How to Prepare for a Government Shutdown

Government shutdowns are never quick or easy to resolve. No one has ever accused the federal government of being light on its feet.

While political showdowns over government funding happen regularly, that doesn’t mean the chaos has to spill over into your personal finances. Preparing ahead of time can help you weather the uncertainty without feeling the squeeze.

“The chaos of a shutdown should serve as a reminder to get your financial ducks in a row,” Joe Camberato, CEO of NationalBusinessCapital.com, said. “Start by establishing an emergency fund. It's a financial lifeline when you're facing uncertainty.

“Beyond that, try to pay down credit card debt to give yourself more financial flexibility in case the unexpected occurs. Even if you don't end up needing it, it's a move that can also improve your credit score."

That advice applies to everyone, but especially if you’re one of the 2.2 million federal employees and 1.7 million active military, whose paychecks are threatened. If a shutdown drags on, there are resources available to help keep you afloat financially.

“There are a range of government programs that can provide a safety net during a shutdown,” Camberato said. “You've got unemployment insurance for replacing lost income. The Supplemental Nutrition Assistance Program (SNAP) for assistance with food costs. Medicaid to cover medical expenses, and various housing support programs.

“However, you may not need these if you've done some financial preparation for such emergency situations."

Unfortunately, many workers aren’t in that position. According to the Federal Reserve’s 2024 SHED report, nearly 4 in 10 adults would struggle to cover even a modest emergency expense with savings. Many could only handle a bill under $500, and a significant share would have trouble coming up with $100.

That leaves a lot of households living on the financial edge. It wouldn’t take more than a couple of missed paychecks to disrupt a family’s stability, even if the money eventually arrives later.

What Is a Government Shutdown?

A government shutdown occurs when Congress doesn’t approve funding for the federal government by the Oct. 1 fiscal year deadline. By law, federal agencies can’t spend or obligate any money without an appropriation from Congress.

There are 12 annual appropriation bills that set the funding levels for federal agencies. If Congress fails to enact some by the Oct. 1 deadline, a partial government shutdown occurs. If it fails to enact any of the 12, a full government shutdown occurs, and federal agencies must cease non-essential functions until Congress acts.

There have been three shutdowns since 2013, including the longest one in history – 34 days – in 2018-2019.

Who Is Affected by a Government Shutdown?

Non-essential federal workers are furloughed in a shutdown while essential workers – law enforcement, active military, TSA, air traffic controllers – continue to work, but without pay.

The Government Employee Fair Treatment Act of 2019 guarantees that federal workers affected by a shutdown, essential or non-essential, will receive full back pay once the government reopens. However, that law does not include contract workers, such as janitors, cafeteria workers, and security staff. Unlike federal employees, most contractors aren’t eligible for back pay, meaning every missed paycheck is income they’ll never get back.

Furloughed employees can usually apply for Unemployment Compensation for Federal Employees (UCFE) through their state’s unemployment-insurance office. You apply in the state where you work, and benefits typically cover about one-third to one-half of your salary, up to the state maximum. States may require Standard Form-8 (SF-8) or Form SF-50 to verify federal employment, but if those are unavailable, an ES-395 affidavit or recent pay stubs may substitute until agencies confirm records.

» You can find your state UI agency and application here

If you later receive back pay for the furlough period, you’ll likely need to repay any UCFE benefits collected. States treat that as an “overpayment” and may assess penalties if repayment is delayed.

Essential employees generally can’t receive unemployment while working, even if unpaid, though back pay is still guaranteed once the shutdown ends.

Medicare, Medicaid and Social Security are not funded through appropriation bills and thus are not affected. The U.S. Post Office uses its own revenue stream and also isn’t affected.

Some 2.1 million active-duty military members and reservists would go without a paycheck with ripple effects spreading to family members, veterans and others who are part of the country’s defense network.

The U.S. Travel Association estimates the travel sector could lose roughly $140 million a day during the shutdown.

Some national parks may remain open, but visitor centers and facilities are closed in a shutdown.

Recipients of federal food assistance programs such as WIC and SNAP benefits could be affected if the shutdown lasts for a significant period of time.

Tips for Surviving a Government Shutdown

The last government shutdown, in the first Trump administration, was the longest at 34 days.

A month without a paycheck could cause you to miss a mortgage or car payment. The expectation of retroactive pay might ease the stress of a shutdown, but a missed paycheck can have serious consequences.

It’s important to have a proactive plan and not just sit back and wait for an agreement to fund the government. Ten steps to take to manage your finances:

1. Review Your Government Payment Needs

What percentage of your family income will be interrupted during a shutdown? What percentage of your bills do you pay with the government income you’ll have to do without?

Will the person missing a paycheck be asked to work through the shutdown? Or will they be furloughed and have the opportunity to earn money through a side job?

Minus that paycheck, and depending on the household income, a family might qualify for help for low-income Americans. There is more help out there for people with disabilities and several programs for those in need, everything from single parents to those having trouble paying their electric bill to programs offering help for seniors and widows.

2. Contact Your Creditors

If a government shutdown puts you in danger of missing payments on credit cards, mortgages, auto loans, or other monthly bills, don’t wait until you’ve fallen behind. Call your lender or card issuer and explain the situation. Ask about hardship programs, deferred payments, or reduced minimums that can give you breathing room.

You might expect a cold response, but most lenders would rather work with you than risk a default. Many have policies in place for emergencies, and a simple phone call can make the difference between staying afloat and slipping into debt trouble.

3. Create an Emergency Budget

The government distinguishes between essential workers and non-essential workers. Do the same with your expenses.

Ask yourself what creditors have to be paid immediately? Who can we put off for a month or two? Do we really need both cars? Should we eat all meals at home?

In order to cut your expenses, you need an accurate accounting of them.

Making a budget is the first step. Even an essential need such as food can be re-evaluated in a new budget. Explore ways to save money at the grocery store.

“Be precise (in your accounting),” Camberato said. “You want calculated decisions, not wild guesses.”

4. Identify Community Resources

Look for a food bank where you can get donated or reduced-priced food. Are there thrift stores in your area? Good quality clothing and other merchandise is donated every day at Goodwill and other thrift stores. See if civic groups or churches help with utility bills.

5. Find Professional Financial Assistance

A free phone call to a nonprofit credit counseling agency can help you review your budget, your debts and assist in devising an affordable consolidated repayment program.

“They can offer guidance, help set up a budget, and sometimes work better terms with lenders, helping you find a way out of the debt maze,” Jeff Rose, founder of GoodFinancialCents.com, said.

6. Discover Income Opportunities

Some federal employees deemed “essential” must continue to work through a government shutdown while others are furloughed.

Depending on your situation, investigating a side job that fits your schedule can help you pay the bills and maybe even lead to a permanent gig when the shutdown ends.

If you have maintenance skills that would be useful around a home or apartment such as painting or carpentry, ask your landlord to trade them in lieu of rent. Consider delivering pizzas or becoming an Uber, Lyft or Amazon Flex driver.

7. Sell Unused Items

Social media sites such as eBay and Facebook Marketplace make it easier than ever to sell those golf clubs gathering cobwebs in the garage or the baby clothes and toys your child has outgrown.

Nearly everyone has something of value – furniture, musical instruments, collectibles – that could be sold.

8. Use Your Accounts Wisely

The money you’ve painstakingly saved is no doubt a temptation in a prolonged government shutdown or a particularly dry stretch between income opportunities.

If you must tap into your savings, do so wisely. Start with your savings account, where withdrawals carry no penalty, and the transactions are typically completed quickly.

There are tax implications and penalties associated with other accounts such as CDs (unless it’s a no-penalty CD), IRAs and 401(k)s. Taking withdrawals from those accounts costs you in penalties and taxes and also in compound interest.

What about personal loans?

"Be cautious about that, and ideally, use that option only as a last resort,” Camberato said. “Taking out a loan during a financial challenge can complicate matters, especially if the situation goes on longer than expected.

“You certainly don't want to find yourself struggling to repay the borrowed amount during a difficult time. If you decide to go this route, create a detailed forecast using all available information to make sure you can manage the loan responsibly."

9. Review Travel Plans

Travel is costly. The money you’ll spend on airlines, hotels, food and transportation could easily add up to a mortgage payment or more.

Travel can also be fraught with stress and airline delays given the shortage of TSA agents that routinely occur in government shutdowns.

National park services were also disrupted during the last government shutdown. Take stock of how the shutdown is affecting various travel sectors before venturing out.

10. Avoid Large Purchases

If you can, of course.

A friend and her husband, both federal employees, needed a new HVAC system a few months ago. They had no choice. For obvious reasons, they have concerns about how a prolonged government shutdown could tax their finances with a large chunk of their emergency fund gone to an essential purchase.

In general, though, it’s wise to hold off on purchases like cars and spending on home renovations – or any large purchase that requires financing.

Many businesses stepped forward with offers to assist federal workers through the last shutdown in 2018. Phone companies like AT&T, Verizon, T-Mobile and Sprint made a “flexible” payment plan that included dealing with late charges.

Several utility companies made similar pitches and credit unions stepped in with options to take short-term, 0% interest loans or skip payments for a month.

Help is out there. Whether you’re a federal employee or not, financial challenges are disruptive and it’s crucial to have a plan that’s nimbler than the federal government.