Film and TV industry workers are watching the clock tick, as a potential writers strike could begin as early as Monday. Planning now can help stave off the negative financial effects of a walkout.
The Writers Guild of America, which represents writers across film, television, radio and other media, said earlier this week that its members had authorized a walkout. The union is currently in contract negotiations with the Alliance of Motion Picture and Television Producers, which represents networks and studios, over issues including pay raises and health benefits. The current three-year contract is set to expire May 1.
A strike could mean millions in lost income. The producersâ alliance calculated that the last strike, which occurred in 2007 to 2008, and went on for 100 days, cost writers $287 million in compensation, according to one estimate. The last strike shut down production across the entertainment industry, affecting everyone from camera operators to actors and caterers and costing the Los Angeles economy roughly $2.5 billion, the Los Angeles County Economic Development Corp. estimated at the time.
Unfortunately for those who lose out on work as a result of an impending strike, the usual rules of unemployment donât always apply. New York is the only state in the country that provides striking workers unemployment benefits, according to Scott Stratton, a certified financial planner and founder of Good Life Wealth Management, an investment advisory firm in Dallas.
Here are some steps to take to get your finances in order before and during a strike:
Keep in contact with your union
Some unions will provide members special benefits in the case of a strike. In some cases, unions will give strikers a little bit of money, perhaps $300 a week, to cover basic needs, said Leon LaBrecque, chief executive of LJPR Financial Advisors in Troy, Mich., and a certified financial planner who has worked with organized labor for more than 30 years. But union-based support doesnât have to be formalized either. âGet a âsupport groupâ of others affected by the strike,â LaBrecque suggested. âConsider group dinners, lunches, picnics and overall support.â
Make sure your credit is in order
During a strike (or any financial emergency), a loan can help keep strikers afloat while they go without income. But a bad credit score will make getting a loan, particularly one with lower interest, more difficult. âYou want to know if borrowing is in or out,â LaBrecque said. Plus, a credit check can help prevent the pitfalls that can come about from opening up too many credit lines.
Build up a war chest for emergencies
It may be too late for this strike, but create an emergency fund for the next one. The usual rule of thumb: set aside between three and six monthsâ worth of expenses. But in highly competitive fields like film and television, put away a yearâs worth of expenses, said David Haraway, owner of advisory firm Substantial Financial in Colorado Springs. This fund should also take precedence over saving for retirement, he said, especially when you consider how little most Americans have in savings. âYou need the cash flow to support yourself, but also to market yourself,â he said.
Evaluate your options for low-interest loans
Re-evaluating your credit-card strategy is important in the lead-up to a strike. Those who would be affected by a walkout like this should consider increasing the credit limits on their credit cards and a 0% interest credit card. Low-interest credit cards can provide a much-needed injection of liquidity during a financial crisis. (If possible, consolidate any high-interest credit card debt into the 0% interest products to avoid accruing too much interest at a time when it canât be paid off as easily.)
Create a budget and make cuts early
Weeding out the priorities â rent, groceries, health insurance, etc. â can help. Itâs important to go into âpreservation modeâ quickly in a situation like a walkout or layoff, since future income is up in the air, Stratton said. âThe painful truth is that if youâre going to have to make some cuts, you want to make them as soon as possible,â he said. Creating a budget is also a good time to explore alternative options, such as going on a spouseâs health insurance. (Strikes are considered qualifying events when outside the open enrolment time frame, Stratton said.)
Determine what bills are due and when
For things like credit card bills and student loans, explore the repayment options. In some cases, the lack of income during a strike could qualify individuals for income-based repayment plans, Stratton said. And if youâre nervous about remaining faithful to a budget and running out of money for the necessities down the line, Stratton suggested considering early mortgage or rent payments. âThat works on a behavioral basis if youâd donât want to just be sitting on a bunch of cash,â Stratton said.
Donât touch your retirement savings
If you have money in a retirement account, youâre already doing something right, given that 80% of Americans donât know how much theyâll need for retirement, according to a recent study. Withdrawing funds directly from that retirement account isnât a great decision, though. Besides putting their future financial in jeopardy, people who pull funds from their 401(k) or IRA before they hit the right age will incur a 10% penalty and face taxes on these distributions.
Taking money out of a Roth IRA is a potentially better option, since no penalties or taxes are incurred if an individual only draws on what they put into the account (though they will incur these losses if they withdraw funds that were accrued through interest.) But doing this comes with opportunity costs, including losing out on the compounded interest the money would otherwise be generating. A 401(k) loan is yet another option, but LaBrecque rated it a âthird-level choice.â Why? âYou do have to pay the interest when you pay yourself back, which I donât like,â he said.