Now that the longest federal government shutdown in history is over, many are wondering what lasting effects the nearly 800,000 workers who were most directly affected will face. The answer depends on how hard their finances were hit when their paycheck didn’t come as scheduled and how much they may have had to rely on credit to get through.
The 2018 Consumer Financial Literacy Survey revealed nearly 7 in 10 (69%) U.S. adults have non-retirement savings and nearly two in five (41%) say they have a budget and keep close track of how much they spend on such things as food, housing, and entertainment. While these figures are representative of the entire adult population, we suspect the circumstances faced by government employees to be similar. Meaning, many will face financial struggles for weeks and months to come as they play catch up with their bills or work to rebuild their emergency fund.
Here’s what furloughed government employees need to know now that the shutdown is over.
The first question on the mind of most returning workers is about the flow of income, and when the paychecks will start arriving. The Office of Personnel Management (OPM) offered new guidance related to retroactive pay in a statement released January 27. OPM reported that federal employees affected by the lapse in appropriations that began on December 22, 2018, and ended on January 25, 2019, must receive retroactive pay at the employee’s “standard rate of pay” for the lapse period as soon as possible after the lapse ends. However, because the intent is to issue retroactive pay as quickly as possible, the guidance indicates that payroll providers may “make some simplifying assumptions” when determining disbursement amounts. Those assumptions could result in adjustments in future paychecks. For example, pay for overtime worked during the furlough may be delayed.
Resumption of Regular Pay
The next scheduled date for paycheck disbursement to federal workers is February 8 according to this federal payroll calendar. That leaves about a week to a week and a half between receipt of retroactive pay and resumption of regular income. The time between those two events is when the critical work of sorting financial priorities should take place, especially in situations where payments fell behind, or emergency loans were utilized.
Budgeting Back to Normal
During the furlough, financial survival likely depended on using an emergency household spending plan. Decisions were based on levels of priority, putting only the most urgent items at the front of the list. Food, shelter and vital healthcare are examples of the things people often identify as the most important financial commitments when the flow of income slows down or shuts off completely. We already know that a number of furloughed workers exhausted their emergency savings long before returning to work, which means they may have borrowed money or asked for financial assistance from their creditors.
Here are some tips to keep priority obligations on track.
- Home and Auto – Any missed car loan or mortgage payment should receive immediate attention. Failure to pay can result in serious consequences since these are collateralized loans. Some auto lenders have acted with more haste when it comes to repossession, so it is vital to keep payments on track when that form of transportation is needed for work and other important commitments.
- Small Loans and Credit Cards – If you took out a loan or used credit cards to pick up where savings left off, you will need to take quick action to repay that debt when your income resumes. Some workers qualified for special interest-free loans that have special repayment terms, most of which require full repayment in one lump sum. For those that borrowed at full interest, the faster the debt is repaid, the less expensive it will be over time.
- Utilities – Most utility providers offer temporary hardship plans for people who may need a little help keeping their account on track during a financial setback. How and where these offers are available depends on the company and the type of service they provide. Nonessential services like cable television may be less likely to offer as much flexibility as electric or water utility companies.
The shutdown may have come to an end, but not all special assistance programs have gone away. Those who continue to struggle financially can access help throughout the year. One resource that can help tackle budget and debt obstacles is nonprofit credit counseling. NFCC member agencies serve communities throughout the country. To connect with a nonprofit financial professional with an NFCC Member agency, click here or call toll-free 800-388-2227.