How to Keep the Wolf From the Door While Walking a Picket Line

Workers of the world, prepare your finances.

A strike can disrupt more than bus schedules, county services or factory production. Extended work stoppages can also play havoc with a striker’s finances as paychecks and benefit coverage disappear.

Planning can help minimize the damage, but even those already on strike can take some steps now to prevent permanent financial devastation, experts say.

Financial planner Mitchell Freedman, who specializes in working with entertainers, said advanced planning keeps his clients well prepared for strikes and other emergencies. The Sherman Oaks planner insists his clients keep an emergency fund equal to at least 12 months of expenses in a liquid account, such as a money market fund.

“These are people who have erratic income streams anyway,” Freedman said. Even successful performers, producers and writers “can easily go six months to a year between projects.”

Here are the steps Freedman and other financial experts recommend to those facing an extended work stoppage:

* Make a budget. Knowing how much you spend now is essential to knowing how much you’ll need to set aside--and which areas are ripe for expense-trimming.

When making your budget, don’t include costs that won’t be incurred if you’re not working, such as wage-related income taxes, 401(k) or 403(b) contributions, classroom supplies (for teachers) and agents’ commissions (for performers). Do include other expenses you deem necessary to maintain a decent standard of living, even if you think you might be able to reduce some of them if a strike drags on. Don’t forget large but irregular expenses such as property taxes, insurance premiums and auto repairs.

If your employer provides health insurance and the strike could last long enough for the coverage to lapse, you may need to include health insurance premiums in your budget. If you’re unsure, contact your union.

If you’re already on strike, this budget can be a powerful tool in helping you identify areas where you can cut back. If you need help or inspiration, frugality books such as Amy Dacyczyn’s “The Complete Tightwad Gazette” (Random House, 1999) or Web sites such as the Dollar Stretcher at https://www.stretcher.com are loaded with tips and advice.

* Build your emergency fund. Once you have a 12-month budget, divide the total by half. That, ideally, should be the amount of money you have set aside as your own personal strike fund, Freedman said.

You probably shouldn’t count on getting much financial help from your union, said Daniel Mitchell, a labor expert and professor of human resources and organizational behavior at UCLA’s Anderson School of Management.

Although many unions have strike funds, there are no set rules about how the money is distributed. Some unions make payments to those who staff picket lines, while others use the money only in emergencies, such as to forestall a worker’s eviction.

What if you can’t build a six-month fund by the time a strike is called? Families with more than one income earner may be able to get by with a somewhat smaller emergency fund, since most strikes don’t last that long. But one-earner families or those in the entertainment industry, where strikes can be lengthy, may want to stockpile more. It can make sense to cash in other investments, such as stocks held in a taxable account, to build up cash reserves. On the other hand, workers shouldn’t touch retirement funds such as 401(k)s or individual retirement accounts except in extreme emergencies, planners say.

* Reconsider your high-interest debt. Paying off credit card debts now could give you more financial flexibility in the future if a strike is pending. Once the cards are paid off, try to stay out of debt by charging no more than you can pay off each month.

If you have to choose between paying off your cards and building an emergency fund, most planners would recommend getting rid of the debt. You can always use your cards to live on in an emergency.

* Say no to big expenses. If you’re already on strike, this is a no-brainer. If you’re facing a possible walkout, remember that now is not the time to deplete your resources by remodeling your house, taking an expensive vacation or committing to any additional, long-term expense such as a lease on a new car.

If you already have a car lease that’s set to expire soon, consider negotiating a one-year extension, said Freedman, who has wrangled such extensions for several of his clients. Car dealers are happy to let you keep the car, rather than have it back on their lot, and your payments will typically be lower, because a smaller amount of depreciation will be included, Freedman said.

* Contact your creditors. If you’re out of work and falling behind financially, don’t ignore late notices or creditors’ demands for payment, said Robin Leonard, an attorney and author of “Money Troubles: Legal Strategies to Cope With Your Debts” (Nolo Press, 2000). Doing so could result in foreclosure, eviction, lawsuits and other collection actions, not to mention long-term damage to your credit report. You may be able to negotiate with your creditors for lower payments or a grace period by telling them about your situation. Such agreements could also ding your credit history, but typically not as much as a collection action.

* Accept help that’s offered. Strikers generally can’t qualify for unemployment insurance, but you may be able to use other community resources, such as food banks, to keep the wolf from the door. The AFL-CIO gave away two bags of groceries to striking commercial actors, for example, as a way to express support and spare the workers some expense.