Seven things to do when facing a pay freeze

The end-of-year holidays are festive for most people: attending parties, decorating, giving gifts, listening to music, visiting family, eating a bit too much.

At work it sometimes means announcement of raises or year-end bonuses when there's profit to be shared.  People may be entering the new year with a fatter wallet and a bigger paycheck.

This holiday season?  Not so much.  Googlers notwithstanding, many people found out that not only were there no year-end bonuses, but there was no year-end raise, either.  About 1.4 million US Federal employees are likely looking at no annual raises in 2011 and 2012. With the prices of groceries, gas, health care, and many other things steadily climbing, staying put is actually falling behind.

While people don't wish that a pay freeze would happen to them, it's far from unusual.  Here are seven things to consider doing if you're going to be pay-raise challenged for a while:

1. Give thanks for your job. For Christians, like myself, this is part of 1 Thessalonians 5:18; it's not a quid pro quo exchange with God, but instead a recognition that everything we have comes from Him.  In any case, a thankful heart is a much better launch pad for being proactive.  Spinning wheels with worry just makes a lot of bad-smelling smoke and wears out the tire treads.
2. Don't panic. A pay freeze is not a pay cut, and it's not a pink slip.  For the time being, the paychecks will continue to come in.  This is not a worst-case scenario.  Food will continue to go on the table, the lights will continue to come on, and the water will continue to run.  The basics, and a lot of the extras, are still there.
3. Recognize the wake-up call. If this pay freeze came out of the blue — heck, even if it didn't — it's still jarring.  Raises aren't always regular.  It's possible to experience a backslide with income.  Jobs, even “safe” ones like government jobs, aren't bulletproof.  Were you ready for the announcement?  If not, it's time.  Get ready.  Don't ignore the wake-up call.
4. Make some battle plans. The Bad Economy is knocking on your door.  Maybe you already have another job or have a side business going, or you've gone back to the basics cut your expenses and have started to do the little money-saving things again.  That's great.  Keep doing more of that.  If not, look at options for earning more and spending less.  Since you're already not in panic mode, you have time to plan for your best way to fortify your finances and find that money that you thought you were going to get.  Revisit the basics and go from there.
5. Work your thaw-out plan. A pay freeze from one job is just that: a pay freeze from one job.  The income can be made up elsewhere, and since you've made plans for how to do that, you just do it.  If you feel most comfortable with another job, then go out to get one.  If you think wringing the unsatisfying expenses out of your budget is the way to go, then find less expensive alternatives to your gourmet premium whatevers.  If you want to tackle a side business, then go for it.  Plan enough to get started, and sand down the rough edges along the way.
6. Build momentum. If the pay freeze on the one job is the worst of it, hallelujah!  If it isn't, and The Bad Economy ends up pounding the door in and you lose that job, then you'll be glad that you just didn't coast when you felt comfortable again.  Build the side business more, or take a battle axe to your expenses.  Build up a nice emergency fund.  The more cushion you have, the more time you have to wrestle your way out of a financial head lock.
7. View the entire process as a test. Life has ups and downs.  This is a down part, a trial, a test.  Tests teach you what you know and what you don't know.  Just going through the test has its own benefits, even if the test itself isn't fun.

Oh, by the way:  I'm going through this myself right now, so you're not alone.

(Thanks to Blonde and Balanced for including this post in the Carnival of Personal Finance.)