Shutdown: The Sequel

Whatever happened to the descendants of those experts who said the Titanic really didn’t need many (or any) lifeboats?

Could it be that some of them moved to America and went into politics? And rose to leadership positions in the legislative and executive branches of the government?

That would explain the shutdown. How the White House and a divided Congress got themselves into a situation where high-visibility parts of the federal government were shut down. Even though so-called experts said it shouldn’t happen and wouldn’t happen. Until it did happen.

Hundreds of thousands of federal employees were told to stay home. That would have saved a bunch of money, except Congress got cold feet and voted to pay them for their enforced vacations.


Now many of the experts who brought us the shutdown say it will never happen again. But what if it does? Or what if the government is closed because of the delayed debt-ceiling vote?

Given the scare they just went through, many feds are making just-in-case plans, just in case. Like this IRS worker in Michigan who said he didn’t apply for unemployment because of the hassle if he had to pay it back. Which he would have.

He says:

“I was secure in knowing I could handle the (financial) situation but trying to act as if this was a vacation was hard. It is just not the same. I felt violated.”

Never again for him either!

Today at 10 a.m. on our Your Turn fadio show, financial planner Arthur Stein will talk about ways to prepare yourself for another shutdown or financial emergency. Here’s his checklist:

Two ways to prepare for a government shutdown (or other financial emergency) are an emergency fund and low debt.

I used to recommend smaller emergency funds for federal employees than my private- sector clients because they had great job security. That job security doesn’t look as secure as it used to.

Reasons job security looks weaker:

  • Sequester gets worse next year
  • There could be another shutdown
  • There is a strong push by Republicans to reduce the size of the federal government, which could result in layoffs.

For many of my federal clients, I used to recommend an emergency fund equal to three-to-six months of living expenses. Now, six-to-12 months of living expenses may be more appropriate.

In order to help generate additional emergency funds

  • Stop making additional payments on your mortgage;
  • Reduce TSP contributions (but not below 5%);
  • For non-retirement mutual funds, stop reinvesting dividends and capital gains;
  • Sell some taxable investments to generate the remainder of the money. That will entail capital gains tax.

Low debt is a good idea regardless of job security. However, low debt doesn’t mean no debt. A mortgage on your house can be beneficial in many ways.

Credit card debt is a warning sign that you are not doing well. You never want to have credit card debt.

One-to-three-year car loans are OK. Car loans lasting four years or more indicate that you are buying a car that you cannot afford.

Later in the show Federal Times senior writer Sean Reilly and I will talk about the prospects for another shutdown, what Congress may next do to federal workers and the state of the U.S. Postal Service.

Listen if you can (1500 AM or online), and if you have questions email them to me at or call in during the show at (202) 465-3080. The show will be archived here.


Compiled by Jack Moore

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