People who work for the federal government are concerned today. A shutdown of the federal government due to the lack of functional ability within the Congress might result in delayed paychecks for many government workers. Worse, if the furlough affects workers who handle Social Security payments, people relying on the government for income will not receive money when they need it.
Are you prepared if your source of income were to be delayed? A year out of college, I worked for a small non-profit organization that handled large projects, and the threat of there not being enough money in the business to send out the following week’s paychecks was always a concern. There was no overt discussion about the group’s cash flow problems, but there were paycheck delays in the past and all employees were well aware of the company’s financial status. This was particularly troubling for me, as I was living paycheck-to-paycheck at the time, or worse, growing deeper in debt when my only expenses were commuting to work, very low rent, and looking for a different job.
Without any savings, I was not prepared. Thankfully, my paycheck cleared the bank every week. If any one check bounced, I would have been in deeper financial trouble.
Building an emergency fund requires discipline, but it requires money, too. If you’re growing deeper in debt every month and are not spending money on anything non-essential, having enough savings to last a few weeks seems out of the question. Forget about having an emergency fund big enough to last three to six months or one month for every percentage point in the unemployment rate. These are great goals, and so often touted by financial authors and gurus, that it’s easy to forget how difficult it is for a family to reach that point.
No government worker, Social Security pensioner, or anyone else who relies on every dollar of their income to meet their basic expenses can afford to be working without some kind of emergency funding plan. it’s easy to blame the government or the non-profit organization that doesn’t pay you enough for your problems if you need to go a week or two without your income, but if you’re prepared, you don’t have to blame anyone.
Getting to the point of preparation is difficult, and extreme situations call for extreme actions. I’m a big fan of moderation, but that’s a luxury available to those who can afford not to focus intently on saving every possible cent. This is where financial gurus will offer motivational encouragement, like, “You can do it if you really want to and you try hard enough!” and “Just trim 10% off your expenses at first — it’s easy!” In reality, for many people in a paycheck-to-paycheck or worse situation, that’s not going to happen, and motivational speeches are meaningless. The best real motivation is living through the consequences of your financial circumstances — hitting “rock bottom.” For some people, accepting financial failure and seeing the results materialize in your life — being left by a loved one, losing your house, resorting to illegal actions to improve your finances, perhaps even going to jail — is the only trigger. And the truth is that some people will never recover. Changing your life around requires the change in mindset that one sometimes goes through when they live at rock bottom.
Those who have hit rock bottom often use their story to try to help others before it’s too late, but ironically, they often use the same motivational techniques that didn’t work for them initially. There’s not much else that can be done, however.
Published or updated April 7, 2011.