4 ways to manage your finances during a government shutdown.
Key takeaways:
- Many federal employees will have reduced or delayed paychecks. Even those not directly employed by the government could experience delays in benefits or services that impact expenses like rent, groceries and medical costs.
- Households can reduce the impact of a shutdown by updating budgets and delaying major purchases. Developments around the government shutdown are constantly changing. This article reflects the situation at the time of publication but may not include the most recent updates.
Navigating your finances during a shutdown of the federal government can be challenging, especially for federal employees and contractors directly impacted by delayed or reduced paychecks or furloughs. However, even those indirectly affected may face economic ripples, such as reduced access to government services and delayed benefit payments you rely on for essential household expenses like rent, groceries and out-of-pocket medical costs. With careful planning, you can minimize the impact of this uncertain time and stay on track toward your financial goals.
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?
Many federal workers may experience a loss or delay in income and benefits. Air traffic control operators, Social Security employees and military personnel on active duty (including reserve component personnel on Federal active duty) may have to report to work and carry out assigned duties without pay. Other civilian employees who are not needed for essential activities will be furloughed during the shutdown.
Since federal paychecks of non-essential employees may be delayed or reduced, or withheld, 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. Check with your department supervisor to request a copy of these plans.
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.
- 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 might be eligible for unemployment compensation link opens in a new window 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.
If you have been affected by the government shutdown and cannot make payments on your Commerce loans or credit cards, contact us at 1-833-518-3458 to discuss your options.
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.
Disclosures:
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