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All aboard! We're navigating you through uncharted water. Here's how the longest government shutdown in American history may impact your wallet and what you can do about it.

We’ve reached the longest government shutdown in U.S. history. The last government shutdown of this magnitude was in the mid-90s, and it ended. As of right now, there doesn’t seem to be any end in sight, as political disputes are causing a delay in signing a new agreement.

According to The Street, “during a government shutdown all federal offices not deemed essential, mandatory or necessary to health and safety close and the employees go home,” whereas “air traffic control workers, law enforcement agents and soldiers will continue to show up for duty however, as they’re deemed essential for health and safety.”

What we’re experiencing is unprecedented, so we’ve put together this guide to help you through the shutdown, as well as prepare for future financial emergency scenarios.

Impact on Tax Returns

While the government remains shut down, it could delay you getting your tax return. Like most other areas of the government, the Internal Revenue Service (IRS) furloughed the majority of its employees.

In case you aren’t aware, a salary furlough means the employee keeps their job but doesn’t report to work and doesn’t earn any pay. Businesses do this when they’re experiencing times of economic struggle but expect to rebound. When a government shuts down, they have to do the same thing.

So this means that most of the employees of the IRS are not working and aren’t getting paid. In fact, one report indicated that the IRS was functioning with just a little more than 12% of its normal headcount.

So you can imagine that this happening right around tax time is less than ideal. What’s more, the IRS is supposed to abide by certain restrictions during a government shutdown, which includes:

  • Not performing audits
  • Not answering any taxpayer questions
  • Not paying out any tax refunds

Now what’s strange about this situation is that it’s somewhat unprecedented. Because of that, acting director of the White House Office of Management and Budget, Russell Vought stated that refunds will go out as planned.

But here’s where it gets interesting.

Not only would the IRS have to beef up its staff to make this happen, but House Majority Leader Steny Hoyer thinks it’s illegal to do so.

So what does all of this mean for you?

Well, most experts are saying to expect delays in getting your refund–at least a week, if not more. According to Yahoo! Finance, “John Lieberman, a New York-based accountant, is telling his clients to expect at least a week of delays. For his clients with a relatively straightforward and simple returns, he’s optimistic for a refund within two to three weeks, but for more complicated returns, it’s more realistic to expect delays of at least one week.”

Tips for Government Employees Affected

If you work for the federal government, either living in or outside of Washington, D.C., or you work for a federal government contractor, odds are your pay has been suspended.

About 380,000 federal government employees have been furloughed without any pay. There are another 420,000 federal government employees working with suspended pay, meaning they’re working for free with the expectation they’ll get back-pay.

You can imagine that’s probably hitting bank accounts and wallets pretty hard. Just this past week, federal employees missed their first paycheck as we moved into the longest shutdown in U.S. History.

First, know that the government isn’t legally required to issue back-pay for employees who are furloughed, but Congress just approved a bill that guarantees back-pay for furloughed federal employees when the shutdown is over. That gives furloughed employees at least some peace of mind knowing they’ll get paid when this all ends.

But what should you do in the meantime?

Apply for Unemployment

If you’re a government employee that’s been furloughed, you can apply for unemployment. CNBC states that furloughed employees will likely qualify for the benefit, as will many of the 4 million government contractors who have seen their paychecks stop.

But there are still problems with this.

With so many federal government employees not working, there may be nobody in the office to verify the information and process the unemployment checks, causing delays in receiving the benefit, if you receive it at all.

What’s also strange is you’ll need to follow typical guidelines for unemployment, such as proving that you’re looking for work. For someone with a full-time job that has been stopped due to a government shutdown, this is a little odd.

CNBC also states that “federal workers will have to pay back any money they receive under the program if Congress passes legislation to compensate them for the period the government was closed.”

Being that Congress passed the bill to guarantee back-pay for furloughed workers, this will take effect and you’ll be required to pay back your unemployment benefits when the government reopens.

For the time being, though, getting unemployment can help ease the burden of paying your bills, including your mortgage or car payment.

Pick Up a Side Hustle

Believe it or not, many long-time government employees are picking up extra work on the side to cover their loss in pay. This is easier said than done, though, because many federal government employees are making a high-wage that they can’t easily replace by delivering groceries with Instacart for example.

NPR tells the story of a man who works as an archaeologist in the Great Basin National Park, making about $73,000 per year. That’s not easy to replace with a side hustle, but at least it can help.

Since the government technically can reopen once an agreement is reached, we recommend finding a side job that is easy to get into and easy to get out of. One example is driving for Uber. Once you’re approved to drive, you can make your own hours and drive whenever you’d like.

Now, you don’t make that much driving for Uber, but it will at least keep you busy and give you some extra income. There’s also a secret hustle in driving for Uber–networking. Liz Wiseman, the author of Multipliers, tells the story of a CEO who would drive for Uber and wait outside of his competitors’ offices to meet potential future hires.

What better way to force yourself into a networking conversation than driving someone where they need to go? Heck, you might meet a potential future employer. Read our article on side hustles to find more creative ways to make money on the side.

Get a 0% Credit Card

I am in no way suggesting that you should attempt to replace your income with a credit card, but if you’re temporarily out of work, you can pick up a credit card that offers 0% interest on purchases for a decent length of time. This will allow you to make the necessary purchases you need, while only needing to make the minimum payment and not worry about paying interest.

Now, the goal would be to pay your balance in full, but if you’re not getting a paycheck, that might be difficult. Make sure you have a firm plan in place to pay the entire balance off once you get your back-pay and start receiving a check again.

I want to make this abundantly clear that we’re not suggesting you rack up debt on silly things because it’s a 0% credit card–we’re suggesting a temporary solution while you’re not getting a paycheck from your job.

To further this, I’d only recommend exploring this option if you’re guaranteed back-pay and a future paycheck. If you’re a contract employee, for instance, there’s a chance you may be laid off. I wouldn’t roll the dice by racking up credit card debt in that case.

We really like what the Chase Freedom is offering right now. You’ll get 0% on purchases for a relatively lengthy 15 months, plus 5% cash back in quarterly categories ($1,500 max spend, activation required). Or you can check out this list of other top interest-free credit cards.

Tips for Government Retirees

If you are on the verge of retiring or you retired during the shutdown, you may run into some issues. According to the Washington Post, people in those situations are “…stuck waiting for their retirement packages to be fully processed because the employees who handle that paperwork are furloughed. As a result, some employees who retired during the shutdown are having difficulty tapping into their Thrift Savings Plan (TSP), the government’s version of a 401(k).”

If your retirement was halted due to the shutdown, experts recommend waiting until the government reopens. Most agencies recommend submitting federal government retirement paperwork two to three months in advance to provide enough time for everything to process–so there’s almost no point in doing it during a shutdown.

If you already filed your paperwork and your retirement date falls during the shutdown, it will reflect the proper date of retirement. The Washington Post states the following: “If a federal employee already submitted a retirement application to his or her agency with a date of retirement that occurred during the shutdown, the employee will be retired, effective on the submitted date of retirement.”

But what if you’re already retired? How will you be impacted?

According to the United States Office of Personnel Management (OPM), “Federal retirees under the CSRS and FERS retirement systems will still receive their scheduled annuity payments on the first business day of the month.” So there should be no disruption to your scheduled annuity payments.

You can read the full guide linked above from the OPM, but the short answer is this:

  • If you were about to retire but haven’t filed paperwork, wait until the government reopens.
  • If you’ve submitted your paperwork and your retirement date falls during the shutdown, it will reflect appropriately.
  • If you’re already retired and receive a government annuity payment, there should be no disruption during the shutdown.

General Tips to Budget for Emergency Scenarios

Obviously, if you’re an employee of the federal government, you’re already experiencing what it’s like to not have a paycheck. Some of you may be dipping into savings or borrowing from friends or family. While the tips above can help you now, here are some general tips to budget for future emergency scenarios like this most recent government shutdown:

Cut Expenses Now

The first thing to do is lean-out your current expenses. Write down all of your monthly expenses (or use a tool like Personal Capital to do this for you) and figure out where you’re spending too much and where you’re spending unnecessarily.

Spending too much can mean things like groceries–where you just need to build a plan to spend less. Spending unnecessarily could mean buying things you don’t really need–such as subscriptions or expensive shoes.

From here, I would suggest making a budget. YNAB is my favorite, but there are other tools and methodologies that can help you figure out a plan for future spending. Read through our tips on budgeting without stress as well as our top tools for budgeting to determine what makes the most sense for you.

Related: Personal Capital Review

Plan for Future Cuts

Next, I would think about ways you can cut in the future if and when there’s another emergency–such as a government shutdown and you’ve lost pay. Doing this during a period of financial crisis, such as a job loss, can often be ineffective, so it’s good to plan ahead.

The first thing I would do is make a list of expenses that you want and can afford now, but would easily be cut in the future if there’s an emergency. A good example is a gym membership. Maybe today it makes sense for you to have because you use it and you can afford it. But if you lose your paycheck, it might be the first thing to go.

Do this for all similar types of expense. Note what the expense is, how much it costs, and any relevant details to cancel it–including terms of the contract, cancellation fees, and phone numbers to call to cancel. Think of this as your emergency guide to saving money.

Lastly, focus on big items.

While cutting back on coffees may seem like a lot, it may not be enough. Think about things like your mortgage (can you work on paying it down now in case you need to refinance?) or your car (can you trade it in for a cheaper alternative or get a lower payment?). Focus on items that will have big impacts on your budget now so if the time comes, you’ll be ready.

Know the Risks of Tapping Into Retirement

Many people end up drawing upon their retirement funds in the case of a financial emergency–but it’s not always the smartest move. You can be hit with penalties and fees that you’ll later regret once things normalize.

Your best bet, if you’re going to tap retirement funds, is by way of a Roth IRA. You can withdraw your deposits to a Roth IRA before retirement age without penalty–but you’ll need to keep track of all your deposits and withdrawals for tax time. You can read more about this here.

If you draw on funds beyond deposits (i.e., earnings) you’ll have to pay a 10% early withdrawal penalty on top of any other taxes you will have to pay (like income tax).

You can also borrow against your 401(k), though I strongly advise against it. You’ll owe interest as you pay it back, but you’ll also miss out on possible substantial gains while that money isn’t in your account.

The goal, for now, is to learn all you can about the pros and cons of pulling from your retirement accounts to fund an emergency. If it’s a last resort, sometimes it’s your only option. Write down all relevant information–account information, fees, and anything else that will come in handy in the event of a financial emergency.

Have Credit Available

It’s always a good idea to have at least one credit card you can rely on in the event of an emergency. You don’t want to scramble at the last minute to apply for something when you find out you’ve been furloughed, for example.

For your emergency card, I would avoid thinking about all other benefits and simply focus on the APR. Find the card with the lowest interest rate and ignore things like points and sign up bonuses. In normal cases, I’d say those are the primary things to focus on–but we’re not planning for a normal situation.

Check out our list of the best low-interest credit cards now to sign up for something you can use in case of an emergency scenario.

I also briefly mentioned paying your mortgage down to have some equity in your home. This is a great idea, because having equity in your home allows you to take out a Home Equity Line of Credit (HELOC) in case there’s a financial emergency.

Now, in the case of a government shutdown, you may be limited on options for getting loans, but it’s still a viable way to protect yourself. HELOC rates are usually lower than personal loans, since the loan is secured against your home. If you’re using the funds responsibly and have a plan to pay it back, I think it’s a great backup option.

Bottom Line

We’re in uncharted territory right now, experiencing the longest shutdown in government history. While the best thing you can do is brace yourself for these types of situations, sometimes it’s impossible to fully plan for what may occur.

If you’re a government employee, stay positive and do everything you can to get some extra income right now. If you’re not, be mindful of those who are out of work right now and see if there are ways you can support friends or family.

Moving forward, it’s a good lesson for all of us to prepare for financial emergencies–because you never really can plan for what might happen.

Article comments

travis stevens says:

Im 45 yrs old and applied for the fafsa grant to go back to school and the government shutdown down scares my self and my family we are depending on the money and the chance of a better future for us we sit everyday in hopes of the advance check will be in the mail box

Lisa says:

Can the banks shut down?

Elizabeth Hoffer says:

That the Government Shutdown is a bad thing