Can You Miss A Paycheck?

My husband is a Federal employee, and the part of the government he works for is currently shutdown.  Payroll was processed last week, but if the shutdown continues much longer, he will miss his next paycheck.  I am a contractor, and am still able to bill to my contract, but could receive notice that I cannot work at any moment, which will mean less money from my side.  Guess what? We are not worried about missing that money. 

My husband and I make about the same amount of money, but we effectively live on a single income.  It shows.  My son recently told me that other kids in his class accuse him of being “poor” because he does not have some things that others in his class have: a gaming system (we did just upgrade from a Sega Genesis to a used Xbox this Christmas); limited wardrobe, small house for our area.  After taxes, childcare, charitable giving/automatic retirement savings, we save 100%of my income.  Because we save so aggressively, we can face emergencies without heartburn. 

In reality, though, not being able to work is not an emergency.  Not being able to work, and having to miss a paycheck, is a reality we all can expect, and must plan for.  We all need to save money, no matter how difficult it is, for the expected and unexpected emergencies. 

I no longer view losing my job as an emergency.  I view losing my job as something that is very likely to happen at least once in my life.  In fact, I already did.  Within six months in 2014, I found out I was pregnant (surprise!); our oil furnace went; our septic tank went; I lost my job; and Glen lost his contract.  The situation was not good.  Yet, none of those things were emergencies from the standpoint that we knew they were all possible, and, in the case of the furnace and septic tank, likely to occur in five to ten years from when we purchased the house in 2010.  As for the pregnancy, it was a surprise, but should not have been, obviously.  I knew my company performance had been poor that year, and I knew there would be lay-offs, I just didn’t think I’d be part of them (ah, pride). 

We had enough money in the bank to pay for everything, about $40,000.  At that point, we had some choices to make.  I chose going back to work to earn back the money we had depleted.  I found and started a job shortly before I had Susanna, and returned to work when Susanna was 6 weeks old.  Others might have made a different choice.  My husband had a new contract, and I could have stayed home longer with my new baby.  In retrospect, I believe I should have done that, but that would have required us touching what we consider our “drop dead” emergency fund.  That is, the money we have set aside for the truly unexpected problems.

My heart goes out to families who earn far less than us who are in a similar situation.  However, most families can save money, even if it is just $1,000 in a money market account.  That can be through reducing a purchase, earning more, or a combination of the two.  Most of our emergencies are not emergencies.  Problems with your house or car; payments on a loan; Christmas presents; and job loss are all inevitable.  They will happen.  It is just a matter of when.

Losing a paycheck is a matter of when, not if.  That isn’t being pessimistic.  That’s being realistic.

If you do not have at least $1,000 set aside for “emergencies,” the time to start saving is now.  Glen and I have two savings mechanisms.  The first are two money market accounts.  One account is for saving estimated tax payments and for our rental property.  The other account is for larger saving objectives, like the house, car, job problems, etc.  The second saving area is our stock dividends.  We always keep at least $5,000 in dividends.  Note, this is not stock, which can fluctuate, but rather the dividends, which we earn off the stock and sit in a cash position unless we reinvest them.  Even in 2014, we did not touch our stock dividends.  That is our true drop-dead emergency fund, as all other emergencies we generally can anticipate.

Can you miss a paycheck or two without heartburn?  If you value peace of mind, start saving.  Your future self will thank you.

Photo by Michal Průcha on Unsplash

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Typically, when the government reopens, Congress includes back pay for furloughed Federal employees in the appropriation legislation.  For Federal employees, they can expect to receive their paycheck, but it will be late.  That does not help them with buying groceries in January.

Contractors typically do not receive anything from their companies during a government shutdown.  In my case, I can still work, but there is not guarantee how long that will continue.  I assume that I need to save a month’s pay each year.