A government shutdown brings more than political drama — it also brings real financial stress to our Feds. When paychecks stop, but bills don’t, even a short disruption can stretch household budgets.
While unpredictable, shutdowns aren’t uncommon, so planning for them is a key part of financial planning for federal employees. From building savings to exploring hardship withdrawals, having a clear understanding of your options can help you stay afloat until paychecks resume.
The First Line of Defense: Building an Emergency Fund
A solid emergency fund is your best buffer in times like these. Consider having six months of worth of savings, potentially increasing that amount if you have a lower risk tolerance or are nearing retirement. Options like a high yield savings account (HYSA) may be beneficial.
If you haven’t hit that target yet, make it a priority when paychecks resume. Even small, automated contributions can add up quickly.
Just be careful not to hold too much in cash. HYSA rates may offer decent returns now, but they won’t always keep pace with inflation. If you’re holding more than 12 to 18 months of cash needs, consider investing a portion to help protect your purchasing power over the long term.
Stretching Your Resources: Budgeting for the Unknown
When you’re not sure how long it will take for paychecks to resume, it’s important to preserve as much cash as possible. Take a look at your spending and focus on cutting back to essentials.
- Cover the basics: Prioritize housing, food, utilities, and insurance premiums.
- Pause the extras: Skip discretionary expenses like dining out, subscriptions, or travel.
- Negotiate where you can: Many lenders, landlords, and service providers offer payment flexibility during federal shutdowns. It can’t hurt to ask.
Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer -
Exploring Hardship Withdrawals and Assistance Programs
If these first steps aren’t enough, hardship withdrawals for federal workers can provide some relief. If you meet certain criteria, you can take a withdrawal from your Thrift Savings Plan (TSP). However, it’s essential to note that this may create a tax liability and will permanently reduce your retirement account balance.
Some federal employee unions and local organizations offer emergency grants or support during shutdowns. Certain credit unions and banks also provide low-interest loans for Feds in shutdown status. Check with your agency or local institution to learn more about your options.
Preparing for the Future: Lessons from Past Shutdowns
A shutdown is frustrating, but it can also be a turning point. If you don’t currently feel prepared, now is the time to adjust. Start by reviewing your spending and identifying areas where you can build more flexibility into your budget. Look for recurring costs that no longer align with your priorities, and consider redirecting that money toward savings.
If you don’t already have a backup income source, explore whether a side job or freelance work could offer some extra stability. Even a small, steady stream of outside income can go a long way during future disruptions. Making these changes now can help you feel more in control next time another shutdown looms.
Moving Forward with Confidence
Government shutdowns are frustrating and disruptive, but they don’t have to derail your finances. When faced with potential paycheck interruptions, focus on stretching your savings and lean on available resources when needed.
For help creating a personalized plan, reach out to the team at Serving Those Who Serve at [email protected].
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
