An estimated 750,000 furloughed federal staff are scrambling to make ends meet as the federal government shutdown enters its third week.
When the federal government shuts down, staff categorised as “non-essential” are ordered to remain dwelling with out pay. Federal legislation says they’re entitled to again pay when the federal government reopens, however their paychecks are in political limbo whereas their payments pile up.
Wes Battle, a licensed monetary planner (CFP) with Monetary Benefit Associates, who makes a speciality of working with federal staff, says a shutdown is “by no means enjoyable or truthful to anybody who serves the federal authorities.”
Lawmakers whose salaries won’t be affected by the shutdown stay in limbo, and it’s unclear how lengthy the shutdown will final. So Cash requested monetary planners for his or her prime recommendation for furloughed federal staff as they navigate the third authorities shutdown in recent times.
This is what they advocate:
1. Prioritize your payments
Ideally, your monetary planner will counsel constructing an emergency fund that may cowl a number of months’ price of bills for simply this case. However the shutdown is particularly tough for federal staff who do not have financial savings to fall again on.
“If you happen to’re not getting paid, the primary rule is triage,” says Patrick Huey, CFP and proprietor of Victory Unbiased Planning. “Prioritize what you want.”
Huey is encouraging federal officers to deal with housing and well being payments. “Maintain a roof over your head, utilities, insurance coverage, and fundamental well being wants on the prime of your record, however lower out every thing you do not want,” he wrote in an e mail to Cash journal.
Finally, he says, you would possibly need to contemplate suspending funds on “non-survival” payments like bank cards, pupil loans and streaming companies.
“Whereas injury to credit score and money might be repaired, it’s a lot more durable to get well from lack of shelter and insurance coverage,” Huey added.
2. Keep away from bank card debt (if potential)
With again pay simply across the nook, federal staff could also be tempted to place their common bills on bank cards through the shutdown. However monetary advisers say they’re cautious about that technique.
In case you have a selection, Huey says to solely use credit score to pay for necessities.
“Keep away from racking up balances for issues you do not want proper now,” he provides. “Attempt to restrict your payments so you do not get overwhelmed with repayments.”
Battle says bank cards aren’t ultimate. One various accessible to federal staff is the Thrift Financial savings Plan (TSP).
Needless to say tough withdrawals out of your TSP are topic to tax penalties and might completely scale back your retirement account steadiness. Nonetheless, TSP loans generally is a good possibility throughout a furlough as a result of they’ve low rates of interest and no prepayment penalties. What’s extra, the quantity borrowed and the curiosity charged can be returned to your account as soon as it is repaid, Battle mentioned.
“Nobody is aware of how lengthy the shutdown will final or if individuals who have been furloughed will be capable of get a job after the shutdown,” added Invoice Schafranski, senior wealth advisor at Moneco Advisors. “What you don’t need is a bank card steadiness with no solution to pay it off with compound curiosity.”
Shafranski’s recommendation underscores the added uncertainty of this authorities shutdown, because the Trump administration seeks to put off some federal staff slightly than furlough them. (A choose ordered a moratorium on troop reductions.) President Donald Trump has steered that some federal staff should not eligible for again pay, regardless of a legislation guaranteeing misplaced wages throughout a authorities shutdown.
3. Talk early and sometimes
Huey inspired federal staff to contact their giant collectors, particularly landlords and mortgage lenders, to tell them in regards to the furloughs.
“Get forward of the issue by proactively calling all claimants and lenders, even earlier than a fee is missed,” he mentioned, noting that this might open up choices for short-term reduction corresponding to fee flexibility.
Some monetary establishments are providing advantages to federal staff to guard them from injury to their credit score in the event that they miss a fee throughout the federal government shutdown.
For instance, PNC clients can request a freeze on their credit score experiences, and Lubbock Nationwide Financial institution is waiving charges and never reporting missed mortgage funds. About two dozen banks are providing related help to furloughed federal staff, in keeping with the American Bankers Affiliation.
Consultants additionally advocate reaching out to native organizations for assist. One choice to shortly scan what’s accessible close to you is the My Fed Advantages instrument, which aggregates identified monetary help packages for federal staff primarily based on location. It exhibits reductions at native eating places and leisure venues for furloughed federal staff.
Cash particulars:
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