Have you ever wondered what would happen if your employer stopped your paycheck without any notice? Have you stopped to think how you would pay for groceries, cover the costs of child care, and put gas in your car – you know, how you would live?
This is the scenario some federal employees are enduring right now.
Dirty politics and federal drama have our government partially shut down, which means many people are out of a job or doing their job without pay. That’s pretty scary considering at least some of the functions of the federal government are necessary.
Recent reports have stated some TSA agents are quitting and not showing up to work, which is an absolute nightmare for frequent flyers and airport security. Besides that, who will process tax refunds if the government stays shut down for much longer?
It remains to be seen when the shutdown will end and what happens to worker pay once it does. But, we do know one thing: Things could get worse before they get better – at least for some.
How the Shutdown is Hurting Household Budgets
The Washington Post , The New York Times , MSNBC , and many other publications are rolling out piece after piece to cover the effects the shutdown is having on federal employes. Let me tell you, it’s not good.
After not receiving a paycheck for weeks, some federal workers are taking drastic measures just to pay bills – including selling their belongings and maxing out their credit cards. Many are also bracing for their February rent or mortgage payment with the full knowledge that they do not have the money to pay it. The same is true for regular bills like groceries, utilities, and even gas to get around.
The entire thing is a huge mess, but it also underscores why we all have to look out for ourselves . The government has been shut down for….what….less than three weeks, yet people are already struggling to pay their bills?
This shouldn’t really surprise me, but it does.
It always does!
Houston, We Have a Problem…
By and large, Americans are trained to spend every cent of their income and then some. We’re taught that we need a new car every few years, that our kids deserve to go to the best schools no matter the cost, and that it’s okay to buy things we can’t really afford and pay for them later – all with a credit card, of course.
A 2018 “Planning & Progress” study from Northwestern Mutual provides serious proof of what I’m saying. According to the study, nearly half (48%) of Americans feel somewhat fearful when thinking about their financial future. Americans are also twice as likely to have accumulated $5,000-$25,000 in debt (33%) rather than personal savings (17%), and more than one in ten (13%) say they’ll be in debt the rest of their lives.
But, it gets worse. The Northwestern Mutual study reports that two in ten (20%) respondents allocate 50% to 100% of their income towards debt repayment. Plus, one in five Americans (21%) have no retirement savings at all and one in three Baby Boomers (33%) have between $0 and $25,000 stashed away…and Baby Boomers should be getting ready to retire if they haven’t already!
What does this mean?
It means that, despite outward appearances, many Americans are broke. They’re spending all the money they earn and living paycheck-to-paycheck , almost always to the detriment of both their financial health and their emotional well-being.
The Problem with Living on the Edge
Living paycheck-to-paycheck is bad enough, but it also means that having any lapse in pay can screw you over in a heartbeat.
You may be able to miss a paycheck once or endure a bump in the road by maxing out your credit card, but what happens when you miss your paycheck for a few weeks? How about a month?
You fall behind – that’s what.
You wind up robbing Peter to pay Paul, selling your Bowflex to come up with rent money, and eating every single canned good in your pantry. Worse, you can also spiral into a cycle of debt that is extremely hard to dig your way out of.
After all, the average credit card interest rate is 17% and late fees for outstanding bills can add up in a hurry. When you are living paycheck-to-paycheck and anything causes you to lose income, it’s far too easy to let the situation spiral out of hand.