If you’re not receiving pay as a federal employee because of the government shutdown, the financial effects are very similar to an actual job loss. There are lots of resources on how to financially prepare for a potential job loss. In this article, we want to address the best shutdown financial planning tips to take now that its occurring.
First, assess your personal situation. Identify how much cash you have on hand in your emergency fund and cash flow accounts. How many months of expenses can you cover from these pools?
You have an emergency fund
If you’ve got 3-6 months in your emergency fund, you are in great shape to out last any historical shutdown period. You can use this as an opportunity to perhaps be more cautious with discretionary spending and defer bigger ticket items until it is resolved. For your shutdown financial planning, if backpay is received, you will be in better shape financially than had the shutdown never occurred. You’ll be able to pay back your emergency fund and have some additional funds to direct toward your next financial priority.
You don’t have an emergency fund
If you don’t have an emergency fund, the steps are different. It’s important to focus on minimizing the damage of the lost pay.
- Immediately adjust any discretionary spending. The sooner you make this change, the more cash you can conserve. If you’re paying extra on debts like cars or mortgages, switch to just the minimum payment.
- Furloughed federal employees are generally eligible for unemployment. Texas provides a great FAQ for federal employees, and most states have something similar. If you receive back-pay, you will need to pay the unemployment back. So we would only recommend applying for unemployment if you don’t have other sources of cash to tide you over. If you’re continuing to work without pay, you probably are not eligible for unemployment, so you’ll need to consider other tools.
- Consider a side hustle like driving Uber, dog sitting through Rover, or other areas of interest. Even if have an emergency fund, if you have more time because of being furloughed, these side hustles can be an opportunity to set aside some additional cash.
- If you have a TSP account, the shutdown does not prevent you from applying for a loan. We generally don’t recommend borrowing from a retirement account. In this situation, however, you could easily repay the loan when the backpay is received. And a TSP loan is one way to access funds without incurring the high interest costs of some other resources.
- If you normally pay your credit cards in full every month, this would be a time to switch to just the minimum payment to conserve cash. There will be interest costs. And we would recommend immediately paying the full balance as soon as you receive your backpay. But this approach will not harm your credit long-term and is better than many of the alternatives.
- The Federal Employee Education and Assistance Fund (FEEA) offers grants and links to other resources.
If you’d like to discuss your specific situation, we’re happy to help strategize. We offer a free initial consultation.