The Federal Shutdown: Financial Lessons

By Cynthia Rivera, JD


As a former federal employee in Washington D.C., my heart goes out to my former co-workers, who along with thousands of federal employees and contractors, are currently living without a paycheck.Despite the promise that many federal employees will receive their pay retroactively, most need their income now. But in the case of federal contractors, they are unlikely to receive any back-pay at all.

For federal employees and contractors alike, the repercussions of living without an income for an extended period of time are devastating and far-reaching, including likely adverse effects to an individual’s credit history, savings, retirement plans, and overall health. This is not just a federal employee problem. Losing a source of income can happen to anyone at any time, and for a variety of reasons, including the loss of a job, divorce, illness, or a disability that prevents you from working. The question is: do you have a plan?

Following are some recommendations to establish a financial plan. A parachute that could help you land safely during your own financial shutdown.

Start an Emergency Fund

Begin to set aside money now to establish your emergency fund. Start small but keep adding steadily. Your goal should be to have enough funds to cover for 3 to 6 months’ worth of living expenses. Your consistency will pay off as your emergency pile grows. You should keep these funds in an interest-bearing account, such as a savings or money market account, where the funds would be readily accessible in case of an emergency.


After you establish an emergency fund and if you meet the eligibility requirements, consider opening a Roth IRA. While providing tax-free growth on deposits, a Roth IRA could also serve as a backup plan to your emergency fund – and also serve as an added retirement component.

If needed, deposited funds may be withdrawn without taxes or penalties.  However, taxes and penalties may need to be paid on the earnings that are withdrawn from a Roth IRA if certain requirements are not met.  Note that Roth contributions are not permitted when income levels exceed certain thresholds.

Mortgage Payment- One month ahead

If possible, pay your mortgage at least one month ahead of time. Being ahead on your payment schedule will provide you with a much-needed financial cushion during a time of need. Mortgage payments tend to make up a large portion of our expenditures each month.  However, getting ahead of your mortgage schedule is a financial strategy to be considered only after you have established your 3-6 month emergency fund.

Call Creditors

If you find yourself facing an extended period of time without income, call your creditors. Call your mortgage lender, car loan representative, and credit card companies and ask for an extension of time or a payment plan.In particular, ask if they can waive late payment fees. Late payments to creditors will impact your credit score, which will adversely affect the interest rate and condition of any future loans. Many institutions will work with you if you are experiencing difficulties in making timely payments, but you have to reach out and call them.


The current federal shutdown is upending the financial stability and compromising the future financial independence for thousands of households. While these strategies are, by no means, easy to get started, once established, it brings you closer to a position where you may feel that you are financially prepared to weather a financial storm.

There are financial lessons to be learned by this crisis. Simply put, we must all be prepared for an adverse economic event.Even if you are not a federal employee, you could experience your very own financial shutdown.  I hope that these planning strategies help you land safely.Discuss your plans and eligibility requirements with your financial advisor, who can assist you with making the choices that are right for you.

If you want to share any experiences regarding your own emergency financial plan, please contact me at riverac@jgua.com. We want to hear from you.

By |2019-02-07T09:27:09-05:00January 23rd, 2019|The Blog @JGUA|