Delayed-pay scheme still on state booksBy Irene Leech, Extension specialist
Spectrum Volume 19 Issue 08 - October 17, 1996
The 1997 budget passed by the General Assembly requires that state employees receive 23 paychecks instead of 24 in 1997. The process actually begins December 1 and 1997 pay dates between January 1 and August 15 will be changed so that employees actually receive one less pay check than usual. This is being done so that there is more time between when work is completed and when employees are paid.
Many employees are very concerned about this change. They are wondering how they are going to pay bills, such as mortgages and car payments which are due in the first days of each month, when they are not paid until several days later.
The only way that the pay schedule can be changed is by legislative action. Unless a special session of the General Assembly is called, the issue cannot be dealt with until the General Assembly convenes on January 8.
Delegates Jim Shuler and George Grayson plan to pre-file a bill to stop this change. By pre-filing a bill, they are taking action to initiate the change as soon as possible. However, the bill must be passed and there is no guarantee that it will be. Also, there is no way around the fact that the bill must go through the legislative process in both the House and the Senate. The majority of legislators in both houses must support it. Then, if differences have arisen in the process, these must be negotiated before final approval which sends the bill to the governor. Realistically, this will probably take several weeks-even if there are no unforeseen obstacles. A bill with an emergency clause goes into effect as soon as the governor signs it.
However, time will still be required for staff members to make the changes which put the pay dates back on the normal schedule.
The bottom line is that state employees need to prepare for the likelihood that several 1997 pay periods will pass before changes are made--if they are made. If your mortgage is automatically deducted on the second of the month and your paycheck does not arrive until February 3, you could have a problem that month. What should state employees do to cope with this situation?
Financial experts recommend that people have an emergency fund of three to six month's take-home pay. Those who have such a fund can tap this money. However, many people do not have an emergency fund.
If you are one of those, don't give up. There are still actions you can take.
If you do not have emergency money saved, you have several options. One is saving the money from paychecks you receive between now and the date when your bills will be due before your paycheck arrives. To do this, count the number of paychecks you will get between now and then. For example, if you need the money before the first February paycheck will arrive, there are six pay periods between now and then (November 1, November 15, December 1, December 15, December 31 and January 17). Divide your paycheck by 6. This tells you how much you need to save from each of those paychecks. For example, if your paycheck (after taxes and other deductions) is $300 and you need the money February 1, you need to save $50 from each paycheck between now and then.
If you cannot save that much, you need to consider ways to either increase your income or decrease your expenses.
Take a few minutes to think about your options. Involve your family so everyone knows what is going on and everyone can work together.
How can you increase your income? Maybe you can work overtime and you can save that money.
Perhaps you can temporarily work a second job-possibly in a position available during the holiday shopping season. Do you have a skill (such as woodworking or baking) which you can use to create items which you can sell at a profit? Or can you sell things you own but no longer use or need. Do you have clothing which no longer fits but could be sold? What about furniture, tools, stereo equipment or other belongings? Check your closets and other storage areas and you may find items you can turn into cash to help you survive this financial challenge.
How can you decrease your expenses? Most people do not keep a detailed written budget. While they have a general idea where their money goes, they cannot account for every penny. As long as things go as usual, this works fine.
However, it's a good idea to take stock of your spending habits from time to time. This pay crisis may be just the reminder you need. Write down every expenditure you make for a time (such as a week or maybe a month) to see what you are really doing. You may discover that you are spending more than you realized on snacks or recreation or gifts or other things. Your local Extension office has several publications (Cutting Costs and Spending Less-also available at http://www.ext.vt.edu) which can help you think of ways to reduce your spending.
The sooner you begin planning for the possibility of a delayed paycheck, the easier it will be and the more options you will have. If you wait until late January and realize that the emergency legislation has still not passed or that the current schedule will not change until March, you could face a financial crisis. Possibly, you could borrow the money, but you will still have to repay the loan and you will have to pay interest and other finance charges.
If you find a way to have that money before the crisis hits in February, your financial status will not be hurt if your bills are due February 1 or 2 but you don't get paid until February 3. Also, if you do not need that money, it can be the start of your emergency fund, so you will be less stressed the next time some sort of financial challenge arises.
One final caution. Be careful with holiday spending this year. If you may have to deal with the delayed pay schedule, the last thing you need to do is use a lot of credit in December. Plan your spending before shopping and stick to your list. Pay cash instead of using credit. Make things or spend time with people rather than buying something. Be creative.
Turn this challenge into an opportunity to improve your overall financial situation. Re-examine your financial goals, your saving and your spending. Decide if there are changes you need to make to reach all your financial goals. Take charge. Don't just wait for this potential disaster to go away. It may not.