in home improvement and self-study or turn your favorite hobby into an alternative source of income. Plan your use of discretionary time as carefully as you would plan your use of discretionary income. You might find that a strike is not a disaster but a great opportunity to re-connect with your family and other meaningful aspects of your personal life. The object should be to emerge on the other side of the strike stronger, more stable and happier than before."

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