Buckley Air Force Base

Financial Lessons from the Shutdown

It’s important to develop healthy savings habits.

In the aftermath of the 35-day partial government shutdown, many federal employees, contractors and others who have their livelihoods linked to government operations realized just how close to the financial edge they have been living. Thousands of furloughed government workers, who missed two paychecks, struggled to cover the costs of basics like housing and food. One furloughed employee told told CBS News she had only $1.06 in her bank account, describing the situation as "terrifying."

According to a study by the organization Prosperity Now, about one third of households lack basic savings accounts, and fewer than 60 percent say they are putting money way for an emergency. Forty percent of Americans are one missed paycheck away from poverty.

Saving money is like going on a diet. It isn’t easy if you have developed spending habits that don’t allow for healthy savings. Most federal employees save for retirement in the Thrift Savings Plan. And as it turned out, for many federal workers, retirement savings were crucial to making it through the shutdown. Kim Weaver, director of external affairs for the TSP, said in an appearance on the television program Government Matters that the shutdown saw a 26 percent jump in employees’ hardship withdrawals and a 5 percent increase in loan applications.

The hardship withdrawals do not need to be repaid, but the distribution is taxable and subject to a 10 percent early withdrawal tax penalty if the participant is under age 59 ½.

As for loans, the TSP recently told participants that “due to limitations of employing agency/service payroll systems, some payroll offices may not be able to deduct loan payments from back pay. If your loan payments haven’t been taken out of back pay, you should submit your loan payments directly to the TSP…”

Although having retirement savings to fall back on in an emergency can be very helpful, it’s always best to have a cash reserve, too. Most financial advisers recommend keeping three to six months of living expenses in a cash account in preparation for an event such as the recent furlough.

How do you structure your finances to be able to build a rainy day fund? I recently was discussing this with Dennis Damp, a retired federal manager and author of a popular benefits and retirement newsletter for government employees. He recommends increasing your savings allotment with every pay increase by putting half of it away in a savings account. “Because federal employment is considered secure, many don't take the precautions they should to prepare for emergencies, such as a shutdown,”  he said. Even if you’re currently living paycheck to paycheck, you can start small and grow your savings over time.

One thing I’ve learned over the years is the importance of putting away money where you don’t see it. Since my husband is the better saver of the two of us, he had a savings allotment taken out of his paycheck and deposited into a credit union savings account rather than our joint bank account. This savings account paid for cars and vacations, and ultimately helped us achieve our retirement goals by allowing us to handle unexpected expenses. We avoided debt like the plague.

I have referred many federal employees, especially young ones, to a 16-page publication called If You Can: How Millennials Can Get Rich Slowly, by William Bernstein. He lists five hurdles that must be overcome to save for retirement:

  • Even if you can invest like Warren Buffett, if you can’t save, you’ll die poor.
  • Finance isn’t rocket science, but you’d better understand it clearly.
  • Those who ignore financial history are condemned to repeat it.
  • We have met the enemy and he is us.
  • The financial services industry wants to make you poor and stupid.

As the government and private companies have moved away from generous stand-alone pension benefits and with the potential for shutdowns, furloughs and layoffs, it’s vitally important to develop healthy savings habits. It isn’t too late to start taking the first steps toward achieving financial independence.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.