5 Ways to Manage Your Finances During a Government Shutdown
Many Americans breathed a sigh of relief when the federal government avoided a shutdown earlier this year. But with another one more likely than not, you might be feeling tense about your finances. It’s understandable, since a standstill could delay paychecks and benefit payments you rely on to cover essential household expenses like rent, groceries, and out-of-pocket medical costs. However, getting your finances in order today could provide stability during an otherwise unpredictable time.
What happens during a government shutdown?
When Congress fails to agree on a budget for one or more non-essential federal departments or agencies funded through annual appropriation bills, those entities cannot operate. Without money to function, such areas of the government close until a budget is approved. The length of a shutdown can vary, with the longest one spanning 34 days, between 2018 and 2019.
Some government employees will not receive a paycheck during a shutdown. However, Social Security, Medicaid, and Medicare recipients should still receive their benefit payments, but could be subject to processing and disbursement delays. Similarly, an interruption in government operations could also affect the timeliness of tax refunds, since there might be fewer IRS workers to answer questions and process returns.
How might a government shutdown affect my household finances?
Essential employees should not be affected by a government shutdown. If you work for an agency or department that provides essential government services, you should not experience a loss or delay in income or benefits. For example, military and federal law enforcement are deemed essential and such workers should continue to receive paychecks during a shutdown.
Since federal paychecks of non-essential employees may be delayed or reduced, late payments to creditors are a distinct possibility. It could also result in you needing to rely on credit cards or loans to cover essential expenses. Lower-income households that already have limited financial resources may be particularly strained during an administrative standstill.
Federal agencies publish contingency plans that describe how a lapse in funding affects their operations. Reviewing this publicly available information might help your household better prepare for a shutdown.
Is there anything I can do to protect my finances before or during a government shutdown?
Yes. Stay updated on the status of a potential government shutdown and how agencies you rely on could be affected. This will keep you aware of changes that might come your way. You might also consider these additional actions:
- Update your budget to reflect the expected change to income and expenses.
- Explore temporary job openings in your area. Working one of these positions could help make up for the loss in income.
- Review your savings balance and decide how you’ll use it to cover expenses.
- Delay major purchases to avoid taking on extra debt and to keep more cash on hand.
- Cancel or pause optional expenses like monthly subscription services and memberships.
Since some federal employees are eligible for unemployment compensation during a federal government shutdown, research your eligibility and prepare your documents early. It can take up to 12 days to receive a response to your unemployment claim. You might also be eligible for other forms of financial assistance during a shutdown. Speak with your supervisor for details.
Actions taken today could help lower financial stress caused by an interruption in income. Organizing your finances and maintaining a savings buffer year-round can shield you from events that might affect your finances.
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