A Financial ‘Wake Up Call’ for Federal Workers

The recent government shutdown has left many federal employees feeling scared, stressed and wondering how they will pay their bills. One financial advisor has some advice that he hopes can help.

With many federal employees now facing being furloughed from work due to the government shutdown in Washington, one sees many stories in the media about federal workers who are scared, frustrated or wondering how they will pay their bills.

One financial advisor understands this and has offered to lend his free advice to federal workers who may be facing this situation.

Dave Ramsey runs a popular nationally syndicated radio show in which he teaches his listeners what he calls “common sense” financial advice, such as how to get out of debt, live on a budget, and save for the future.

One of the things you often hear him say on his show is that it is critical that everybody have an emergency fund because one never knows when life can take an unexpected turn. Case in point, the sudden furloughs this week have left many federal employees facing an unexpected and financially challenging situation.

“We’re here today to help you,” Ramsey said on his show Tuesday afternoon. “I am going to do everything I can to help you because I know a lot of you are scared and a lot of you are struggling. The longer this goes, the harder it’s going to be on you. I hope for the sake of the federal government employee that it doesn’t go very long.”

He has offered a standing invitation to any federal employees to call or email him with their questions. The Dave Ramsey Show airs live weekdays from 2-5 PM Eastern.

Ramsey also stressed that a short furlough could actually have an upside.

“I will tell you this,” began Ramsey. “Let’s say it (the shutdown) runs out until Friday and it mathematically isn’t going to have a ton of effect on your life and all it did is scare the crap out of you. That could be a good thing for you. Maybe this becomes your wake up call for some of you. I’ve had bad things happen to me and that became my wake up call. That’s not to pick on you, that’s just to say there is some good that can come out of this, especially if it’s just a little short blip and then you’re right back to work and you go, ‘That scared the crap out of me; I don’t ever want to be there again. I am going to get out of debt, I am going to have an emergency fund, I am going to live on less than I make, I am going to get on a budget so if this continued problem with the government (goes on) that I’m not going to get into a mess that I can’t survive because the thing might be longer next time.'”

Ramsey cautioned federal workers that these types of furloughs can easily come up again in the future as the government’s spending and debt continues to increase. “It’s going to become more and more unstable as the overspending and the increase in the debt continues,” he said.

One employee who was furloughed from the VA called Ramsey and attested that having some extra savings did indeed lessen the stress of the shutdown for him and his family. He had no debt except for his home and had an emergency fund of about 6 months. He said that while he had never had to use that fund in the past, he was glad he had it now that he was furloughed.

Increasing Savings

A recent Wall Street Journal article lends credence to Ramsey’s supposition about the shutdown being a wake up call.

The article profiled John Olson, a financial advisor at First Command Financial Services in Annapolis, Md. “They’re (federal workers) increasing savings so that if this were to happen again, hopefully, they’re a little better prepared for it,” said Olson in regards to behavior patterns he’s seeing among federal employees he advises.

Bill Varettoni is another advisor profiled in the article who works with Community Ladders in Silver Spring, MD, another firm that works with many federal workers. His firm is recommending that their clients make plans to live on less than they make to build up their savings as a precaution against potential longer and/or future furloughs.

Bob Hill is a financial advisor in Arlington, VA. One of his clients is a federal supervisor making about $75k a year. Hill says the client decided to stop his IRA contributions and put the money into a savings account instead to build up a rainy day fund so he wouldn’t have to face early withdrawal penalties from the IRA in an emergency.

Nobody knows at this point how long this furlough will last or if there will be others in the future, but some have already started making a case for why shutdowns could become more common in Washington in the future. Should that turn out to be the case, the advice from some of these advisors might help to make the situation somewhat less stressful for employees who are faced with a furlough.

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.