The government shutdown is over. Government workers have returned to their jobs and backpay should be arriving soon (if it hasn’t already). Things are back to normal… for now.
However, it’s the “for now” part that should leave many people concerned going forward.
In truth, the last month has been an incredibly valuable moment for learning for all of us. It’s exposed some difficult truths about our government, but more than that, it’s also exposed the fragile nature of the financial and professional lives of many, many Americans. Hundreds of thousands of government employees and many more contractors have seen their lives thrown into chaos when they previously perceived their employment as incredibly stable.
This experience has provided all of us with a great opportunity to step back and look at the reality of our own financial and professional worlds. It’s pointed at a few things we should all keep in mind as we move forward.
Here are seven key personal finance lessons I’ve taken away from the government shutdown.
1. There Is No Truly ‘Stable’ Job
Part of what caught many government employees by surprise during the shutdown is the belief that their job was supremely stable and that they could rely on that paycheck every two weeks like absolute clockwork. Clearly, that’s not 100% true.
Of course, many people tend to believe in the stability of their job – many state and local government employees and employees of private businesses tend to fall into that same mindset, even though there’s less evidence of stability there, especially in the private sector. I’ve even known some small business owners who believed that their business was so stable that they could take the income for granted.
Here’s the truth: No job is perfectly stable. It doesn’t matter who is employing you or what the arrangement is. Employers can run into all sorts of unexpected problems, even ones as big as the federal government. Unexpected events can happen to any employee, too, transforming a stable job into a pink slip at the blink of an eye.
Never, ever lull yourself into complacency and believe that the job you have now will always be there and will always be stable. You should never act as if your next paycheck is a guarantee, because even if you have what seems like the safest job in the world, it’s not a guarantee.
Rather, you should always take steps to ensure that your life remains secure even if the next paycheck doesn’t arrive. Let’s start with the big one.
2. You Need an Emergency Fund. Period.
This is the first and absolute most fundamental step that everyone should take in their personal finance journey. You should have at least a month’s worth of living expenses sitting in a savings account at all times in case of job loss or other emergencies. If you don’t have that sitting there waiting on you, you’re begging to be blindsided during the next big unexpected event.
Think about it: If every federal employee had a month’s worth of emergency savings, the government shutdown would have been much less of an issue in terms of how ordinary people were affected. People would not have been panicking. People could have made rational decisions regarding their income and their future livelihood.
Note that I’m talking cash here, not credit. Your credit card is not an emergency fund. It won’t be there for you during a natural disaster. It won’t be there for you if your identity is stolen. It won’t be there for you if you have credit issues. Cash is king. Cash solves problems. Cash is safe. Cash is the form you want your emergency fund to take.
You should make it a very high priority in your life to save up a month’s worth of living expenses and stow it away in a savings account. Do it any way you can. My personal recommendation is to set up an automatic transfer from your checking account where $20 (or more) is moved every week from checking to savings automatically. Then, supplement that with whatever you can until your savings account has at least a month’s worth of living expenses in it… but never turn off the automatic transfer. Leave it there, so that the fund automatically fills and when you tap it, you’re not scrambling to refill it.
If you’re wondering how on earth you could possibly save up a month’s worth of living expenses, keep reading.
3. If You Can’t Do This, You’re Living Far Beyond Your Means
This is the stark truth that many people don’t want to hear about their finances, but it’s true: If you can’t save up for an emergency fund in any sort of reasonable amount of time and you can’t make any progress on your debts beyond minimum payments, you are living far beyond your means. You are constructing a house of cards that will eventually collapse, and when it does, it will hurt.
If you look around your life and think that it is “impossible” to spend less than you earn, that it’s “impossible” to build up an emergency fund, that it’s “impossible” to pay down your debts in any reasonable timeframe, the hard truth is that you’re living beyond your means. If you ever want anything to be different in your life, you have to change something significant about either your income or your spending. If you don’t want to eventually suffer a financial meltdown, you have to change something significant about either your income or your spending – or both.
Much of the rest of the article focuses on career steps, but right here and now, we’re going to talk about spending. If you struggle to make ends meet, you have to change something about your spending. You need to cut back significantly on the frivolous spending, meaning things that don’t involve the most basic of food, shelter, clothing, and transport to work. All of the extra stuff might feel important, but it’s setting you up for disaster.
There are essentially two ways to make a serious difference in your spending. You can either modify the small, frequently repeated expenses, in which a change that saves $0.10 or $0.25 or $0.50 or $1 can add up to a lot over the course of a year, or you can make a major move that in a single action saves hundreds.
Small moves (that save a little at a time but build up through repetition) include simply eating all of your meals at home unless there’s a strong reason to do so (and planning those meals out in advance so you can shop for groceries with a list), doing energy improvements to your home like air-sealing the windows and installing weatherstrips, installing LED bulbs in each socket where you don’t have one, making your own household supplies like laundry detergent, buying store brand everything, and so on.
Big moves (that you can do once or maybe twice but save a lot each time) include moving to a less expensive place, shopping around for better auto and homeowners insurance, eliminating a car and relying on mass transit, shopping around for a better cell phone plan, cutting cable and relying only on Netflix and over the air signals, and so on.
If you are in a situation where something as simple as paying down your credit cards or building up an emergency fund will take years, you have to start making changes in your spending or else you are begging to be blindsided hard by any sort of uncertainty in your life, and as we’ve established, no job is completely secure.
Don’t let your life be as fragile as a house of cards. Get your spending under control, spend less than you earn, and start patching up that ship now. Build up an emergency fund, start whacking that debt (starting with the high interest stuff), and start saving for retirement, too, especially if your employer matches your contributions. If you can’t afford to do that, you’re standing on a very tall ladder on a very gusty day.
Let’s move on to some career advice.
4. Don’t Think of Your Current Job as Permanent; Instead, Think Big (and Small)
As we’ve established, there is no such thing as a truly stable job, so stop thinking of your job as a permanent state of affairs. It’s not.
Rather, think of your current job as a temporary but mutually beneficial arrangement that will continue until it’s not mutually beneficial any more. When your employment ceases to be beneficial to you – meaning you could make more money elsewhere or be in a more enjoyable situation elsewhere or you could retire – you’ll quit. The same is true for the employer – if your performance isn’t up to snuff or they can’t afford to continue your position, they’ll downsize you.
With that mindset, start thinking about what your ideal professional situation would be. Would it involve more income? Would it involve more meaningful work? Would it involve less stressful work? Would it involve less personal interruption? It might even involve a different location or a different field entirely.
You might think of your current job as something pretty close to that – I know I do. In that situation, you should work to make sure that your current position is as permanent as you can make it. You want to shore up your current position and make yourself as valuable as possible.
If your current job isn’t anything close to that, you should work to make sure that you’re getting ready for that next job or your career switch or whatever the next step is. Do not feel bad about using your current job as a springboard to your next career. If you’re doing your current job but your focus is on saving money and preparing for a career change, that’s fine as long as you’re fulfilling expectations.
In both cases, many of the same principles apply. You should have your financial bases well covered, with an emergency fund and a routine of spending less than you earn, for starters.
Beyond that, there are three things you should always have on your mind at work.
5. There Is Immense Value in Having a Strong Professional Network, So Start Cultivating One
You need to have as many strong professional relationships in your field as you can cultivate, both inside your own workplace and outside of it. The more relationships you have, the more likely it will be that you can tap one to make the next step in your career, whether it’s a step you take by your own choice or a step forced on you by an unstable employer.
The first thing you can do is be a reliable coworker that your fellow workers can depend on. Few things cause poison in the workplace than someone who is not doing their part and can’t be relied on. Do your job to the best of your ability and try to avoid letting others down. If you have to let someone else down, be very clear with them on what you can’t take on, with as much notice as possible.
You should avoid negative talk about coworkers and others in your field whenever possible. While this might help you cultivate a very small network of strength, it burns a lot of bridges and damages your reputation. It’s impossible to cultivate a strong network if you’ve burnt a lot of bridges and people don’t trust you.
Take every opportunity you can to go to meetings, conferences, and conventions related to your field. Meet lots of people, then take the time to follow up with many of the people you meet with further contact later on. Collect a bunch of contact information and business cards and follow up with all of them.
Touch base with the people in your office regularly and the people in your professional network regularly. Try to avoid eating lunch alone. Know a thing or two about each person and use that as a source of conversation. If you find that any of those people need help, particularly if it’s the kind of help you can offer with relatively little effort compared to the benefit to that other person, do it without question and without wondering what you get in return.
If you do this consistently when things are good and stable, you’re going to find that when you have a professional need, there will be a lot of people able to help and a lot of surprising doors open to you. Thus, these efforts should be a consistent part of your professional life.
6. You Should Always Keep an Eye on Improving Your Own Marketability and Transferable Skills
Another important part of your professional stability is your skill set. Not only do you need to have the skills necessary to do your job as it sits right now, you also should be cultivating the skills needed to do the next job you want to do and the skills you’ll need for your current job in the future.
There are many ways to go about this, and they vary widely. Some careers rely on self-education. Others rely on certifications. Still others rely on on-the-job learning. Whatever it takes, you should be devoting some of your time to adding new skills to your repertoire related to the career path you see yourself following going forward.
One good way of doing this is by looking at what skills are required and what skills are desired for the job that you want to have. Go look at job listings for the job you wish to have and then use that as a checklist for the skills you should be cultivating.
Another approach is to sit down with your supervisor and talk about a plan for you that will lead to a raise or a promotion. Almost always, the skills cultivated during that process are ones that improve your value in the professional marketplace as well, plus it strengthens your relationship with your boss as you’re moving through the steps.
Of course, you need to promote this fresh marketability…
7. Your Resume Should Always Be Ready to Go
Make sure that your resume is ready to send at all times. Review it monthly, if not more often, and keep all of your skills up to date there.
You should, at the very least, maintain a resume that’s ready to mail in a document on your computer or in the cloud (I use a Google Doc), as well as updating your resume in a few places that can easily be found online, such as LinkedIn. An updated resume that you have in hand makes it easy to quickly send one off if needed, and having an updated resume online makes it easy for others to find you with potential offers and enables others to share your resume on your behalf, something that happens sometimes when you have a strong professional network.
You should literally pencil this in as a monthly reminder or to-do. The time it takes to make sure that your resume document is updated and in an easy to find place plus the time it takes to update your resume at sites like LinkedIn is minimal; you can do it in just a few minutes.
Yet it’s that regular updating that keeps the window open for opportunities to come in. People will find your resume online and may contact you with offers. Professional associates may suggest your resume to others for potential job offers or other opportunities. Keep it updated and those doors remain open for you.
The key lesson of the government shutdown is that no job is permanent. No matter how reliable or trustworthy your employer seems to be or how wonderfully you perform at your job, things can always happen. You can be an employee of the federal government, which is about as stable as you can get, and still be a month late in receiving your pay. Pink slips can happen. Unexpected corporate bankruptcies can happen.
Things happen. Be ready. If you’re not, someone else will be.