What You Can Learn From a Government Shutdown

It’s that time of year again and it has become a common scene, especially if you work for the government. Our elected officials have failed to provide a budget for the upcoming year, and if they fail to provide it by September 30^th, they can’t operate the government. As a government employee for over 27 years, this wasn’t always the case. We never even thought of a budget until the first one wasn’t passed and we were all told to stay home without pay. This was a difficult time for many government employees. I don’t believe it resulted in any bankruptcies, but it does cause a tremendous amount of anguish and a negative cascading effect on our economy.

What can we learn from a government shutdown? Two valuable lessons can be learned from a government shutdown. The first is to have a long term budget. If our government officials really had a solid long term budget, we wouldn’t be going down this destructive fiscal road again. Second, you need a short term budget. This budget has to incorporate your long term budget goals and is used to ensure you are staying on track. If you don’t budget at all or if you haven’t dusted it off in a while, here is a great article that can get you going: www.bankrate.com/…/secrets-to-creating-a-budget-1.aspx.

Government shutdowns happen because our elected officials fail to plan. Planning how you will allocate your money is critical to your financial success as well. If you have no idea where you spend your money, it will be very difficult to ever get ahead, regardless of how much money you make in the future. At JPCashflow.com, we constantly talk about creating alternatives to your job that creates cash flow. However, if you don’t control what you do with that cash flow, you may not be able to truly enjoy financial freedom. With each obstacle we hit, either as an individual or a society, there is always a lesson to be learned. Practical, common sense steps can be applied to overcome these obstacles. In this case, if you are negatively affected by a government shutdown, this is the time to put into action steps that will mitigate the effects it may have on you. Even if a government shutdown doesn’t directly affect you, it is an opportunity to ensure your own household budget is in order. There are two steps you can take tonight to set yourself up for success in the future:

1. Determine where you spend your money each month.
2. Create a budget based on that spending.

These are two easy steps that you can work on right after dinner. Determining where you spend your money is the basis starting point of your budget. Start to run your household like a business by creating a budget and then prioritizing where you spend that money. Your business (household) should have at least two budgets, a long term and short term budget. The long term budget can run a time span of anywhere from three to five years, but it must be achievable. Your short term budget works off the basis of your long term budget. Get into the habit of looking at your budget quarterly at a minimum. Annually, you’ll want to re-visit your budget to make adjustments. I have found the best time to do this is when you are preparing your taxes.

If you are like many Americans and you live paycheck to paycheck, make it a goal this year to change that. The first item of you budget is to deposit a portion of your paycheck into savings. You may need to give up something you don’t need in order to do this; however, it is a crucial step so that you have an emergency fund of cash in the event of a cash flow problem. Choose a goal that is attainable in the very near future. For example, you may choose to ensure you have one month’s net income in this account (i.e. after-tax take home pay). You will find that once you achieve that goal, it will be easier to increase that amount and reach the next goal. I personally believe you should have a minimum of three months expenses in savings. This would allow enough time to replace your income, especially if you have to rely on unemployment as this process can and will take time to get setup.

This fear of a government shutdown can give everyone a new direction on their own budgets that will help mitigate a personal financial shutdown. You won’t be able to fit every scenario in your budget, so focus on the big ticket items. Even if you have a current budget, if you haven’t looked at it in over three months, it isn’t doing you any good right now. It’s important to look at your budget periodically to ensure you are on track as well as make changes for unforeseen events. If you begin to treat your budget the same way a business treats its budget, you will find that in a few years your financial picture will be much brighter even if your cash flow doesn’t increase. Learn from the government’s failure and plan to put a budget into action in your home today. You won’t be able to move forward and onto financial success without it.

There are several websites that can help you even if you have a current budget. A great tool that I am using religiously is Mint. It takes a bit of time to setup, but it will track everything and even give suggestions on better financial products that will reduce your costs. There are even paid sites that will teach you how to create a budget and get out of debt such as DaveRamsey.com. These sites can be very valuable because they utilize a team and hold you accountable each month. However, no matter which path you take, choose one today. Action is the key to realizing your dreams and financial goals.

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