These are my top recommended credit cards for this month. Some have $450-550 annual fees waived exclusively for US military personnel.
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Here we go again – for the 2nd time in my short military career, the prospect of the government shutting down is looming on the horizon. What does that mean for the grunt on the ground in Afghanistan or the airman turning wrenches in Germany? He or she won’t be getting a paycheck on 15 Oct if the threatened shutdown does occur.
Congress has until midnight of 30 September to pass a funding bill. If that bill can’t be passed, then non-essential services of the US government cease to be funded and shut down. The US military will continue to function, however the personnel serving their nation around the world in some of the worst places in the world will not receive paychecks until the funding bill is passed.
Because the 1 Oct pay is for the previous fiscal year (1-30 Sep), you will receive that paycheck. The next paycheck (15 Oct) would be the first one affected by the shutdown.
Will Military Members Get Paid if the Government Shuts Down?
Update as of 1 Oct 2013: It now appears that military personnel will be paid on time due to recently passed legislation. However, the threat of losing a paycheck still remains very real for military servicemembers. Start building your emergency fund today!
Originally no, but not it seems the answer is yes. Without the HR 3210 law, benefits and pay will continue to accrue and be back paid whenever Congress decides to pass a budget. That could be just a few days into October, in which case you can expect your 15 Oct paycheck, or it could be a few weeks, in which case you may miss 1 or 2 pay periods.
However, now that HR 3210 has been signed into law by President Obama, military personnel should receive their normal paychecks on time, gov't shutdown or not.
TriCare benefits will still be available. Appointments and medical care should continue normally.
Veterans Agency (VA) benefits should be processed normally, but if the debt ceiling causes another shutdown (possibly in mid-October), those payments could be interrupted as well.
How to Prepare for Missed Paychecks
For those living paycheck to paycheck and not getting ahead, a missed paycheck could be devastating to their financial situation. The time to start saving and planning for a financial hazard like a government shutdown was years ago. If you have built a solid financial foundation and saved an emergency fund, missing paychecks will be painful but it won’t be catastrophic.
If you aren’t prepared today, there are several things you could do in the next few weeks to prepare for a government shutdown.
Allocate your savings towards cash and your emergency fund
You’ve got one more paycheck on 1 Oct between now (end of September) and when you may miss a paycheck. This is not the time to buy a new hot tub or car. Save as much of this paycheck as you possibly can, probably in a checking or savings account so that you can easily access it if you don’t receive your 15 Oct paycheck.
Temporarily reduce your debt repayments or investment amount
Instead of making extra payments on your loans or investing heavily in your retirement accounts, just make the minimum payments on your debt and skip investing until you receive your regular paycheck. As long as you make minimum payments on installment debt (auto loans, mortgage, student loans) you won’t see any fees or extra interest. If you have credit card debt, this is more of an emergency, but having access to cash may be worth delaying your credit card payment.
If you’re investing in the Roth TSP or Roth IRA via MyPay allotments, it’s too late to change them and receive the allocated pay. However if you are investing in your retirement accounts via monthly withdrawals from your checking account, now may be the time to hold off on that transfer so you have access to the cash. You can always invest that money the next time you receive a paycheck. The difference between investing it now and investing it in 3 weeks will be minimal. You’ll be glad you have the cash in your checking account if the government does shut down, rather than your retirement account.
Join a military friendly bank
The top military banks are again proving why they are so valuable to military members. Both USAA and Navy Federal Credit Union are offering to cover military paychecks on 15 Oct if the government skips paying the troops. Here are the details:
- 1 Oct pay will be processed normally
- If the government does not send your pay via direct deposit on 15 Oct, Navy Federal and USAA will cover the normal amount of your pay (up to $6000 for USAA, no limit for Navy Federal)
- The money will be offered interest and fee free from both USAA and Navy Federal
- When normal payroll direct deposit is resume, both banks will deduct the amount covered from your checking account
- If the shutdown continues after 15 Oct, both banks will update their policies for the current situation. Check back here if that does happen.
This is an amazing benefit and gives our military servicemen and women the peace of mind they need. When you’re fighting America’s wars overseas, you don’t want to have to worry how your kids and spouse are going to eat back home. Thanks USAA and Navy Federal for this tangible support of our troops!
“We all hope that policymakers will reach a deal before military pay is threatened,” says David Bohne, president of USAA Bank. “But we stand ready to help our members who would be impacted if that happens.”
How to Make Ends Meet When You Don’t Get a Paycheck
Tap your emergency fund
A government shutdown should be a once in a blue moon occurrence and is definitely a good reason to tap your emergency fund. If you’ve saved up the recommended 2-6 months of expenses, or even just $500-1000, a temporary government shutdown will not be as painful.
Put your expenses on your credit cards
This can get ugly quickly. I always recommend NEVER charging anything more to your credit cards than what you have in your bank account. Credit card debt is an easy trap to fall into, and once you’re in it, digging your way out can take years.
However, if you understand how credit cards work, you’ll know that if you charge something in one billing period, your bill for that item won’t come due for 3-7 weeks. That could be just enough time for Congress to get their act together and pass the funding bill. However, if the shutdown continues, you could be stuck with a credit card bill you can’t pay. Tread very, very carefully with this.
Check with your landlord and other billers if you can take a break
Just a simple phone call may be enough to delay your cell phone bill, get an extension on your rent due date, or delay any other recurring bills that you have to pay. If the government does shut down it will be big news. Explaining that you haven’t received your paycheck from the government and asking politely for an extension on your bill due date could never hurt you. Many companies may offer extensions for active duty military just for the public relations benefit. We’ll see what happens.
Check with your service’s Family Readiness Center
Every branch of service has some sort of aid society that is ready to step in to assist their servicemembers’ in the event of some financial hardship.
- Air Force Aid Society – offers the “Falcon Loan,” a $750 loan which you can repay over 10 months, interest and fee free. The process is simple and requires less than 1 minute of paperwork.
- Navy-Marine Corps Relief Society – offers the Quick Assist Loan or QAL. Up to $500 available interest and fee free within minutes to active duty sailors and marines.
- Army Emergency Relief – offers up to $1000 without commander’s approval.
These are all great options from military charities directly associated with their respective branch. All of these loans are interest and fee free, which can be the difference from achieving your financial goals or falling even further behind.
What You Must Not Do If the Government Shuts Down
DO NOT take out a payday loan, auto title loan, payday advance loan, or charge more to your credit cards than what you will be paid! This is the easiest way to get yourself into financial trouble. There are better options (listed above). These times of financial scams are the worst possibly thing you could ever do for yourself financially. Don't even think about it. Payday loans: not even once.
How to Deal with the Massive End of Crisis Paycheck
When Congress finally passes a spending bill, you will receive all of the back pay that you missed. This check could be double or even triple what your normal bi-monthly check is. It’s important to remember that this is not a windfall! You didn’t just win the lottery, you’ve only been paid for the money owed you previously. Stay focused on your financial goals and follow these steps to stay on track:
Pay off your credit cards and any other debts
If you put took out any of the relief society loans listed above or you put your expenses on your credit cards, now is the time to pay those off and continue living debt free! Don’t let the government shutdown and missing a paycheck or two be the beginning of your financial ruin. Pay off those debts ASAP, even if they are 0% interest!
Make your extra payments on your debt and invest your money
If you didn’t make your normal extra payments on your debt or skipped investing your retirement accounts so that you would have extra cash on hand, now is the time to make those extra payments and start investing again. You’ll have missed the opportunity for a few weeks of investing growth or debt repayment, but if you put your paycheck back to work quickly you’ll soon return to normality.
Start saving an emergency fund for the next time the gov’t shuts down!
This is the second time a government shutdown has been threatened since I joined active duty in 2010. In our current political climate, I don’t foresee this ever NOT being a problem. Learn from this time around and start saving that emergency fund.
Hopefully we won’t miss any paychecks. But if we do, now you should be better prepared.
AMEX Platinum With NO Annual Fees for US Military
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The AMEX Platinum offers:
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- $200 airline fee credit
- Centurion Lounge and Priority Pass Airport Lounge Access
- NO foreign transaction fees
These benefits make it my top recommend card.
If you already have an AMEX Platinum card, check out the other AMEX cards, Chase credit cards, and this month's top recommended credit card bonuses, most with no annual fees for US military personnel.