October 9, 2013

The United States government went into shutdown mode for the second time in 17 years on October 1, with no end in sight as of this writing. For many Americans, the shutdown will not have critical effects on daily life – at least not right away. The mail will be delivered, including Social Security checks and Medicare benefits. Food stamps and unemployment benefits will be paid. So-called essential services such as air traffic control and border patrols will also be maintained.

If you are a veteran receiving benefits from the Veterans Administration, you’re safe, but only if the shutdown doesn’t last longer than one month. After that, you may not receive benefits. Likewise, if you are a veteran with a disability claim in the system – your interminable wait may well get even longer, as many VA workers have been furloughed. If you depend on assistance from the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) or if your preschooler is enrolled in Head Start, you may be out of luck soon, if you are not already. And of course, if you are one of 800,000 “nonessential” federal workers, you have already endured more than a week without pay. We’ve put together a few strategies for surviving the shutdown in today’s post.

How You Can Cope

If you are adversely affected by the government shutdown, the usual advice pertaining to hard times applies. Cut back on expenses as much as possible without going on a complete austerity regime. Substitute DVDs and popcorn at home for going out to the movies. Have friends over for potluck dinners instead of dining out.

Don’t hide from your creditors. Especially if you have maintained a good payment record in the past, many creditors will be willing to allow you to reduce or even skip a payment or two if you explain your circumstances. By reaching out before you fall behind on your payments, you will be more likely to minimize the damage to your credit – and reduce the probability of dire consequences such as losing your house or your car.

If you are truly in dire financial straits, there is some help available. Many states are attempting to pick up the slack for services and benefits halted by the shutdown, at least in the short run. Social service agencies, religious institutions and community organizations are also stepping in. It’s up to you to seek out the help that is available.

October 15 Federal Tax Deadline

If you are among the many Americans who requested an extension from the Internal Revenue Service to file your federal income tax return until October 15, you may wonder how the shutdown will affect you. Hint: You still need to submit your return, along with any payment that you did not make on or before the regular April 15 deadline.

If you cannot pay what you owe, file your return anyway, and pay what you can. The late filing penalty is 0.5 percent per month, as opposed to the late payment penalty, which is 3 percent per year. If you are owed a refund, don’t hold your breath waiting – refund payments have been halted until the shutdown ends. On the other hand, don’t expect your payment check to “float” – the IRS will cash incoming checks. On the other hand, no taxpayer audits will be conducted during the shutdown.

Lessons from the Shutdown

What lessons can ordinary Americans learn from the most recent shutdown? First and foremost, if at all possible, establish and maintain an emergency fund. Of course, if you’re struggling to make ends meet, this goal is more easily stated than accomplished. However, if you save even $5 per month, you’ll begin to establish a savings habit that will be easier to maintain once your financial picture begins to improve. You will also be better prepared to cope if and when the next government shutdown occurs.

Photo: Yahoo News