I did it! I survived the longest government shutdown in U.S. history. The federal government was shutdown for 35 days, which was a wake up call for me, 800,000 government employees, and 1.2 million contractors affected by the shutdown.
For the first time in my career, I didn’t get paid from my “good government job.”
As a result, I had to dip into my emergency fund to cover my bills. This was not how I expected to use my emergency savings, but I was grateful to have the money.
Once the government shutdown ended (and I got paid), the first thing I did was replenish my savings.
The epic shutdown brought to light a few things about our country and Americans’ financial habits. Even if you weren’t affected by the shutdown, there are lessons you could learn. Anyone is capable of experiencing a loss of income or unexpected expenses.
Read The Government Shutdown Survival Guide
February 15th is just around the corner and we could have another government shutdown if the government doesn’t reach a deal. Below I share some lessons learned so you can be better prepared for when life happens.
Save More or Pay More
Many Americans impacted by the shutdown could not pay their bills after just one missed paycheck. This revealed the sad truth that 78 percent of Americans are living paycheck to paycheck.
You should have an emergency fund with at least three to six months of monthly expenses saved. This can take time to build, but get started. Start saving, even if you only have $5 to spare each week.
During the shutdown because so many people did not have emergency savings, they were forced to use credit cards or take out loans to pay their bills. The average interest rate for credit cards is 19 percent for new customers. While the average interest rate for personal loans is 10 to 28 percent, depending on your credit score. Yes you read that right, 28 percent!
So that means people that are already living paycheck to paycheck went into even more debt to cover regular monthly expenses. When they do pay this debt back it will be at a higher cost. They could end up paying more than the back pay they received.
So the lesson is to save more now, so you don’t have to rely on credit cards or loans later. If you aren’t sure how you can save on a tight budget, start your savings account with $5. Then start tracking your spending to see where your money goes. Tracking will show where you are overspending or wasting money.
Most people do not realize how much they spend to eat out, shop, or purchase apps. So do the math to know for sure. Then take the money you spend on lattes or small purchases you don’t need to boost your savings.
Set It and Forget It
Once you identify how much you can afford to save, put that amount into a savings account every time you get paid. Don’t force yourself to remember to save. Instead set up automatic transfers to your savings account through payroll deductions or automatic transfers from your checking account to your savings account.
Invest this money in a high interest earning savings account so your money can make money. Money market accounts are good accounts for saving. Just note, these accounts are limited to six withdrawals per month so only withdraw money for emergencies.
Now that the shutdown is over (for now at least); when you get your back pay, replenish or start your savings. If you have any money (no matter the amount) left over after you pay off your credit cards or loan, save that extra in your savings account.
Get a Side Hustle
The shutdown emphasized the importance of having multiple streams of income. Furloughed government employees with other revenue streams didn’t feel the blow of a miss paycheck as much as others. So you should have a side hustle or passive income too.
You need multiple streams of income and passive income–money you make in your sleep– is best. Not sure where to start? Check out these lists of several side hustles and passive income ventures.
The interest you make off your emergency savings could be your first form of passive income. But you can also monetize something you are passionate about or sell unused items around your house. If you can declutter and make money, that’s a win-win.
Two Maryland sisters started selling Furlough Cheesecake. In less than 35 days (they started their business after New Year’s Day), they moved from their home kitchen to a commercial kitchen and got Ellen to pay $20,000 for one cheesecake!
When the shutdown ended Jaqi Wright and Nikki Howard, The Furlough Sisters, had a viable business and back pay. There is currently a 2-3 week wait for their tasty desserts. They did not get lucky, but rather took advantage of a chance to create a business and earn extra income. You can do this too!
Rally Together in Time of Need
In a time of despair, the shutdown reminded me that there are still good people in this world. Local food pantries, restaurants, and small businesses stepped up to help those affected by the shutdown. People accustomed to a consistent paycheck found themselves at food banks picking up groceries to feed their families.
We came together as a community and looked out for one another. I even volunteered to feed residents in Southeast DC during the shutdown with other members from the DC area. It’s refreshing to see folks stepped up help others in this historic time.
This was not an easy task since most food banks were just ending their busiest giving season when the shutdown began. Many organizations distributed a lot of their goods prior to Christmas and then needed just as much supplies to feed furloughed folks afterward.
If you went to any of the community organizations for help, now is a great time to start giving back. You can make a donation or donate your time. This will help them support others in need. Pay it forward folks.
What’s next?
I cannot say it enough, save more. The fact that we could experience another shutdown in another two weeks should be more than enough motivation for government employees and contractors to start hoarding cash.
Now is also good time to reassess your worth. Polish off your resume, update your LinkedIn profile, and go on a few interviews. An interview doesn’t mean you will quit your job. But it does give you insight into your current pay and if it’s time to ask for a pay raise or promotion. The demand for workers is higher than the applicants and some companies are offering signing bonuses and sweet benefits to attract talented candidates.
If you need more education to pursue your next job or career, take a course or two to boost your skills and qualifications. Don’t be afraid to learn, you will be better for it.
Look for a side hustle that requires little to no startup costs. It’s best to pursue something you are passionate about so the work doesn’t seem like work. Put in the effort to boost your cash flow, which is money left after you pay your bills. This will ensure you are better off financially, in the future.
What are some lessons you learned from the government shutdown? Please share your comments below.