The US government has been on a partial shutdown for a week now with no end in sight. The bozos running the country are still bickering AND they are getting paid while 800,000+ people deal with having no income. Hopefully, Congress will get their act together soon and pass a budget before the US debt default date on October 17th. The economy will grind to a halt and we’ll all be feeling the pain then.
Being on a furlough or an unpaid leave is not necessarily a bad thing. I’m a huge advocate of taking some time off so you can test drive your retirement. This is a great opportunity to see how ready you are for early retirement. If you are prepared financially, it should not be difficult to weather a short furlough.
- Emergency Fund – Most families should have 1 to 3 months of their living expense in an easily accessible account. This fund is for financial emergencies such as fixing a car or getting furloughed. This fund will prevent you from sliding into debt when there is a big bill to pay.
- Multiple Income – Don’t depend on one paycheck to provide for the whole family. Each able-bodied family member should bring in some income to help with the expenses. This recent furlough shows us that it’s no longer practical to rely on just one income. We all need to figure out how to generate more income from different sources such as dividend stocks, P2P lending, rental properties, and maybe a part time job.
These two things are essential to surviving a short disruption in pay. I’m sure a large percentage of the 800,000+ people don’t have these financial safety nets though. What if you’re living paycheck to paycheck? This will be a much larger setback, but you can still survive it.
Cut your expense
This shutdown could easily last another 2 weeks and you will need to reduce your expenses as much as possible. Get all your bills together and call to see who will give you a break. For example, Hyundai is deferring car payments for furloughed workers. You can probably get a discount from your cable company or just reduce it down to basic service for the duration of the furlough. Now is the time to see where you can trim the fat. Cutting back on entertainment isn’t always easy, though.
People tend to spend money when they have free time, but you have to be conscious of that and avoid it. If you don’t have money to spend, then you need to avoid shopping, entertainment, eating out, and other expensive activities.
Now is your chance to try my favorite hobby – unearthing free stuff. They are out there and you just need to find them. Here are just a few ideas.
- Books and movies from the library
- Free lectures from local universities and clubs
- Free days at the zoo, museums, gardens, and other local destinations
- Free concerts and other local festivals. It’s actually hard to avoid spending money, especially on food, at these local festivals. Consider packing a lunch or eating before you go if money is tight.
The furlough could be a blessing in disguise. This is the opportunity to reduce your monthly expense for the long term. It’s easy to keep spending money when you have a paycheck coming in. I bet a lot of people can cut their expense quite a bit and adapt to a simpler lifestyle.
Generate some income
No matter how much expense you cut, you’ll be in trouble if your family doesn’t have any income. You need to raise some short term cash.
- Sell some crap. US households probably have the most crap per capita in the world. Even a frugal family like ours has a bunch of stuff lying unused around the house. Gather all these things up, take some photos, and sell them on Craigslist or EBay. I just listed a bunch of toys that are taking up space and hopefully they will be gone soon.
- Get a part time job or two. The local pizza joints always need a delivery person. Amazon is hiring 70,000 seasonal workers this year. See if you can get a seasonal part time job at your local department stores. Search Craigslist for your local episodic “gigs.” You have to be pretty selective on Craigslist, though. There are a ton of part time jobs out there. Who knows, you might find a good part time job that you can keep doing even when the furlough is over. It’s a great way to pay off debt or to generate more income for investments.
- Rent out a room/parking spot. You can rent out a room through airbnb.com or find a roommate locally. If you have a desirable parking spot, see if you can rent it out for a month or two.
- Become a robot – Amazon mechanical turk. The pay is terrible and the job is deathly boring, but if you have too much free time and need money, then why not try it out?
- Sell some plasma. There is always the last resort of selling some blood and other bodily fluids… (Yuk!) You can also sign up to do clinical research, but I think that takes a little time. Besides, many of the research organizations are not accepting any new patients for their clinical trials for the duration of the government shutdown.
Borrow some cash
Ugh! I hate recommending this, but sometimes you just need a little hand to get over a rough spot. Hopefully the furlough will be over soon, so it’s just for a short term.
- Hit up family and friends. Write up a contract and promise to pay them back with a minimal interest when the paychecks start up again.
- Peer to peer lending. If you have good credit and investors like your profile, then you can get a loan funded in about a week. The rate can be pretty high though so you should pay it back as soon as possible.
- Apply for some credit cards. Another terrible idea, but this should get you over a short furlough.
- Pawn some stuff. You won’t get much for your stuff and the rate is pretty high. You can get your stuff back once the paycheck come in.
Borrowing money to pay the bills is a terrible idea that can lead to a downward spiral. It’s best to avoid borrowing more money unless it’s really the last resort. This illustrates the necessity of the emergency fund. Everyone should have some liquidity stashed away to avoid being in this situation.
Being furloughed through no fault of your own is tough. One day you are working and the next, you’re cooling your heels at home. You have to keep upbeat and stay busy so you don’t give in to the negative emotions. The financial impact is difficult, but the psychological impact is also real. Just tough it out for a couple more weeks and hope the shutdown will be over soon. Call your congressman and tell them to do their job!
It’s not all bad though. Treat this as a preview to early retirement and you’ll see if it is for you. Some people aren’t cut out for early retirement. Those people should continue to work or find other opportunities until they are really ready to stop working completely.