Money Lessons Learned from the Government Shutdown
As I write this post, the government shutdown is entering its 32nd day, with no end in sight. While most of the 800,000 people affected will eventually go back to work and receive back pay, it’s certainly a scary time for lots of people.
At least, that’s what the media leads us to believe.
I’ve seen countless stories about the hardships furloughed workers are now facing. From the media’s perspective, it seems that EVERYBODY is living paycheck to paycheck.
While it’s difficult to gauge the actual percentage of Americans living paycheck to paycheck, most reports put the number close to 50%.
For those individuals, it is a stressful time.
Missing one paycheck means:
Accruing high interest debt to pay everyday expenses
Inability to fund emergency savings
Not saving for short-term goals (vacation) or long-term goals (retirement or education)
My heart goes out to the people most affected financially by the shutdown. Truly some people have no choice but to live paycheck to paycheck, whether it’s the single parent working multiple jobs to support a family or the young adult just starting out in a career or countless other circumstances.
I get it.
My first job out of university was as a government contractor. For contractors, a furlough means they may not receive any back pay. Back then, having no income for an indefinite period would have wrecked my finances. I was just starting out and I had absolutely no emergency fund. It takes time and discipline to build one.
Whether or not you are currently being affected by the shutdown, it should serve as a wake-up call to all of us. That no job provides 100% financial certainty.
And it should remind us of some critical steps we can take to prevent financial disaster if and when the income from a job suddenly stops.
Have an Emergency Fund
Most experts recommend having 3 to 6 months living expenses in a savings account. An account where the money is safe and easily accessible.
For those in debt or struggling to make ends meet, Dave Ramsey’s first step is to build a $1000 emergency fund. No excuses. He advises to do anything (legal) to build this amount.
For most people, $1000 will not cover a month without pay, but it is certainly a start and could keep someone from desperate acts in a time of need.
As I already noted, an emergency fund takes time and discipline to build. If you haven’t started building one, now is the time.
Know your get-by number
A.k.a. understand your needs versus wants.
We all probably have expenses in our budget we could do without. Eliminating these items may not be comfortable, but it will allow us to focus on the absolute necessities.
Currently our monthly budget includes $15 for Spotify and $20 for SiriusXM for both our cars. In other words, we spend $420 per year so that we can listen to ad-free music 24/7.
Could we listen to the free radio in the car? Yep.
Could we “get by” without all this music? Certainly.
I wouldn’t be happy about it, but I’d drop the services in a heartbeat if it meant not being able to purchase prescription medication or put food on the table.
All of us have a get-by number, meaning that if we cut out all discretionary spending, we’d be left with just the necessities. Everyone’s get-by number is unique, because what is necessary to one person may not be a necessity to someone else.
At the very least, your get-by number includes food, shelter and medication. When times get tough, we should look at everything else that isn’t in these categories and cut out the stuff that is an indulgence.
Think about a Side Gig
I’ve been impressed by the creativity of some folks to take on a side gig to make ends meet.
I saw a story about one stay-at-home mom turned Uber driver.
Another story focused on a parks worker who is washing windows for businesses. Granted it was in Colorado. And she looked very cold. But kudos to her for her willingness to do whatever it takes.
There are a lot of side gigs most people are capable of that can bring in money right away. These include: pizza delivery, tutoring, Uber or Lyft driver, etc.
While some government jobs require a notice to the employer before taking on a side gig (to prove the job is not a conflict of interest), now is the time to think about a potential side hustle that could alleviate some stress until the regular paycheck resumes.