If the government shutdown hasn’t affected you yet, don’t think you are entirely out of the woods.WalletHub.com, a personal finance website, released an interesting study this week showing how states were being affected by the shutdown based on seven different criteria from number of federal employees and federal contract dollars to those who receive Social Security, veteran benefits and student aid.Turns out Texas ranks 26th among all states and the District of Columbia in terms of affect by the shutdown, based on government and think tank data. Virginia, Alaska and Alabama were listed in the top slots of most affected states.But don’t get too comfortable. When you break down the numbers, you see a better picture of what is at stake.For example, the state ranked 14th in federal contract dollars per capita with $24.4 billion released to Texas contractors by the third quarter for 2012, the most recent data available. Texas ranked 12th in number of students who filled out the application for student federal aid — some 500,000 students — in the third quarter of this year.Here are some other eyebrow raising numbers:• 1.7 million veterans are in Texas receiving benefits (ranking 43rd in nation)• 3.7 million Social Security checks were cut this month to senior citizens in the state (47th in nation)• The state has 143,000 federal workers, most who are now furloughed (29th in nation) • 250,000 small-business loans were given to Texas companies in 2011 (39th in nation). New loans backed by the Small Business Administration are not being made during the shutdown.• 12.8 percent of the state’s gross state product is real estate (35th in nation). Federally-backed mortgages are on hold during the shutdown.Check existing debt John Kiernan, a senior analyst for WalletHub, advises that everyone be on guard financially until the dust settles in Washington.“The main thing even if you’re not directly affected now is to consider the possibility that you might be and take steps to be ready for it,” he said.If you are worried about our future income, Kiernan recommends adjusting your budget to reduce optional spending like eating out or buying clothes as much as possible. Apply for additional credit. Many credit card companies are offering zero percent interest rate deals right now, if your credit score is high enough to take advantage of them, so it would cost nothing to have additional credit ready.If your job has been furloughed or benefits cut, talk to your creditors immediately, he advised.“Open a dialogue and brainstorm possibilities,” he said. “We are hearing that creditors are working with people affected by the shutdown.”Economists say interest rates will spike if the national debt ceiling is not raised next week, so Kiernan suggests looking at existing debt with a variable interest rate and consolidate it now with a fixed rate.Create an emergency fundBryan Clintsman, a certified financial planner in Southlake, said he has already received a call from a panicked client who works for Lockheed Martin. The giant defense contractor announced furloughs last week but has since reduced the number of workers affected and said that none are in Fort Worth.“But we had the pieces in place for him—including emergency reserves—so a furlough would not have been as harmful to him as others without an emergency fund,” Clintsman said. “Job layoffs, or even the possibility of layoffs, is the world’s way of reminding us that we must have an emergency fund and cannot live paycheck to paycheck.”Clintsman said many do not take the need for money for emergencies to heart.“Emergency reserves are not an option,” he said. “They are the No. 1 rule in any financial plan to always have 4-6 months of emergency reserves available at all times.”A second choice if emergency reserves are not available could be a line of credit on a home or a low- or no-interest credit card, Clintsman said.“Ironically, new lines of credit can often not be opened if a person is already experiencing a gap in income,” he said.A third option for ready cash to pay bills could be a loan from your 401(k) retirement account, but only if the employee has a reasonable expectation of continuing employment with that employer, Clintsman said. Keep in mind, however, that any outstanding 401(k) loan is almost always taxable with possible penalties, if the employee is terminated from a company without immediately paying back all of that loan.What happens to an employee’s health insurance is another major benefit that those facing a furlough or possible layoff need to understand, he said.“The second rule of financial planning is to never be without proper insurance coverage for catastrophic events that could devastate your family such as a major medical issue or even death,” Clintsman said.While job uncertainty or loss should be a time when you immediately stop funding any unnecessary savings accounts such as 529 plans, resist the urge to pay off cars, mortgages and other debt to reduce your monthly outflow of payments, Clintsman said.“These loans often have a low interest rate that makes little sense to pay down, and you will not be able to get another loan during a period of unemployment, so keeping the ones you have may end up being critical,” he said.Most of all, Clintsman advises to take the threat or reality of a furlough or job loss seriously and act upon it.“Remember, layoffs and job losses are like war – you have to match the seriousness of them with equal firepower of financial changes in your life,” he said.
Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net