The government still hasn’t passed their spending bill, and we’re getting close to “go time.” If the government doesn’t pass their spending bill in the next few hours, many military members and other government employees run the risk of only receiving a partial paycheck when their next paycheck is due, and potentially missing future paychecks if the situation drags on. Read Will Military Members Get Paid if the Government Shuts Down? for more information.
Military members and essential government workers will be required to report to work if the spending bill isn’t passed, and if they don’t receive their paychecks on time, they will at least receive back pay for missed pay. However, some government workers deemed non-essential would be furloughed and may or may not receive back pay for any missed paychecks. This is an ugly situation, but one that has not yet been finalized, so there is still hope. Here are some things you can do to help bridge the gap in pay if there is one.
How to cope with a missed pay check
1. Dip into emergency savings
If ever there were a time to stress the importance of an emergency fund, this is it. Government jobs are usually considered the most secure jobs of all, but this goes to show that even the most stable of jobs can have issues.
2. Talk to your lenders or landlord
Many lenders and landlords are aware of the situation and may be willing to work with you in this situation. It is always better to seek out assistance before you need it than to ask forgiveness for a missed or late payment after the fact. Contact your lender or landlord now, explain the situation, and ask them if there is any way they will be willing to work with you should the government force missed or late paychecks.
3. Tap into a home equity line of credit (HELOC)
This probably only works if you have an open HELOC since being approved for a new HELOC would probably take too long to get approved. Keep in mind that tapping into a HELOC for normal living expenses is not usually a good idea because you are putting your mortgage on the line. You should pay it off as soon as possible to avoid risking your home.
4. Credit cards.
Use credit cards judiciously and only for necessary expenses, not luxuries. The chances are very high that this will not last a long time, and you should receive your back pay soon, if indeed any pay checks are missed. If this is the case, then be sure to pay your balance off as quickly as possible to avoid interest charges. You may also wish to use a credit card that has a 0% Intro APR period for new purchases, which could offer you several months of 0% interest on your new purchases, which would effectively be an interest free loan. Again, you want to be careful with this and only charge what you can afford to pay off immediately upon receiving back pay. Here is a list of some of the best military credit cards.
5. Sell items.
Go through your garage, closets, and rooms and find items you no longer need or use and see if you can turn them into some quick cash. There are several ways you can do this, including listing items on Ebay, selling things on Craigslist, taking items to a pawn shop, having a garage sale, etc. you may need to get creative, but it beats being without money, and it can also be nice to clear out some space in your home. My wife and I cleared out our home this past winter and sold close to $2,000 worth of items on Craisglist – things we weren’t using and no longer needed. It was great to make money and have more room in our home!
6. Take odd jobs for cash.
There are many ways to earn extra cash – you could take a part time job, do landscaping work, freelance work online, babysit, clean houses, etc.
7. Contact your Service Aid Society.
Each branch of the military has an aid service which may be able to offer temporary assistance. For example, the Navy Marine Corps Relief Society (NMCRS) has stated they will offer single sailors and Marines a $300 loan and families will be able to receive a loan for $600. The Air Force Aid Society has already published a series of frequently asked questions: In Event of A Government Shutdown FAQ.
8. Don’t panic and remain proactive.
Right now not a lot is known about what will happen. My guess is that this will go down to the wire, and there may be a delay in some pay. But everyone will receive their pay through at least April 8th (the April 15th paycheck would only be half the normal size), and if this impasse continues, then some pay may be deferred. the best thing military members can do is be proactive, talk to their lenders and landlords and try to find ways to juggle their funds to minimize the impact of this situation.
9. Prepare for the future.
It is unfortunate that we reached this point, and that things may get worse before they get better. That is why it is imperative for you to take matters into you own hands. Start now and begin putting money into a savings account so you can have something set aside for a rainy day. Even adding $10-$25 a week can make a big difference in your ability to handle these situations when they arise. And I’m not just talking about when the government fails you – I’m referring to when life happens. A car wreck, a home emergency, unexpected travel expenses, and family emergencies happen. This is a great reminder to prepare yourself and your finances for the unexpected. Here are some of the best interest rates for online banks.
Comments
Although it looks like these types of steps may not be required. How close we all came to missing a paycheck makes it that much more important to focus on the emergency fund, and the financial basics. Its important to remember that there are no guarantees in life, and we all have to plan for contingencies like this!
Whoa! I understand that you are putting all the options out there, but listing the HELOC as an option? Tsk. Tsk. That’s how so many people got burnt in the past.
Nice post.
Romeo, I don’t recommend a HELOC for frivolous spending, but in an emergency, it can fill a need. The key is to remember how a HELOC works and the inherent risks involved. And in this hypothetical situation, back pay would have been quickly forthcoming, making it easy to pay off any lines of credit.
***at least I didn’t mention pay day loans, which I consider to be one of the worst financial options for anyone!
Romeo – Years ago, we had a nice “emergency fund.” But as rates fell, its return was dropping to 1%. At the same time, it occurred to me that by throwing the whole thing at my mortgage (then 6%), I could drop from the 20+ years remaining to a lower rate 15 year mortgage (which, now has just over 6 left).
I discussed this with the mrs first. Would she be comfortable with no real emergency fund, but a mortgage that was lower in both size and rate, and a HELOC on top. At this point, we have a small HELOC balance, but when the house debt is treated as one line item, it’s far less than where we’d have been otherwise. And using it to smooth out irregular income and irregular expenses has worked quite well. Our 2010 interest line on Sch A was less than half what it was in 2006. It’s a matter of discipline I suppose, but it works for us.
10. Call your bank. Navy Federal Credit Union offered to cover their military members during a shutdown and USAA pledged “to support members.” If you bank with military friendly bankers you’ll likely get support. Put that in your mind for the next phase of this battle…
Great point, Lee. Many military banks understand their customers needs and are willing to work with them in the event of an emergency, deployment, military operations, etc. It always pays to be upfront and let your lender or bank know what your situation is.