3 Personal Finance Lessons From the Government Shutdown
The most recent government shutdown revealed some very important personal finance lessons that we can all benefit from. Ask yourself: What would happen if your income suddenly stopped? What would you do?
- A study by the Federal Reserve reported that 4 in 10 adults wouldn't be able to cover a sudden $400 expense without borrowing or selling belongings.
- A study by CareerBuilder reported that 78% of U.S. workers live paycheck to paycheck.
- Another study by CareerBuilder reported that 70% of workers are in debt.
These are not good statistics, people. This is not a good way to live. Now I understand that every situation is different and sometimes it is very tough to break free from bad habits but every step toward financial independence is one step away from being dependent on the system. I want to talk about three very important lessons that we can all learn from this government shutdown.
Have a Solid Budget
The best time to have a budget was yesterday, the second best time is today. Having a budget ensures we know all our financial responsibilities and we can cover them under normal circumstances. Having this plan keeps us aware and sharp as to what is going on with our money. The best time to set up a budget is when you don’t think you need it because things can change very quickly. If you have some extra money it’s a perfect opportunity to start saving and laying a solid financial foundation for your life.
Have an Emergency Fund
An emergency fund is critical for your financial wellbeing. An emergency fund prevents you from being completely dependent on your job and keeps you out of the paycheck-to-paycheck trap. The common advice is to set aside enough to cover 3 months of expenses but even 1 month can protect you from sudden income gaps. The stress that these people had to go through over the past month is not fair and not right. Having to chose between feeding your family or paying your mortgage is a situation best avoided. While it’s easy to point fingers at the government this whole situation reinforces the importance of having some money set aside for a rainy day (or month). So please, even if it’s a few dollars a week, start building an emergency fund to protect your finances and your current lifestyle.
Have Some Side Income
Having multiple sources of income is a cornerstone of financial independence and it is very common advice from most personal finance experts. Whether it’s a side job, a small business, or a hobby that you can make money on having the additional income can really you build your financial castle. The extra income can provide significantly higher savings during good times and can cover and gaps during bad times. Depending on your skills and how much time you are willing to invest you should explore what options there are for making extra money here and there. Avoiding the paycheck-to-paycheck trap is the top priority here and having more than one income decreases your dependence on your primary income.
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