Advice | What to do if a federal government shutdown stops your paycheck

Another federal budget battle.

This is life for government employees and contractors — fear of missing paychecks or business income because of the dysfunctional way Congress negotiates the nation’s spending priorities.

Previous showdowns have closed the government for as short as one day to as long as more than a month.

A disagreement in late 1995 between President Bill Clinton and the GOP on balancing the budget led to a 21-day closure that lasted into January of the next year.

The government’s most historic shutdown happened when President Donald Trump tried to get $5.7 billion to build a barrier along the U.S. border with Mexico. Funding for a wall, which he had promised that Mexico would pay for, prompted the longest-ever federal shutdown — 34 full days over late 2018 stretching into 2019.

Although federal workers were eventually paid retroactively, many contractors and other businesses reliant on government spending never recovered the lost income.

Some workers were forced to feed their families by turning to food banks. In the D.C. region, the Capital Area Food Bank hosted pop-up markets to hand out canned goods and fresh vegetables.

Many others tapped their retirement accounts or took out loans to make ends meet.

Whether you’re a federal worker, contractor or private-sector employee, a disruption in your income can throw you into a financial panic. And a prolonged shutdown could upend an economy already pressured by high inflation.

Here’s some advice to help make it through if there is a partial or full government shutdown.

During the 2018-2019 shutdown, the Office of Government Ethics issued an advisory with guidance about permissible and prohibited actions by furloughed employees when it comes to taking outside employment, accepting gifts and using crowdsourcing sites such as GoFundMe to raise money.

How to survive without a paycheck if a financial emergency strikes

For instance, such workers cannot receive compensation for teaching, speaking or writing that relates to their official duties. Nor can they accept outside employment that would conflict with their official duties.

There’s not a lot of time until the fiscal year ends on Sept. 30, but do what you can to slow down your spending and save some cash. The threat of a shutdown could be temporarily postponed with a continuing resolution or spending bill, giving you more time to build up your cash reserves. If that happens, use the reprieve to save as much as you can.

Put aside enough to cover major expenses, such as your rent or mortgage, your car payment and food.

A federal government shutdown looks more and more likely: What to know

These are measures to take until your paychecks start up again and you receive your back pay, which will come thanks to the 2019 Government Employee Fair Treatment Act. The law ensures federal employees will get retroactive pay in the event of a shutdown once funding resumes.

Furloughed employees or those who are required to work during a lapse in appropriations are guaranteed back pay.

Desperate times may call for desperate measures, like deciding which bills to pay.

If you’re not getting paid and you don’t have savings to fall back on, it’s a matter of necessity to concentrate on covering just the bare necessities.

If there’s not enough money coming in, you may be forced to triage your bills, much like a medical staff with an emergency room full of patients. This system tends to the most critical, then works down the list.

If you don’t have enough money to cover all your financial responsibilities, accept that some creditors are just going to have to wait.

Your highest priority should be your rent or mortgage, your auto loan, and child support. Lower priorities might include credit card debt.

Credit card debt tops $1 trillion, trapping even six-figure earners

Be proactive in contacting your creditors

In the past, financial institutions have offered assistance to federal employees and contractors affected by a shutdown. Some proactively waived overdraft and monthly account fees. Others allowed borrowers to place their loans in forbearance, giving them a break from making payments.

During the last shutdown, utility companies waived late fees and offered extended payment plans.

But the assistance may require action on your part.

If you can’t pay your credit card bill, be proactive. Contact the card company and see what you can work out.

Longer government shutdowns have become more common

Call every creditor and ask for a reprieve on paying your bill. Explain your situation and see whether you can get a month or even two months of deferral.

Better to ask for help than silently struggle when help may be available.

Make withdrawing money from your retirement account a last resort

One pot of money you may consider tapping is your retirement account.

For federal workers, that would be the Thrift Savings Plan (TSP), which is the government’s version of a 401(k). There are two ways for workers affected by the shutdown to get to that money — a hardship withdrawal or loan.

But hardship distributions are subject to income taxes unless they consist of Roth contributions. Additionally, if you’re younger than 59½, you may be subject to a 10 percent penalty for the early withdrawal.

If a shutdown lasts for an extended time, you may feel you have no choice but to tap your retirement funds. But make it a last resort.

Put a pause on any aggressive debt reduction

Suspend any aggressive debt payoff plan and just make minimum payments. Right now, you have to preserve your cash. You may need that money to keep the lights on or buy food.

If you want more personal finance advice that’s timeless, order your copy of Michelle Singletary’s Money Milestones.

Until there is certainty about the budget, concentrate on essential expenses until the crisis has passed.

The frequency of these shutdown threats can be nerve-racking.

Talk to a professional so that you don’t make unwise financial moves or become susceptible to a scam in a desperate attempt to make money. If you’re covered by health care that provides behavioral health services, go see a therapist.

A financial crisis can be crippling. Don’t keep your angst bottled up.

B.O.M. — The best of Michelle Singletary on personal finance

If you have a personal finance question for Washington Post columnist Michelle Singletary, please call 1-855-ASK-POST (1-855-275-7678).

Recession-proof your life: The tsunami of economic news is leading consumers, investors and would-be homeowners alike to ask whether a recession is inevitable. Regardless of the answer, there are practical steps you can take to help shield yourself from a worst-case scenario.

Credit card debt: Carrying credit card debt is never good and you should ditch the habit. Here are seven ways to lower your credit card debt in light of the Fed continuing to raise interest rates.

Money moves for life: For a more sweeping overview of Michelle’s timeless money advice, see Michelle Singletary’s Money Milestones. The interactive package offers guidance for every life stage, whether you’re just starting out in your career to living an abundant life in retirement.

Test Yourself: Do you know where you stand financially? Take our quiz and read advice from Michelle.

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