Offering advice on how to cope with a pay cut or furlough is tricky. I want to be useful without being patronizing. Or laughingly obvious.

You know. Not: Get another job! Panhandle. Be a laborer for a day, or six. Camp in the buff. Rob a bank while regulators are seizing it.

Otherwise, I risk parody by Jon Stewart or The Onion. I can see the online spoof now:



The Oregonian's personal finance columnist today recommended people enduring pay cuts replace that income by issuing their own zero-coupon, high-yield performance bonds.

"With interest rates near zero on savings accounts, investors are chasing yields like creditors chasing Bernie Madoff," Brent Hunsberger wrote. "What better time to offer your own, new financial instrument to the beleaguered bond market. Besides, who really knows what zero-coupon means? The word 'coupon' alone will lure cost-conscious, gullible investors."

No, this is serious stuff. Painful, too; I know. Even as I write, I stare at a paycheck with a "deposit amount" I wish was erroneous. "Debited deposit amount" would be more accurate.

I hope these are options you might have overlooked, strategies you should reconsider or ways of looking at cuts that make them more palatable.

First, it's obvious, but if you haven't started tracking what you spend, you need to start. Now. Otherwise, you won't know what you can cut, and none of this stuff will work. Create spending goals or plans and stick to them.



Boost withholdings: If you took a 10 percent pay cut, you can likely increase your withholding allowances on your W-4 form to generate more cash flow -- even if it results in only $10 more a week. If you wait for that money to come as a tax refund, you're essentially giving Uncle Sam an interest-free loan. The Treasury needs all the help it can get, but you need cash flow.

If you claim too many allowances (underwithhold), you can adjust later or send in an estimated tax payment if necessary just to "catch up," said Joseph Anthony, a tax consultant in Portland. But be careful.

"What I always warn people about is that if they significantly underwithhold, then come April 15 they may be owing not just taxes but also interest on underpayments of taxes due," Anthony said.

Fill out a mock tax form for 2009 to figure out what kind of refund you might get. That'll help you safely estimate allowances. Your payroll manager should be able to help. The IRS also offers a withholding calculator at www.bit.ly/IHDFV.

Call your insurance agent: Revisit your policies. I did this week and shaved $30 a month off my auto insurance premiums.

If you have emergency savings built up, you can probably risk raising your deductibles. If your car isn't worth much, you might drop your comprehensive coverage, which isn't required by state law. If you're driving a vehicle fewer than 7,500 miles a year, you could get a lower rate. And you can also get rebates for consolidating policies with one carrier.

"Sometimes all it takes is a phone call," said Brian Hicks, a financial adviser at McDonald Franceschi LLC in Portland. "They (agents) know people are out there shopping, and they're sensitive to it and the last thing they want to do is lose your business."

Negotiate bills, contest fees: As with insurance agents, your phone, TV and Internet providers don't want to lose customers. Use that to your advantage. Ask how you can reduce your bill. Question even medical bills. Be persistent. Tell them your other offers. You won't know unless you ask.

Refinance: At today's rates, even lowering your existing mortgage by one percentage point could shave a couple of hundred or more off your mortgage payment. That can help make up for quite a chunk of your pay cut, and there might be some tax advantages, too. Check with a CPA or financial adviser.

Move: Many people's homes are underwater. But for those whose aren't, there are good deals right now -- not all of them short sales or foreclosures. If you've been in your home awhile, moving to a cheaper neighborhood or community might give you more breathing room.

Be nice in new ways: "I have clients who live in a resort area," explained Marilyn R. Bergen, a financial planner with CMC Advisers in Portland. "They traditionally have lots of friends and relatives come to stay with them. It becomes outrageous when they look at increased food costs and alcohol." So, this year, they're telling friends and relatives they're not accepting company.

Instead, host low-key, bring-your-own-drinks potlucks, she said. Good friends will understand, and you'll still socialize.

Institute a personal spending allowance: Buy all your clothes, coffee and movie tickets out of one monthly pot of cash split evenly between you and your partner.



Set a time limit on cutbacks and allowances: You're not going to buy used clothes or skip lattes forever -- just the next 12 months. "The time frame thing is a helpful piece for people really struggling to cut back," Bergen said. "It's, 'OK I don't have to do this for the rest of my life. In 12 months I can re-evaluate.'"

Don't cut out all fun: "I have seen clients clamp down very tightly on expenses only to then feel so constrained or discouraged that they give up on the entire effort," said Derek R. Lenington, a financial planner in Portland. "Make sure there is something to look forward to at least monthly."

Know what to buy used: Goods you should never pay full retail price for, according to two marketers: Clothes, housewares, books, CDs & DVDs, electronics and shoes. They also are the most popular items donated and sold at Goodwill Industries of the Columbia Willamette, spokesperson Dale Emanuel said. I'd add fast-depreciating autos to that list.

Send teens to work: Involve the kids in your budget-cutting discussions. Get ideas from them. Ask them to contribute by getting a job if they want to keep buying Xbox games or new, name-brand clothes.

Go free this summer: Find free summer outings and concerts around Portland at aroundthesunblog.com.



Save something: Contribute at least enough to your 401(k) to get your full employer match. And try not to stop contributing if your employer suspends that match.

If you don't have a rainy day savings fund, use the $25 you saved on your cable bill and sock it away. It'll take awhile, but it'll be worth it.

Don't just take Brent's word for it. Get savings tips from other experts and bloggers here.

Employers, workers creatively cope



By Brent Hunsberger, The Oregonian

Sunday May 17, 2009, 8:00 AM

Cliff Conley was only half-joking in an e-mail last week about how he is dealing with his one-day-a-week, unpaid furlough.

"I have eliminated every possible convenience or pleasure in my life," the maintenance mechanic wrote. "I simply exist."

"I now only eat two meals a day," he added. "On the upside, I am losing weight."

He is, of course, not alone. Workers and business owners of all walks of life are coping with pay cuts and furloughs like never before.

These cutbacks have happened at major local employers: Daimler Trucks North America, the Port of Portland, The Greenbrier Cos., Tektronix, Oregon Health & Science University and the state of Oregon. They are the nasty byproduct of deflation, dysfunctional markets and the massive deleveraging of our economy.

Conley, unfortunately, is used to it. Working in manufacturing over the past decade, he estimates his annual earnings have fallen $20,000. He's racked up an estimated $30,000 in credit card debt, partly due to paying his wife's health bills from her battle with cancer. He is now making only minimum payments on the cards.

He has drastically reduced his rounds of golf, set his thermostat to 65 degrees and brought scrap wood home from work to burn in the fireplace. He takes on remodeling projects even though his 62-year-old body protests.

The Conleys have cut out weekend pleasure drives and weekly trips to the movies. He has canceled dental appointments for crowns and fillings. His oldest daughter lost her full-time job and recently moved into his three-bedroom home with her 1-year-old.

In his 1994 Toyota pickup, "I coast whenever I can to save gas," he said, adding, "You'd be surprised how far you can coast."

The pay cuts, some of them unforeseen, have forced workers young and old to get creative in lowering costs and replacing income.

Becca Smith-Morgan, 30, closed her Pearl District gift shop cheeky b in March after December's winter storm fell like an avalanche on her make-or-break Christmas season. More than half her household income is now gone.

She is living off savings and her husband's food service job at Reed College while looking for work and helping a friend with a business idea.

"I didn't second-guess a shopping trip to Nordstrom's," she said of her shop-owning life. "I didn't second-guess going to a bar and buying my friends drinks."

Now, she has stopped buying new clothes. If she does go out, "It's not on me."

She favors potlucks or in-home "happy hours" with a couple or two.

"Right now we're less likely to offer having a hosted dinner party," said Smith-Morgan. "We're not in a position to invite over six of our friends and have a nice fancy dinner."

She is not concerned about the implications. "My friends know I'm cheap."

She is considering canceling their dental insurance to save $53.96 a month. She is cashing in gift cards from people who didn't know what else to get a gift-shop owner. She earned $900 last month clearing out her basement and selling the items on Craigslist. Now family members want her to do the same for them. "For sure, I'm going to take a cut," she said.

Larry Shrake is in worse shape. His Choose & Chew vending-machine-stocking business has fallen by more than half. His girlfriend, a secretary at a warehouse, had her hours cut, too. And he lost thousands on a buy-and-flip home remodeling project that tanked with the housing market slump.

He stopped paying his mortgage in October. He is now helping to sell life insurance and debt reduction services for Primerica Financial Services to bring in more money.

"You got to go ahead and do something," Shrake said. "And I don't want to go ahead and sell Avon."

For his part, Conley doesn't sound panicked or bitter. He is more accustomed to simply being laid off in downturns, so he is grateful his employer, a glass manufacturer, has imposed less-drastic cuts. Still, he is not sure how much more he can cut back, unless he downsizes and moves from his Southeast Portland home of 30 years.

"The American dream has kind of gone away for us," Conley said. "We've seen a real erosion in our quality of life."



Brent Hunsberger does not give individual financial advice but welcomes questions and comments about his column and blog. Reach him at 503-221-8359 or brenthunsberger@news.oregonian.com.

