I have a lot of friends and family members who are impacted by the current government shutdown. Over the past few days I’ve been talking to them about the situation and their plans for surviving the furlough.
It turns out that many of them are unprepared for this type of financial holding pattern and very few of them have emergency funds to help them wait for the government to get back on track.
I must admit that I was surprised by the number of people who said they could survive two weeks without a paycheck, but not much longer than that. A lot of the people we know earn six figure salaries. A few of them earn as much as $200,000 a year, yet they don’t have enough money in the bank to get them through a month without pay.
I’ve heard that savings rates and emergency funds are proportional to the amount of income you earn. The more you make the more likely you are to save for a rainy day. The same can be said for those with college degrees. Those with advanced degrees tend to save more.
It’s interesting that this doesn’t appear to be the case for the people we know. We know a small group of high earners with advanced degrees who don’t have enough money to survive two missed paychecks.
Of course, you never know someone’s financial situation. They might be helping to pay for a sibling’s education or have extensive medical bills in need of repayment. Perhaps they have high student loan bills and an overly large mortgage. Whatever the reason they will be in trouble if the government remains shutdown.
I know that savings rates have fallen over the years, that fewer people plan for emergencies and that in times like this that we all start to question our previous financial decisions.
I’ve taken stock of my own financial situation over the last couple of days and verified that we could survive a few months without pay. If we started cashing out stocks and other less liquid assets we could last even longer. How about you? Are you prepared for an emergency and how long do you think you could last without a paycheck?