Are you affected by the Michigan State University salary cuts?
There’s a lot of uncertainty in the world of higher education right now. Universities around the country are trying to figure out what Covid-19 will mean for students and instructors as we head into fall and winter. With the new semester underway, there still seems to be as many questions as answers at this point, but one thing is certain: this fall will be different.
During this turmoil, Michigan State University has announced salary reductions of 0.5% up to 8%. In addition, they have reduced the employer contribution to faculty retirement accounts from a very generous 10% match to 5%. The average salary cut is 2.3%. At this point, nobody knows for certain whether these cuts are temporary, permanent, or just the beginning.
Coping with the Michigan State University Salary Cuts
Coping with a pay cut is never easy. Here are some financial planning tips that we hope will help:
#1. Don’t panic.
A 2% cut in pay certainly has its impacts, but after taxes and other deductions, the net change may not be that drastic. It’s time to be prudent about spending and look for places to adjust, but your financial world is probably not crumbling yet.
#2. If you don’t keep a budget, now is the time to start.
The best way to avoid living paycheck to paycheck and to deal with economic uncertainty is to know that you are living within your means. It is important to understanding where your money goes. There are many systems and tools out there to help with budgeting. It doesn’t really matter what system you adopt – pen and paper, spreadsheet, or a computer app all work well. The best one is the one that you will use consistently.
#3. Look for places that you can adjust your spending to account for the income reduction.
A good budget starts with funding necessities first and discretionary stuff last. To reduce your budget, work in reverse, looking at discretionary spending first.
#4. Budgeting is about priorities and tradeoffs.
It’s also about balance. If you can’t find enough reductions by cutting discretionary spending, or if you find you’ve had to cut all the fun stuff out of your budget, look at your necessary spending for ways to reduce your fixed overhead over time. This may mean refinancing your home to lower your mortgage payment, downsizing, or driving a less expensive car. Changes like these can make a big difference over time, but they don’t have to be done all at once. Think strategically about what is important to you and your family if these cuts persist or worsen over the coming years.
#5. If you have an emergency fund in place, that savings can help absorb the budget cut temporarily.
But if you find you’re dipping into your contingency funds regularly go back to the budget and look for additional cuts. The goal is to maintain and rebuild those savings over time if possible.
#6. If you don’t have an emergency fund in place, creating one is the next step.
Go beyond cutting the budget to break even and look for savings. Funnel that extra money into a regular bank savings account or money market. This will provide a cushion against future cuts and make sure that shocks to your budget (unexpected car repairs, home maintenance, or health issues) don’t lead to credit card debt or other problems.
#7. If you anticipate having trouble making ends meet, deal with the problem head-on.
Too many people put off budgeting issues until their credit cards are filling the gap, they start missing payments, and late fees add up to long -term damage. If you can’t find ways to fix your budget and you worry about having problems with your creditors, talk to your creditors before it’s too late.
#8. If you need help with cash flow and budgeting, call us.
We can help you figure out your spending priorities and create a financial plan focused on your values. If you need help working with your creditors and dealing with debt, we have resources that we can recommend.
Michigan State University Salary Cuts: The Wrap Up
Unfortunately, economic uncertainty is a fact of life. The Covid Pandemic has reminded us all that things we thought were safe and certain can change quickly. Hopefully, these cuts will be temporary, but there is no doubt that higher education will not look the same regardless of how the health crisis plays out. Implementing these strategies should help see you through the current turmoil. Budgeting strategies and creating an emergency fund can put you in good stead for whatever the future might bring.