Budgeting for the basics is something one does before an emergency, not during one.
The partial government shutdown has forced some federal workers to move money around to pay for food and rent. No surprise there. What’s shocking is the many who don’t have the money to move. They have no financial cushion to cover even one month’s worth of ordinary expenses.
Don’t they have any savings, any savings at all? Consider, a government job provides fairly secure employment. It comes with health coverage, paid vacations and sick days. And the pay, though not princely, is solid.
But a loan processor at the Agriculture Department says that she’ll be going to a church pantry for food. An aerospace engineer for NASA — presumably well-paid — reveals that she’ll have to live off her credit cards.
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Before going on, let’s state that this government shutdown is ridiculous. It’s another stunt by President Donald Trump to focus everyone’s attention on a fake crisis. If Trump were so set on a wall, he would have asked the House for the funding when Republicans held the majority — a whole two weeks ago.
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And the shutdown is hurting many more, especially in rural areas heavily dependent on federal jobs. Stores and utilities are suffering a loss of customers and nonpayment of bills. In one such region, the Florida Panhandle, locals are still reeling from Hurricane Michael.
Air travelers fret about unpaid security personnel not coming to work. Farmers can’t get loans or other federal aid they depend on. For a while, the IRS wasn’t providing income verification for folks seeking mortgages. It has resumed doing so. (Wall Street, apparently, gets service.)
In this paycheck-to-paycheck society, 40 percent of adults told a Federal Reserve survey that they could not cough up $400 for an emergency without borrowing or selling something. During the recent holiday season, Americans on average put over $1,000 on their credit cards, according to MagnifyMoney’s yearly debt survey. Only 42 percent said they’d pay it off in three months. And 22 percent said they’d be making minimum payments. That means it could take them more than five years to pay for one holiday blowout.
The time-honored rule is to sock away three to nine months’ worth of living expenses for a sudden setback. That could be loss of a job, a natural disaster or a medical crisis. The federal workers’ despair at not getting a paycheck last week was especially remarkable in that they will receive their full back pay once the government is again funded. It’s not like getting fired.
Personal savings represent money set aside after spending and paying taxes. The personal savings rate in the U.S. is about 6 percent. It is over 14 percent in France, and in Germany, it’s nearly 17 percent. And these are countries in which the citizens don’t have to worry about medical bills.
Chinese households save an astounding 29 percent of their personal income. That makes their savings rate nearly five times ours.
One could ask whether people who can’t summon up one month’s mortgage payment from savings should even have a mortgage. A mortgage implies owning a house. Suppose the water heater goes out. Where are they going to find $900?
Meanwhile, an employee for the Transportation Security Administration at O’Hare Airport tells a reporter, “It’s difficult to budget things like food, or knowing which bills to pay, when you simply don’t know when you’ll have money again.” That’s not how it works. Budgeting for the basics is something one does before an emergency, not during one.
There’s no denying that suspended paychecks make life harder for many workers, but you’ve got to wonder. If Americans in secure and decently paying government jobs aren’t saving money, who is?