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Have you ever wondered what would happen if your employer stopped paying you one day without any notice? Have you stopped to think how you would pay your groceries, cover the costs of child care, and put gas in your car – you know, how you would live?

This is the scenario employees of the federal government are enduring right now.

Dirty politics and a lack of negotiation skills on the part of our representatives have our government partially shut down, which means that many people are out of a job or doing their job without pay. That’s pretty scary considering at least some of the functions of the federal government are necessary.

Recent reports have stated some TSA agents are quitting and not showing up to work, which is an absolute nightmare for frequent flyers and airport security. Besides that, who will process tax refunds if the government stays shut down for much longer?

It remains to be seen when the shutdown will end and what will happen to worker pay once it does. But, we do know one thing: Things could get worse before they get better – at least for some.

How the Shutdown is Hurting Household Budgets

The Washington Post, The New York Times, MSNBC, and many other publications are rolling out piece after piece to cover the effects the shutdown is having on federal employes. Let me tell you, it’s not good.

After not receiving a paycheck for a few weeks, some federal workers are taking drastic measures just to pay bills – including selling their belongings and maxing out their credit cards. Many also appear to be bracing for their February rent or mortgage payment with the full knowledge that they do not have the money to pay it. The same is true for regular bills like groceries, utilities, and even gas to get around.

The entire thing is a huge mess, but it also underscores why we all have to look out for ourselves. The government has been shut down for….what….less than three weeks, yet people are already struggling to pay their bills?

This shouldn’t really surprise me, but it does.

It always does!

Houston, We Have a Problem…

By and large, Americans are trained to spend every cent of their income and then some. We’re taught that we need a new car every few years, that our kids deserve to go to the best schools no matter the cost, and that it’s okay to buy things we can’t really afford and pay for them later – all with a credit card, of course.

A 2018 “Planning & Progress” study from Northwestern Mutual provides serious proof of what I’m saying. According to the study, nearly half (48%) of Americans feel somewhat fearful when thinking about their financial future. Americans are also twice as likely to have accumulated $5,000-$25,000 in debt (33%) rather than personal savings (17%), and more than one in ten (13%) say they’ll be in debt the rest of their lives.

But, it gets worse. The Northwestern Mutual study reports that two in ten (20%) respondents allocate 50% to 100% of their income towards debt repayment. Plus, one in five Americans (21%) have no retirement savings at all and one in three Baby Boomers (33%) have between $0 and $25,000 stashed away…and Baby Boomers should be getting ready to retire if they haven’t already!

What does this mean?

It means that, despite outward appearances, many Americans are broke. They’re spending all the money they earn and living paycheck-to-paycheck, almost always to the detriment of both their financial health and their emotional well-being.

The Problem with Living on the Edge

Living paycheck-to-paycheck is bad enough, but it also means that having any lapse in pay can screw you over in a heartbeat.

You may be able to miss a paycheck once or endure a bump in the road by maxing out your credit card, but what happens when you miss your paycheck for a few weeks? How about a month?

You fall behind – that’s what.

You wind up robbing Peter to pay Paul, selling your Bowflex to come up with rent money, and eating every single canned good in your pantry. Worse, you can also spiral into a cycle of debt that is extremely hard to dig your way out of.

After all, the average credit card interest rate is 17% and late fees for outstanding bills can add up in a hurry. When you are living paycheck-to-paycheck and anything causes you to lose income, it’s far too easy to let the situation spiral out of hand.

The Government Shutdown Could Happen to You

I’m not picking on federal workers at all. They are just a microcosm of the United States – a community of workers who are trying to get by just like the rest of us. Since there are as many as 800,000 federal workers not receiving pay, however, it’s only natural that their trials and tribulations would be broadcast in such a big way.

The reality is, the exact same thing could happen to you or to anyone you know. The federal government shutting down may be big news, but businesses close up shop and lay people off all the time. The same outcome could easily happen to you if you live paycheck-to-paycheck and lose your J-O-B.

Don’t believe me?

Imagine for a moment that your employer files for bankruptcy and shows you the door today. What would you do?How would you pay your bills, put food on the table, and have the resources to get by until you landed another job?

Without an emergency fund, you would have to handle it in the same way many federal workers have – by doing whatever you had to do to get by (or not getting by at all). You wouldn’t have any other option, mostly because you never gave yourself one.

Here’s Why You Need an Emergency Fund

This, my dear friends, is why you need an emergency fund. Now, let me say it louder for people in the back.

No matter who you are, and how stable you think your job is, you need an emergency fund!!!!!

If you rely on another person for a paycheck, having an e-fund with at least a few thousand dollars is the best way to give yourself some breathing room.

With some money stashed away for emergencies only, you would be able to keep up with bills if you were laid off or experienced some sort of income crisis. You could keep the lights on, keep up with your mortgage, and keep your kids fed and happy until you worked things out.

Most experts suggest you keep three to six months of expenses in an emergency fund at all times. Now, don’t feel so overwhelmed by that goal that you don’t save at all! Even if you can’t save up months of expenses, you can still save up a few thousand dollars and go from there.

If you’re not sure where or how to save, start small.

My favorite savings account, the CIT Bank Savings Builder account, currently offers 2.45% APY on any size balance provided you transfer at least $100 per month. That makes this account a no-brainer since most accounts only pay .01%, especially since you don’t have to have a big balance to get started.

Whatever you do, just start saving something every month. Any amount is better than nothing, and even small sums can add up over time.

The Bottom Line

The government shutdown sucks for sure, but it’s also a cautionary tale that shows what can happen when you leave your financial fate in someone else’s hands. If you lose your job or face a large surprise bill, you’ll be glad you planned ahead.

Build your own savings account and strive to keep debt at a minimum. Then, you’ll be in a position to get by no matter what life throws your way.

Do you have an emergency fund? How would you get by if you stopped receiving a paycheck?