Once again, we are living with the threat of a Federal Government shutdown. The three-day stoppage may have been brief but if the budget is not figured out in the next three weeks, we could be facing another one. If you’re a Federal employee, or your company relies on the Federal Government for much of its business, even a temporary shutdown can have serious consequences. However, with a little bit of forethought, you can mitigate some of the shutdown’s effects, especially in the short term. Here are four steps you should take right now to prepare for and make it through a government shutdown.
Expand your emergency fund
One of the best measures you can take to lessen a shutdown’s effects is to build up an emergency fund. You should consider having enough cash on hand to keep your household or business afloat for at least three months, and keep paying your bills. If your emergency fund is currently short, consider converting other securities in your portfolio, such as stocks and mutual funds, into liquid assets. You should also start saving more of your current salary as well.
Contact your bank
Don’t wait until you’re in the middle of a government shutdown before you contact the financial services you rely on. Let your bank know right away how a government shutdown may affect your cash flow; it may be willing to offer you a low interest line of credit to help get you through it. Also, let your credit card and mortgage companies know about your situation as well. Some lenders, many of whom rely heavily on businesses with federal employees, may offer different lending terms for you temporarily to lessen the blow of a shutdown.
Review your budget
Now is a great time to review your household budget and gauge whether you need to make some serious changes as a government shutdown looms. Maybe it’s time to tighten the belt a little bit. Cutting extraneous expenses, such as cable and phone services, can save you hundreds of dollars each month and improve your cash flow situation during a government shutdown. Paying down short-term credit cards while you have the opportunity to do so may make sense, too. Since shutdown threats are becoming recurring events, it also may be a good time to revise your budget permanently to better account for this unfortunate trend.
Keep good records
A government shutdown, or even the threat of one, can disrupt the work or contracts that you already have underway with the Federal Government. Make sure you keep meticulous records for all your work on government contracts and accounts during this period. Federal workers who monitor contractors or other employees may be furloughed during a shutdown, and your failure to keep good records may make it difficult to receive compensation later on. In addition, if the shutdown disrupts your ability to complete a project on time or to standard, your records may also help you renegotiate your terms after it ends, too.
Start diversifying your business
If your company relies heavily on the Federal Government for its business, it may be prudent to start diversifying. Set a goal in 2018 to have a certain percentage of growth in your company’s private sector portfolio. Even a modest amount of non-government clients can help you make payroll and keep the lights on in your business if the government shuts down. In addition, once you make the leap to the private sector, you may have a leg up on the competition and be able to diversify away from government business more rapidly than rival companies if a government shutdown actually occurs.
Prepare for contingencies
If a government shutdown happens, and Congress cannot broker a deal to end it, what’s your plan for the long term? Eventually, your cash reserve is going to run out. Having a longer-term plan to survive a government shutdown can help stave off the panic as your money dwindles and bills pile up. Fortunately, you do have a few options to consider to help you keep moving forward.
You may be able to tap into your retirement savings if you have no income coming in; many different retirement accounts, such as the Federal Government’s Thrift Savings Plan, will allow you to access these funds in the event of a dire situation. Other accounts may allow the same, so check in with your retirement plan manager.
If a shutdown continues for an extended period, you may want to consider some temporary employment options, too. Working as a freelancer, even for a short period, may help generate enough cash flow to keep you solvent until the shutdown finally ends.
Keep calm and carry on!
A government shutdown is challenging enough; don’t make it worse by panicking and doing real damage to your business or finances. Avoid making drastic short-term financial moves, such as selling off all your investments, or investing in something you know little about. Stick to your plan.
Don’t do anything that seriously affects your business due to the threat of a shutdown, either. Remember, the Federal Government will come back in force right after the shutdown, so don’t burn any bridges.
Living under the threat of a shutdown can be nerve-wracking, but there is no reason to be worried. The above tips can help you prepare for a government shutdown and mitigate the effects on your household and business should it occur.