As the government shutdown enters its second month on Monday, over 800,000 federal employees are about to miss their second paycheck. Meanwhile, expenses like rent, groceries, credit card payments and fuel still don’t stop. Many are being forced to rapidly to drain their emergency fund or the college savings plans for their kids. Worse yet, some are forced to raid their retirement accounts, take loans from family or look for other jobs

Thankfully, we have a small truce has the two sides agreed to a temporary end to the shutdown on Friday January 25th. But the damage was already done. The combination of the longest shutdown in history after a holiday season where people normally overspend has left some folks in near crisis mode. For example, according to a recent CNN article, over 1,500 campaigns have been set up on GoFundMe by furloughed employees looking for aid. Altogether, over $300,000 has been raised.

As financial planners who cater to the unique needs of federal employees, we normally spend our time and consulting on TSP allocations, optimizing FEGLI and coaching workers through the retirement process. However, given the shutdown, our attention has increasingly turned towards the topic of emergency funds. Specifically, how much should someone have in an emergency funds and where should it be held?

Frankly, discussing this now won’t help those already in dire need. Emergency funds don’t materialize overnight. The shutdown could end tomorrow or it could drag on for another month. At this point, there is nothing we can do but wait, and hope.

Fool me once, shame on you. Fool me twice, shame on me.

– Ancient Chinese Proverb

The threat of future government shutdowns is very real especially now that ‘shutting down the government’ around budget time to push political agendas (for either party) happens so routinely that it’s almost like spring cleaning.

In order to ‘not get fooled again’ We need to take this shutdown as a lesson to change how we think about cash on hand and that old rain day/emergency fund.

So, how much should I have in my emergency fund? Where should I keep it? Why should you NOT consider your TSP an emergency fund? What is the role of credit cards in emergency funds? What constitutes a ‘true emergency?’ (hint—a prolonged shutdown leading to loss of income is one of them)

Our new series on cash management for federal employees is geared towards answering the questions above with tried and true advice but customized to the unique challenged of Federal and Postal employees.

Enjoy our next article:

“How exposed are you and the 4 Rules for determining how much you need.”

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