With the government shutdown over, for now, it’s time to think about how you can financially prepare for the next time your pay and benefits might be affected. Having a plan can make a pay or benefits disruption an inconvenience instead of an emergency.
Government shutdowns aren’t uncommon. We’ve had four since 2000, and from 1980 to 2000, the government shut down six times. What made this particular shutdown difference was its length -- a record 43 days -- and the fact that the federal government paid troops without congressional action to guarantee military pay. The Pentagon performed some extraordinary maneuvers to get troops paid on the two paydays during the shutdown. It was unclear if any extraordinary measures were left to pay service members if the shutdown had lingered a few more days.
Read More: Government Reopens: What Every Service Member and Veteran Needs to Know
Military pay isn’t the only government spending that affects military families. Many military spouses are government employees, who were either furloughed or worked without pay during the shutdown. Food security programs were affected, including the Special Supplemental Nutrition Program for Women, Infants and Children, commonly called WIC.
The takeaway is clear: Despite decades of statements that “the military always gets paid,” it’s possible that the military won’t get paid one day. Or that other government spending that our military families rely on won’t be available. So we’ve got to figure out a plan to provide for ourselves when the government is unable.
You can take three key steps to prepare for financial instability -- due to a government shutdown, or any other situation.
Emergency Funds
Everyone needs to have an emergency fund. An emergency fund is a stash of money that you can access quickly in unexpected situations. How big should your emergency fund be? That depends on your needs. A single airman, with no debt, living in the barracks, may need only $500. A large family with two car loans, a big mortgage and tuition payments may need tens of thousands of dollars.
Two popular steps in many plans to build an emergency fund are:
1. Scrape up $500 or $1,000 as quickly as you can.
2. Then save a set amount with each paycheck until you reach three to six months of living expenses. Getting to that fully funded emergency fund will take time, but every dollar you put aside increases your financial flexibility.
Read more: Your 2025 Emergency Fund: How Military Households Can Weather the Storm
Pay Down Debt
One of the most stressful parts of pay interruptions is when every dollar is already spent before you get it. In many cases, this situation arises when you have debt. Whether you have student loans, car payments or credit cards, removing those monthly payments from your budget gives you flexibility.
Two popular strategies for paying down debt are the avalanche method and the snowball method. Both strategies start with a list of all your debts, including the balance, the interest rate and the monthly payment.
Read More: Does Paying Off Debt or Investing for the Future Take Priority?
In the avalanche method, you throw every available dollar at the debt with the highest interest rate. Once that debt is paid off, transfer that money to the debt with the next highest interest rate. The advantage of the avalanche method is that you’ll pay the lowest possible amount of interest in total.
In the snowball method, you throw every available dollar at the debt with the lowest balance. Once that debt is paid off, transfer that money to the debt with the next lowest balance. The advantage of the snowball method is that you’ll see progress by paying off small debts fast. That can give you encouragement to stick with it.
Reduce Your Fixed Expenses
Fixed expenses are the expenses that you have to pay every single month and can’t adjust when things are tight. These typically include rent or mortgage payments, fixed utilities such as cell phone service and internet, and minimum levels of food, other utilities and gasoline.
The best way to reduce your fixed expenses is to make economical choices with each move. Get an apartment or house that’s just a little less expensive. Choose economical cell phone plans, and figure out how to keep your basic utility, food and transportation expenses low. Often, your utility and transportation expenses are tied directly to your choice of home; be sure to include that in your decision-making when you choose a place to live.
Figuring out how to reduce your fixed expenses frees up money to be flexible. When you run into unexpected situations, you can reassign money to those surprises. When things are going well, you’ll have more money to have fun!
Most of us can’t magically pay off all our debt, build an emergency fund, and cut our fixed expenses overnight. It’s a process in which little steps add up to make big changes. Building this financial readiness will prepare you for all sorts of unexpected situations, including a government shutdown. And being prepared is key to reducing stress when life is hard.
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