April 19, 2019

What Would You Do If You Missed Two Paychecks?

“The government shutdown ended late last week. It went on for 35 days and meant that nearly 800,000 government employees and contractors missed two paychecks. Furloughed workers took out high-interest loans and second mortgages on their homes, and visited food pantries to get meals on the table. Though workers are still digging out, the worst of the nightmare is over for now due to a temporary spending bill; still, the government could shut down again in a few weeks.

For the rest of the country looking on, the question of what we would do if we missed two paychecks in a row was on many people’s minds. And for many, it was no mystery: They wouldn’t be able to afford it.

I’m a financial educator and adviser. Experts in my field have a wide variety of views and often disagree on specifics. Yet there is near-universal agreement on this: Always have an emergency fund — money set aside for unexpected costs such as medical bills, a broken-down car, or when the government is locked in a legislative battle that leaves you furloughed for a month.

In my 15 years of doing this job, people rarely are kept up at night because they worry about the specifics of tax-efficient investment or an inability to calculate interest rates. It is much more likely that they worry about having enough resources to weather a storm. It’s why prioritizing an emergency fund is likely to make your nights more restful and your financial life more resilient in the years to come.”

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