Thursday, October 03, 2013

How to Survive a Government Shutdown or Other Financial Crisis


A government shutdown is when the government stops providing services except those deemed "essential". Government shutdowns do not exist in other countries. Services that continue despite a shutdown include the National Weather Service, medical services at federal facilities, the postal service (I received my mail on October 1st), armed forces, air traffic control and management, and corrections. Personnel that continue to get paid during a government shutdown: the President, Congress, the military, federal law enforcement agents, doctors and nurses working in federal hospitals.

The United States Federal Government has shut down on 18 occasions since 1976. During the 1995-1996 government shutdown Over 1,000,000 federal employees were sent home.  The DC Government, National Archives, The Kennedy Center, Food Safety and Inspection Service, Patent and Trademark Office, Social Security benefits, unemployment benefits, SNAP (food stamps), IRS refund delays, border patrol, some high ranking presidential appointees, approximately a dozen presidential personal aides would still function.

The government shutdown occurred because the Democrat led Senate refused to put on hold the Affordable Care Act that went into effect October 1, 2013.  Due to that the GOP led House shutdown the government.  The Affordable Care Act or Obamacare law was passed over three years ago. It was ruled constitutional by the Supreme Court over a year ago and survived 40 separate House votes to repeal it.  If a budget is not approved the government will run out of money by October 17, 2013.

Nothing is gained by shutting down the government.  There are other diplomatic ways to express your concerns regarding an issue. It doesn’t matter that many Americans support Obama care, many Congressman support Obama care. It doesn’t matter that many Americans who were uninsured will now have healthcare coverage and many others will have more healthcare options.  It doesn’t matter that many Americans will lose income including small businesses that generate over 80% of the jobs in America.  It only matters that the GOP is happy that their agenda to shutdown the government succeeded.  I truly hope all voters who elected those guilty of shutting down the government remember them during the next election and during the next presidential election.

The Affordable Care Act benefits include:  allowing millennials to stay on their parents’ health care coverage until they are 26, provide “free” subsidies for birth control to single women, provide coverage for those previously uninsured; prevent cancelation of policies when we get sick or deny coverage for existing conditions, stop charging women more than men, provide free preventive care, including checkups and vaccinations, no annual limits on healthcare and get money back if your insurance company doesn’t spend at least 80% of your premium on care.

Americans will have to change the way they think about money and how they spend it.  They must change their bad spending habits to ensure they have a decent life in case an unexpected expense occurs such as a medical condition, job layoff, and death of a loved one or economic crisis. 

Due to the government shutdown many Americans have been forced to make adjustments to their lifestyle.  It is better to reduce spending by downsizing because it is much easier to scale back by making small adjustments to your life than to make drastic changes. 

You can downsize your lifestyle to help shield yourself from a personal or economic crisis.  You should downsize: 1) if you were previously a two-income household and you are now  a one-income and you have been unemployed for 2 months or more, 2) if you are behind 2 months or more on your mortgage, car payment, utilities, 3) if you owe late fees on all of your credit cards, 4) if you owe so much in late fees or over-the-limit fees on your credit cards that you will never get caught up by just sending in the minimum monthly payment or are unable to make the minimum monthly payments or 5) experienced a temporary job loss, medical condition, reduction in pay or benefits. Here are 11 practical ways to shield yourself from a personal or economic crisis.

  1. Emergency Fund.  Your emergency fund is your safety net to hold you for a few months to help get over a personal financial crisis or economic crisis.  An emergency fund should be enough savings to pay your bills for at least 9 - 15 months to prevent going into debt. 
  2. Voluntary Simplicity Movement. The Frugal Simplicity aspect of the Voluntary Simplicity Movement means spending in terms of needs vs. wants, cutting back in various areas of your life – reducing expenses, and being responsible with your spending. This helps you move towards a debt free life and financial independence. 
  3. Get current on old accounts. Pay down credit card and loan balances. Keep credit card balances at 20% or less of the credit limit which helps increase your credit score.  Pay credit card balances in full each month.
  4. Create a budget. Create a budget to determine how much you earn, how much you owe and how much you are spending.   Include savings in your budget.  Track your spending daily, weekly or monthly.
  5. Reduce expenses. Reduce your expenses by determining areas where you can reduce spending by buying more needs vs. wants such as bringing your lunch to work, shopping at discount stores or buying generic brands or downsizing to a smaller car or home.
  6. Don't hide from bills.  Call your creditors right away to setup payment plans to get current on old bills to prevent harassing calls or letters from creditors, damage to your credit report or legal action.
  7. Plan for retirement. Contribute 10-20% towards a retirement fund each month.  Contribute to a retirement account through your employer or make automatic contributions to an IRA if you are self-employed or if your employer doesn’t offer an adequate retirement plan.
  8. Get Protection. If you don't have health, life or disability insurance consider getting at least basic health and life insurance.  Bundle services with the same company to save money.
  9. Extra Income.  Find ways to earn extra income.
  10. Plan for the unexpected. Plan for the unexpected. Reduce spending by 30-50% and have a plan A and B.  Think of possible scenarios and action plans for each such as illness, death, divorce, unemployment, etc. and how you can adjust your spending to accommodate for those events.
  11. Shop differently. Buy a used car instead of a new car. Buy everything generic: household items, clothing, prescriptions, toiletries, dry goods, canned goods, paper products. Buy non-designer clothes.  Avoid impulse shopping. Buy only basic necessities.

Do whatever you can to make sure whatever is going on in the world does not control your environment or finances. "Money can generate wealth or generate debt – you make the choice."

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