Posted on Thursday, 17th October 2013 by

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I would say that anyone who has to borrow to pay their mortgage is in trouble, wouldn’t you! Can you imagine having to borrow not only to pay the mortgage but to just make the interest payments on your credit cards and other debt? Fortunately the government shutdown is over and everyone should be back to work shortly. However, the bad news is that with all of the hype over passing a clean continuing resolution (CR) and allowing government to continue to borrow 40 cents of every dollar it spends can’t be good for any of us long term. If a typical family tried to do this they would be bankrupt within the year and lenders would toss them out of their office. I wrote an article titled “Is This Coming Your Way & The National Debt Crisis” last year that describes the debt crisis by comparing it to a typical family’s income and expenses that you may find revealing.

Government should be setting an example of sound fiscal policy not of reckless abandonment and the sad fact of the matter is that most just don’t realize just how dire this situation is. If government doesn’t get spending under control and focus on putting people back to work the negative impacts will ripple through all of society.  The glimmer of hope that came out of this past several weeks is that the President stated many times that if congress passed a clean CR and extended the borrowing limit he would be willing to sit down and negotiate on any subject. I hope that he and congress follow through prior to early next year when this all could happen again.

The 16 day shutdown is like a shot across the bow of a ship; a near miss never less a shock to the system. I read several stories about federal employees that were furloughed struggling without their biweekly pay coming in on time. I went through a number of shutdowns while in federal service and was sent home as non essential twice.

One story focused on a family of four where the federal worker was in his 50s with kids in College and bills coming in that he couldn’t pay on time. The family was living pay check to pay check and struggling to get by during this 2 week period. I can certainly understand the stress this family was going through. Fortunately, furloughed federal workers will eventually receive back pay and in effect received extra paid days off. Not bad considering that many in the private sector simply were laid off without any hope of back pay.

What these stories highlight is that many simply aren’t prepared for the unexpected and have little to no savings set aside for a rainy day. Sure we have secure jobs in the federal sector but that doesn’t mean we shouldn’t be fugal, live within our means, and save for that rainy day that will eventually come our way. All workers, especially those in their 50s and close to retirement, should have savings set aside for emergencies and retirement, other than their THRIFT plan, even with kids in school. That is why retirement and financial planning is so critical and should be addressed early in ones career. If you were in the same boat as the story line relayed above it’s time to get serious about financial planning strategies and retirement planning.

A fellow worker once said to me that he didn’t have to put anything aside for retirement because of his CSRS annuity and his THRIFT Plan savings. Not so, sure the CSRS annuity can be generous however you never know what is coming your way and the costs of everything is increasing. I mentioned in a recent column that in the past few months our home owners and car insurance premiums increased over 30% and our real estate taxes were just raised 30% as well. That was unexpected and a huge hit especially for someone on a fixed annuity and/or Social Security considering that retirees are expecting up to a 1.5% COLA next year!  They just announced that federal employees will receive a 1% pay increase in January.

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