Government Shutdown Shows Americans Are Putting Little Aside for Savings
Inside Subprime: Jan 28, 2019
By Aubrey Stitler
The government shutdown left furloughed workers in a state of financial stress and uncertainty, highlighting that most Americans live paycheck to paycheck, even in a robust economy. And only 40 percent of U.S. adults have $1,000 or more to cover an emergency expense.
And as President Donald Trump has acknowledged the possibility of another shutdown, it’s important that federal employees start saving as soon as they are able.
Financial experts suggest setting up a savings fund with enough money to keep you afloat for three to six months without pay.
Every family needs a budget, and experts recommend putting aside 20 percent of your income in a savings account. Only 30 percent should go towards items like entertainment and travel, while 50 percent should be put towards basic needs. A savings account should be families’ first consideration, before any unnecessary spending. And if you can’t seem to put anything aside, you’ll need to find ways to trim your budget.
For those impacted by the shutdown, debt may be a more immediate problem. “People who hit bottom with their finances during the shutdown face more difficult days and months ahead,” said Bruce McClary, vice president of communications for the National Foundation for Credit Counseling (NFCC). “This isn’t over by a longshot.”
Some federal workers have even turned to payday loans, which have exorbitant interest rates that will make it difficult to get ahead, even with back pay. Experts recommend tackling the most expensive debts first, after taking care of basic expenses like rent or a mortgage payment. According to Scott Astrada with the Center for Responsible Lending, federal employees who used payday loans should pay them back as soon as possible. “Payday loans are the ones that are the most dangerous and can extract the most fees every single day that those are outstanding,” he said.