Over 800,000 individuals are missing their regular paychecks as a result of the most recent government shutdown. If you are impacted or know someone who is, please read or watch my video as I offer four steps every impacted employee can follow to survive a financial interruption.
40% of Americans can’t cover a $400 emergency expense
The truth is, the vast majority of Americans simply can’t survive financially over an extended period of time without receiving their regular paychecks. A recent study showed 4 out of 10 adults couldn’t cover an unexpected $400 expense without selling something or borrowing money.
As we wait patiently for Congress to pass legislation to resolve this, here are four steps to survive the government shutdown:
1. Review All Expenses. This is the FIRST and most important step to get a handle of your situation. Make a list of all upcoming expenses and include the amount due and due date. This list should include EVERYTHING, including your subscription services like NetFlix, Apple Music and Hello Fresh.
2. Prioritize Your Expenses. With your completed list in hand, it’s time to prioritize needs over wants. Decide which nonessential expenses can be canceled, temporarily suspended or skipped. This step may be very uncomfortable and will require you to say “no” to activities like your child’s private baseball coaching sessions or that spa day with your girls that’s been on the books since last year. Since we don’t know how long the shutdown will last, this is a necessary exercise.
As you prioritize, CALL and TALK to your lenders or creditors to see if there is anything you can do or any assistance they are willing to provide regarding your upcoming expenses. Contact your landlord, utility companies, credit card companies, and other lenders where a payment is due. Explain your situation and ask for a payment plan or late fee waiver.
The good news is there are several companies already stepping up to help make things a little easier. For example, T-Mobile and Verizon have offered federal employees payment options during the shutdown and many banks are offering federal employees refunds on overdraft fees. But don’t assume these companies will just offer assistance. You’ll need to proactively ask for assistance and hopefully get the lifeline you need.
3. Make A Plan to Pay Your Expenses. Once your checking account runs dry, what’s your next source of funding? This is why everyone needs an emergency fund. If you haven’t been saving regularly, or if your emergency fund is running low, it’s time to get creative with how you will cover your expenses. Consider these options:
- CD (certificate of deposit) – check with your bank to see if they will waive any early withdrawal penalties. Ally Bank is offering this courtesy to their customers, so definitely ASK.
- Credit cards – If you have to rely on credit cards during this time, know the interest rates being charged. If the interest rate is really high, call and ask for a lower interest rate for purchases made during this time. And avoid taking out cash advances since they always have much higher interest rates.
- Personal or Other Loans – When it comes to loans, check with your local credit union. They typically have lower rates than most financial institutions. Some credit unions may offer personal loans to government employees at 0% interest over a specific period of time.
Relying on credit cards or other loans can be dangerous ground, so tread carefully with this option.
As you consider all your options, avoid expensive payday loans, as well as making early withdrawals from retirement accounts. Yes, these can give you access to cash quickly, but it may come with expensive and long-term costs. If you have into tap your retirement accounts early, do it with your eyes wide open, and make sure you understand the consequences and risks of borrowing from your retirement accounts
4. Look for Quick Ways to Make Extra Cash. Consider these options:
- Use your talents or make money from an existing hobby – I’ve seen a few promising stories on social media, of people creatively using their talents and gifts to make some extra cash. For example, two sisters from Maryland, both furloughed employees, have started a cheesecake business to make ends meet. Beyond Uber and Lyft, take a closer look at sites like Roadie, Task Rabbit, Upwork, and Rover to see if any would be a good fit.
- Declutter and Sell Some Items – Take an inventory of all the stuff we accumulate in our closets and basements and begin to sell the things you no longer need, but would be valuable to someone else. Post your items on Facebook Marketplace, Craiglist, or cool apps like Poshmark that make it really easy to snap a picture, post a good description and start bringing in some cash.
While these opportunities won’t make you rich, every bit helps during times of uncertainty. And since we don’t know how long this partial shutdown will last, it’s important to stay positive, be productive and focus on the things you can control.
I hope you found this information helpful. If you did, definitely share it with your friends, family and colleagues who may also be impacted.
I Want to Hear From You. What financial decisions have you made as a result of the partial government shutdown?