First and foremost: I need to make very clear that this article is ZERO PERCENT about politics and 100% about your personal financial security (or potential lack thereof).

This is a no politics zone

It matters not what side of the aisle you fall on right now. It matters only that despite how you feel, the 2018-2019 government shutdown is the latest proof that regardless of “how secure” your job (and therefore paycheck) may seem to be, it’s probably not as secure as you might think.

Ok, now that we got that out of the way, and no one is talking politics…

The government can actually shut down??

Unless you’ve been living under a rock recently, you’ve undoubtedly heard that the Federal Government was partially shut down for a minute. Or 35 days. That’s the longest government shutdown in America’s two hundred forty-two and a half year history.

As of January 25th, 2019, the government is fully open again, but with only a band-aid. While the bleeding has been temporarily stopped, the cause of the bleeding has not been cured. The band-aid will last for three weeks. On February 15th, if Congress and the White House aren’t on the same page, we’ll be back to square one.

What have we learned from this? Just because you have a paycheck that shows up every few weeks allowing you to pay all of your bills, and hopefully save some too, doesn’t mean that you’re good to go.

Job security is a myth

What if that paycheck stops coming? There are dozens of reasons why that could happen. Before you start thinking about how secure your job is or seems to be, to make yourself feel better, let’s ponder on a few things.

Federal government jobs are widely considered to be among some of most secure jobs and career paths. This is due to a number of reasons, which don’t matter for the purposes of this post. It simply matters that government jobs are perceived as having “excellent job security”.

Welllllll, that’s interesting…

Remember that time, when the government was shut down for the longest time in history? And 800,000 federal employees (to include the U.S. Coast Guard) were either furloughed or worked without receiving their predictable, secure paychecks on time?

Bad news…

…your paycheck can stop for reasons totally out of your control, and your bills still need to be paid.

The shutdown and absence of paychecks dominated the news cycle for weeks. There have been countless stories about government employees needing to go to food banks in order to feed their families, and aren’t sure how their bills are going to get paid.

Guess what, your mortgage company or landlord still needs that mortgage/rent check. Your credit card company and car financer expect you to make your payments as scheduled. The local grocery store isn’t going to accept a smile in the check-out line.

Your lifestyle needs to be paid for, regardless of what happens to your income stream.

Enter: F-You money. Or at the very least, an emergency fund.

Oh hello, sweet freedom

“There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and to work for whom you respect.

Those who live paycheck to paycheck are slaves. Those who carry debt are slaves with even stouter shackles. Don’t think for a moment that their masters aren’t aware of it.”

JL Collins, The Simple Path To Wealth

Being forced to work without pay is certainly a form of slavery. Those who went without paychecks should be made whole. It remains to be seen if everyone who worked during the shutdown will receive back pay. Furloughed employees are another ball of wax entirely. I’m an expert in exactly none of these topics. My point is, it’s not clear yet. And when it becomes clear, the answer still may not be great.

As JL Collins points out in his book, The Simple Path To Wealth, another form of slavery is living without, at the very least, a fully-funded emergency fund.

If you don’t have any kind of cushion in the bank, you’re a slave to your paycheck. Whether you choose to acknowledge it or not doesn’t change the truth of the matter.

The all-important emergency fund

If you don’t like the term “emergency fund”, you have my blessing to call it whatever you’d like. A rainy day fund perhaps. Or an “oh sh*t fund”. The point is, you have money set aside, that you don’t use for that Disney Cruise you want to take your family on. It’s strictly for things like the car breaking down, or the roof that suddenly needs to be replaced, or perhaps your paycheck stops showing up…

It gives you the ability to deal with major situations without having to whip out a credit card and go into debt to do so. It’s not fun, but what is less fun is needing to replace your roof AND being stressed out about how to pay for it at the same time.

Ok fine, how much money does my emergency fund need?

Different people have different definitions of what a fully-funded emergency fund looks like, but generally, the guideline is three to six months of your living expenses.

Obviously, that can vary widely from one household to the next.

Let’s say your monthly expenses, and I mean all of them, add up to $3,000. You should have $9,000-$18,000 in your highly liquid, low-volatility account, designated as your emergency fund. If your lifestyle requires more to the tune of $9,000 a month, then your e-fund needs somewhere in the ballpark of $27,000-$54,000 sitting in it.

If you’re among the nearly 30% of American’s who have less than $1,000 saved, I’ll give you a second to pick your jaw up off the floor.

The good news is if you have a less than fully-funded emergency fund, or no fund at all, you’re now aware that it may be time to take a closer look at your finances. Knowing is half the battle.

If you’re reading this, you’re in a good place to do just that.

Excuse me, I believe you have my paycheck

The point of this specific post is simply to call attention to the fact that missing 1-2 paychecks sent an alarming number of Americans into a financial panic.

I am in no way implying that it shouldn’t be a big deal to just stop getting paid for the work you do, through no fault of your own. Especially in such a short time horizon with little or no notice.

I also know that there are a plethora of extenuating circumstances. But those are the exception, not the rule. Everyone likes to think they’re special enough to be the exception. In fact, most of the time they’re (you’re) the rule, just like everyone else.

If you’re fired because you show up to work drunk, or not at all, or you suck at your job, or you punched your boss in the face, or *insert any number of other reasons to be fired here*, then there should be no surprises.

Assuming you show up to work every day, sober, and do your job at least marginally well, don’t punch anyone, and are generally a productive member of society, you deserve to be paid for said work.

If you stop getting paid for your work, through no fault of your own, you should definitely be ticked off about it. What I’m advocating for is that you should be angry, but not forced into a financial panic.

It is absolutely your personal responsibility to ensure you have at least some financial security. That means outside of your paycheck.

You could have a medical issue or accident come out of nowhere and force you to take a leave of absence. Depending on your employer/insurance, it could be an unpaid leave of absence. You could be laid off from your job and take a few months to find a new one. The government could shut down and stop paying you.

There are dozens of reasons why, even if you do everything you’re supposed to, and you follow all the rules, your next paycheck might not show up on time, or at all.

You have the power to put yourself in a position where if your paycheck stops coming, you can be mad, but you won’t fall into a financial tailspin.

Ok fine, where do I start?

You don’t have to like it, but you must admit that having a nice cushion to break your fall would be a huge potential stress reliever, right?

If you have anything less than zero debt, a fully-funded emergency fund, and a significant savings rate (50%+ in my humble opinion), step one is to start tracking your spending if you’re not already.

Not budgeting. Not yet. Just start paying attention to where your money goes.

Even if you’re already fairly frugal and aren’t standing on a mountain of consumer debt, I’m still willing to bet tracking your spending will be quite the eye-opener. It certainly was for us.

That very simple little step will shift an enormous amount of power back into your corner. You now have the ability to make intentional, informed decisions.

Once you know where your money is going, you can let it continue to go to those places, or you can redirect it to other places. Other places like faster debt payoff, or to a high-yield savings account earmarked as “emergency fund”. Or if you’ve got all that covered towards that Disney vacation you’ve been dying to take! (See, this can be fun too!)

Now that you’re aware of your hard-earned dollars’ final destinations, decide if it’s

1. where you thought it was going
2. if it’s going where you want it to

I’m willing to bet that there will be some changes you want to make right off the bat.

Make those changes. Pick the low hanging fruit. Redirect some of your money towards your emergency fund and slowly start buying back your freedom. Start an actual budget to get there faster. You’ll be amazed at how much better you sleep at night.

Can you survive financially if you miss a few paychecks? Do you have a cushion? I want to hear your thoughts… as long as they don’t involve the politics of all of this 🙂