Government Shutdown Military Pay: 3 Things to Do Now | Military Money Manual Podcast Episode 95

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Spencer Reese from militarymoneymanual.com and Jamie talk about the potential federal government shutdown in 2023 and what military servicemembers and families can do to protect their paychecks.

  1. Don't panic
  2. You will be back paid and may be paid anyways.
  3. Focus on what you can control

Military Money Manual Podcast Episode #95 Links

Outline of Episode:

  • How often do government shutdowns happen? 
  • Protections for military personnel 
  • Protections for veterans and retirees 
  • Practical advice to follow through a government shutdown

Military Money Manual Podcast Episode #95 Transcript

[00:00:00] Jamie: A lot of people's initial reaction is to panic and think that this has never happened before. For a lot of our listeners, this may be the first government shutdown rumors that they've ever heard.

Welcome back to the Military Money Manual podcast. I'm Jamie and I'm here with Spencer from MilitaryMoneyManual.com. Today, we're going to talk about three actionable steps you can take to survive a full or partial government shutdown. It's in the news. Everyone's nervous about it. Spencer, what are your overall thoughts about government shutdowns? Is this something we should all be worried about?

[00:00:52] Spencer: Like most things in the news media, Jamie, I think if you were on Mars under a rock and you just ignored the media for the next week, month, even if this shutdown ends up lasting a couple months, I think you'll be better off just completely ignoring it, going about your business. 

And there's three things I want to address today, and that's don't panic. Number one, number two, if the government does actually shut down, you will be back paid. In fact, you might not even miss any paychecks. 

And then number three, focus on what you can control. The government shutdown is one of those things that is so far above your pay grade. You don't really need to worry about it because it's almost like an act of God. There's nothing that little airman, little soldier, little marine you can do about it.

So just go with the flow and focus on the things that you can actually control and try not to stress about the big things that are completely out of your control.

[00:01:46] Jamie: Okay, that's a really good overview. I think that a lot of people's initial reaction is to panic and think that this has never happened before. For a lot of our listeners this may be the first government shutdown rumors that they've ever heard during their career. Is this the first time our politicians have gotten us in this situation where the government might shut down?

Is this new?

[00:02:06] Spencer: No, it's not new at all. In fact, in my 12 year Air Force career We had three actual government shutdowns and then one, actually a couple that were threatened.

Close calls. Didn't end up panning out. So in 2011, I remember I was in pilot training and there were rumors of the government shutdown. And this was, again, this has happened before in the nineties and it happened several times during the Obama and Trump administration. So it's both parties. It's Republican Democrat.

This isn't really a political or partisan thing. It seems like both parties really play the government shutdown card to force issues that they want to get through. And they use the threat of the fear factor, the fear factor, right? And it's just heightened drama. It's like a reality TV show.

It's really annoying to watch it play out. As a military service member, it can be really frustrating, right? Because for the average citizen, a government shutdown usually doesn't have a big impact on them, right? Air traffic control still runs. Military service members still show up. Federal prisons are still in operation.

Most health services are deemed mission essential, right? So they continue. So for the social security checks, they'll go out and we'll get into all the nitty gritty details of it here. This has happened before. This will happen again until basically until Congress gets their act together and either passes a law that says like we can't shut down or comes up with a budget that everybody can agree to and then it gets passed, but I'll get off my soapbox about that for just for a moment, but the government nearly shut down in 2011 and I remember I had, I was in pilot training and I had a conversation with my instructor and I was like, what's going to happen like I'm tight on cash and he was really calm, chill guy and he was like, “Man, one day you're going to be a captain and you're going to have a nice fat emergency fund and it's going to be okay. And he's right now, just cut your expenses back and try to ride it out if it does happen.” And in 2011, it didn't actually happen, but the federal government shut down 16 days in 2013, three days in 2018.

And I was actually TDY for that one. And they almost recalled me back to my home unit, which was OCONUS. So that was going to be a real pain in the butt. But I didn't end up having to do that because it happened over the weekend and then they got funding after the fact. And then for 35 days the government shut down, 2018 to 2019.

Since 2013 the government has shut down three times. If it happens again in 2023 please don't panic. Just continue what you're doing, your good financial habits, and it's going to be okay.

[00:04:39] Jamie: You mentioned earlier, I still have to go to work though? There's no way to get out of that for this whole shutdown situation?

[00:04:46] Spencer: Yeah, usually military personnel on active duty are deemed mission essential and that you just continue to report to work as your commander directs. There's usually no break. Federal, sometimes contractors, the contracts expire. Federal civilian employees are sometimes sent home and furloughed. National Guard, sometimes the orders are curtailed or aren't issued. And so the national, depending on if it's state or federal money, that's right. Yeah. Follow the orders of your chain of command. But if you're on active duty, expect basically normal. It's mostly political theater.

Like I said, and you're still going to be required to report to work. Maybe if you're TDY, it might get cut short again. Just, have an open conversation. This is something that. If you have a good chain of command, they should be out ahead of and they should start preparing you for, and it can feel like a little bit of fear mongering and a little bit of anxiety, like so many things in the military, you don't know what you don't know, and your commanders probably don't have any more information than you do, honestly, when it comes to most of this stuff.

[00:05:52] Jamie: Okay, so if the shutdown actually does happen over the weekend or early next week or any time in the future, military members have some protections built in and there's some draft legislation and sometimes even the banks will take care of us. 

Can you explain a little bit about that?

[00:06:07] Spencer: It goes back to The Hitchhiker's Guide to the Galaxy the book by Douglas Adams but and the back cover of it was you know in big bold letters is the saying don't panic and Usually Congress wants to avoid the political impact of not paying the military because if the military isn't being paid, that's something the opposition party, whether it's Republicans or Democrats or a third party that emerges in the future, that's something that party can point to and say, Look, they shut down the government and they're not paying our military and they're hurting our military service members and nobody Right wing, left wing wants to be painted with that.

So in previous government shutdowns, since 2013, Congress has always passed last minute legislation to continue paying military service members. I'll caveat that, though, except in 2018, 2019, the Coast Guard, which falls on, usually, under the Department of Homeland Security, except in wartime, which it falls under Department of Defense, the Coast Guard was not exempted, and so they did miss a couple paychecks, and that was pretty tough on them.

And the other thing, was usually like you said, military friendly banks step in and offer interest free loans and I don't know why, but I think USAA. Didn't at the time and Navy Federal did. I'll have to fact check that one, but Yeah, that was a tough situation for the Coast Guard.

So probably your pay will continue regardless even with a government shutdown and if it does actually shut down your pay is not protected. Both USAA and Navy Federal Credit Union and FCU are offering up to $6,000 and zero percent interest loans and it's based on your previous direct deposit payment.

So if your last direct deposit payment into your Navy Federal account was, say, $3,700, Navy Federal is going to round down to the nearest $500 and they're going to loan you $3,500. So if your last direct deposit payment was $5,700, again, they're going to round down to $5,500. And there's a two page PDF that you can Google.

Navy Federal's Government Shutdown Loan Program Terms and Conditions and you can check out how Navy Federal has set it up there and then USAA has a very similar program as well. You can Google government shutdown assistance, USAA, and that program should pop right up. But basically, both military friendly banks are going to help you bridge the gap until we start getting paid again if military pay is affected during a government shutdown, which, historically, It hasn't been.

[00:08:37] Jamie: What about for the veterans and retirees? Are there any protections? Obviously the money's coming from the federal government. What happens to them if the government were to shut down?

[00:08:46] Spencer: Yeah, again, so this just gets back to like how this whole federal government shutdown thing is pure political theater and nobody actually wants anything really bad to happen despite what the news media says. VA disability payments, social security payments, military pensions, all of these are different pots of money and completely unaffected by a federal government shutdown. So you do not have to worry about any of those payments. If receiving VA disability payments, military pensions, social security payments, they will not be affected by a federal government shutdown.

And you will continue to receive those payments as you normally do. 

[00:10:04] Jamie: Okay, so we talked about number one, don't panic. Number two, if the government does actually shut down, you'll be paid back.

Your third main point was to focus on what you can control.

[00:10:15] Spencer: Yeah, and I think this just gets back. This is like big picture stoic philosophy, but like I said before, this is a natural disaster. This is a hurricane that's coming towards you and no matter what you do, you can't change the direction of this hurricane.

So rather than panic or have anxiety about it, just accept that. Okay, the hurricanes are coming and what can I do? I can get some sandbags, I can volunteer at my local blood bank, I can stock up some food and water, get my family to higher ground like there's actionable steps you can take during a government shutdown and some of those things are probably steps you should have taken before.

Like we always say the best time to invest was yesterday and the second best time to invest is today, right? So might as well and you can't go back and change the past. So for a lot of people this could be the wake up call where they are like man I need to get out of this paycheck to paycheck cycle because it sucks and when I have this kind of this natural disaster of a government shutdown heading towards me I feel powerless.

I feel like I can't do anything. And so this is the time to take that control back and to understand that yes, you can do some things. And some of those things probably needed to be done a few months ago, but you can start doing them now. And so the next time a government shutdown is coming up, you can think, man, that sucks, but it's really not going to affect me because I'm financially resilient. 

So some of the things you can do are reduce your expenses. So now is not the time to purchase those airline tickets for that wedding in a year from now. Just wait until the dust settles a bit, right? Don't increase your credit card bill and buy things that you absolutely don't need to.

You can also get interest free loans from the different aid societies that all the branches have so the Air Force Aid Society, the Navy Marine Corps Relief Society, Army Emergency Relief, and the Coast Guard Mutual Assistance all offer interest free loans that you can pay back over your purchase. An extended period of time, usually a year to two years.

So you can use one of these aid society loans to help bridge the gap. If you have car payments coming up, if you have mortgage payments coming up, if you have rent payments coming up, another thing that you can do too, is take a little bit of ownership and contact your lenders. Ask for a month of relief from payments, whether it's mortgage, rent, car payments, student loans, credit cards, it never hurts to ask for a pause in payments or reduce payments until your paycheck resumes.

And a lot of these organizations, a lot of these companies, are going to understand that your paychecks delayed and you're in the military and that's completely out of your control and so you might be able to go down to a reduced payment schedule or you may be able to defer your payments for a month until you get back paid.

But again, this only comes into effect if your military pay is affected and I think it is extremely unlikely in the event of a government shutdown that your pay would be affected. But these are just some tips, some tactics that you can use in case your pay is affected by the government shutdown. So it's a bit late, but you could also use this experience to start saving for an emergency fund.

This is exactly the scenario an emergency fund is designed for. So when I was that young lieutenant in 2011, I don't think I had $1,000 in an emergency fund yet. And so I was really nervous about the government shutdown coming up. Fast forward a couple years, 2018, while I've been a captain for a while, I've got a $10,000 emergency fund.

And while a government shutdown and a loss of pay would sting, I knew that I could cover our expenses for at least a couple months until our pay resumed, if that's when it came to.

[00:13:43] Jamie: Yeah, Spencer, absolutely. I think if money is stressful for you and you're worried about what to do with this, you're either behind on your bills or you're in the paycheck to paycheck cycle.

This should be your motivation to break that, to think about how money can bring more peace into your life and not stress, not anxiety. This situation is out of your control and the only thing you can really do is adjust your mindset about it.

[00:14:05] Spencer: Yeah, that's right, Jamie. I think this is a great time to dive into some stoic philosophy.

I'm always talking about it, but a couple places to start. Obstacle is the Way by Ryan Holiday or Stillness is the Key, another Ryan Holiday classic. And then Tim Ferriss put out The Tao of Seneca on Audible and he also released a couple of PDFs as well, but I really like the Audible version because the narrator has an excellent voice for it, but I think ultimately you need to turn off the news.

And don't monitor every update. There's nothing you can do about this. And the tension is just going to, they're just going to ratchet it up higher and higher. And the politicians are going to get more and more airtime. And the CNN headlines are going to be flashing at you. And none of it matters. None of it actually impacts you and affects you.

And so focus on what you can control. Decrease your expenses. Increase your income. Save for a rainy day. Hit the gym. Spend time with your family. Switch to a military friendly bank and recognize that this too will pass. You will get to the other side of this and you can use this challenge, you can use this obstacle as motivation to come out on the other side better, or you can just let it wash over you and end up as like a piece of debris on the other side and just completely adrift and still with no financial plan.

So use this challenge as an opportunity to move yourself ahead financially, emotionally, spiritually and all other aspects of life. Recognize that sometimes there are events that are outside of your control and you can only control your reaction to those events. You can't control those events. 

So again, listener, those are three things that Jamie and I recommend you do in the event of a government shutdown.

Number one, don't panic. Number two, if the government does actually get shut down, go You will be back paid. There are assistance programs out there to help you bridge that gap until we receive our next paycheck, but usually military pay is protected in the event of a government shutdown. And number three, focus on what you can control.

We'll catch you in the next episode of the Military Money Manual podcast. 

[00:16:32] Jamie: The views and opinions presented here are those of the speakers and do not necessarily represent the views of the DoD or its components. Reference to any commercial products or services does not constitute DoD endorsement of those products or services.

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