When a government shutdown occurs, your budget could be affected in myriad ways.
You might see few to no changes in certain areas, such as continued Social Security paychecks or a government pension. Other segments could have more intense consequences, including delays in travel or application approvals. The exact implications will depend on many factors and will be based on the agreements that Congress makes in the next few days.
The new fiscal year for the government begins Oct. 1, 2023. Lawmakers have not yet enacted all the bills that will set discretionary spending levels, according to the Committee for a Responsible Federal Budget, a nonprofit organization. This means that if they are unable to provide the funding for the upcoming fiscal year, many U.S. government services could be affected. While some essential jobs may continue, other workers might be furloughed until a resolution is found.
To prepare financially for a government shutdown, you can take the following actions:
— Understand: What is a government shutdown?
— Check your financial emergency funds.
— Look at your government payment needs.
— Review your travel plans.
— Hold back on large purchases.
— Revisit your long-term financial plan.
[READ: Here’s How Much Money You Could Lose if Social Security Goes Bankrupt]
What Is a Government Shutdown?
A government shutdown can happen if policymakers are unable to enact legislation that will fund the federal government for the following fiscal year. Each Oct. 1 is the start of a new fiscal year.
During a government shutdown, nonessential U.S. government offices close until funding is renewed. Essential services, which typically include public safety, remain in operation. Each federal agency comes up with its own shutdown plan. This means that you may notice some government services continue but in a restricted way.
Government shutdowns have occurred on occasion in the last decades. Some of the recent shutdowns include pauses during 1995 and 1996, a shutdown in 2013 and a 34-day stretch from the end of 2018 to the beginning of 2019.
Check Your Financial Emergency Funds
There could be changes to interest rates when a shutdown occurs, including a spike if market conditions take a dive. Consider squirreling away extra cash for unexpected expenses.
“It’s wise to have an emergency fund in a savings account that can cover at least three to six months’ worth of living expenses,” says James DesRocher, a financial advisor and founder of TrueView Financial in Middleton, Massachusetts. “This cushion can help you weather the storm without resorting to high-interest debt or dipping into long-term investments.”
[READ: Prepare for the Unknown With an Emergency Fund]
Look at Your Government Payment Needs
In past shutdowns, government benefits have continued.
“Stay informed about your Social Security benefits and any other government assistance programs you may rely on,” DesRocher says. “Understand the eligibility criteria and the process to apply.”
It’s possible that certain processes will be paused during a shutdown. This could mean that if you are eligible for Medicare or Social Security, you won’t be able to get the benefit verified. During a government shutdown in 1995 and 1996, Medicare applicants were temporarily turned away. Social Security requests might not be reviewed, and tax refunds could be delayed as well.
If you’re in a tight money spot, look for other places for help.
“Various nonprofit and community-based organizations offer assistance during government shutdowns,” says Daniel Morris, founder of My Caring Plan, an elder care resources hub, in Cambridge, Massachusetts. A few to try: civic groups, senior centers, food banks and thrift stores.
Review Your Travel Plans
In previous shutdowns, national parks have halted visitor entry or services. In 2018 and 2019, when the government paused its funding, some places remained open. However, visitors did not receive services inside the parks.
In addition, there were extra delays at airports during the 2018-2019 shutdown. This was due to shortages related to Transportation Security Administration agents. In their absence, fewer security checkpoints were open and travelers had to wait longer than usual in lines.
[READ: Insider Secrets to Booking Cheap Airfare.]
Hold Back on Large Purchases
When there are uncertain times, you may opt to avoid new loans or significant home renovations.
“Reduce nonessential spending,” Morris says. This will keep your cash reserves intact, and it will prevent you from overleveraging your finances. Once the government resumes and the market stabilizes, you might decide to move forward with your plans.
Revisit Your Long-Term Financial Plan
You may want to sit down and spend some time evaluating your portfolio and the different risk levels of your investments. If your job position faces uncertainty due to a government shutdown, you might look for other ways to bring in cash.
“Diversify your income sources by exploring part-time work or side gigs, which can provide an additional financial safety net during uncertain times,” DesRocher says. “Being proactive and maintaining financial flexibility will help you weather government shutdowns or other unexpected financial challenges more effectively.”
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How to Financially Prepare for a Government Shutdown originally appeared on usnews.com
