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The Financial Impact of an Absent Paycheck




The government furlough may be over, but no paycheck is ever guaranteed. According to a survey from Bankrate.com, just 37% of Americans have enough savings to pay for a $500 or $1,000 emergency. The other 63% would have to resort to measures like cutting back spending in other areas, borrowing, or going without.


During the most recent government shutdown, and the longest to date might I add, government employees and federal contractors' greatest concerns were lack of cash to pay rent, mortgage, medicine, buy groceries and pay bills, but unfortunately there are other problems that will have a longer-lasting impact. Now here we are today in a pandemic!


By no means am I diminishing the fear, anger, and immediacy of not receiving a paycheck. I know firsthand that not being able to feed your kids is a serious financial and emotional problem and sadly, one that has no current resolution on the horizon. For those who were furloughed and have other employment skills, gifts and talents, picking up other random employment from side hustle jobs – can help ease the pain a bit. But for those workers who are considered essential during the shutdown and have to still report to work, there is no opportunity to make extra cash. Long after workers receive their “promised” back pay, the potential negative effects of the shutdown still loom over the heads of furloughed workers.


· Past due bills

· Damaged credit scores

· Potential loss of security clearances

· Potential new stress-related illnesses


We heard all over the news and social media alike that creditors were willing to work with consumers and make concessions for their hardships. Although this may be true, it will take time and effort on your part to reach out to creditors to set up such arrangements. Even then you will need to do the follow up on your credit reports to ensure the agreed arrangements didn’t report as a late payment to the credit bureaus. Remember one late payment, regardless of whether it’s reported correctly or incorrectly, can drastically reduce your credit score.


Some of us are quite familiar with playing catch up and robbing Peter to pay Paul. So if you didn’t have a savings to cover your bills in the absence of your paycheck, you will be playing the catch-up game. Even if employees are able to catch up on missed payments once back pay is received, the damage to their credit report and score is already done. And the damage will last for quite some time. Rebuilding a credit score doesn’t happen overnight. It also means higher interest rates for these employees on any new credit cards, car purchases and mortgages in the future.


Another major concern for federal workers who require security clearances is that their job could be in jeopardy yet again! All security clearances are reviewed periodically to determine if a person should continue to have that clearance and one of the major aspects of the review is the employee’s finances. Credit reports are pulled as part of the process. If it is determined that an employee’s financial house isn’t in order, that employee could potentially lose their clearance. Without their clearance, they can no longer hold their job and will also lose their paycheck yet again.


Last but not least, financial stress can affect nearly every facet of your life, this we know. Two of the most common effects of financial stress are anxiety and depression. These two conditions usually go hand-in-hand. Each one is a debilitating condition that makes it hard to focus at work, spend time with your family, and keep up with your bills and other financial responsibilities. So how do you prepare yourself for the next financial disaster you ask? Well, the first step is to be sure you have emergency savings. If you didn’t have one before today, make it a priority to start now. Know the exact dollar amount it takes to keep your household running and then shoot for 3 times that amount…the more the merrier! If you can’t save that much, then set a goal to start with just one month and continue building from there.



1.) Whenever you are in a situation that doesn’t allow you to pay your bills on time, remember that those reporting to the credit bureau will have an impact on your credit report and credit score. It is likely you can negotiate payment with your flexible expenses such as utilities, including offering a partial payment. Creditors that report to the major credit bureaus report on a 30-day billing cycle. Creditors can’t report you late on your credit report until you are 30 days late in paying your bill. For a bill that is due on the 15th of the month, a person can wait to pay until the 30th of the month or prior to the end of the billing cycle. It will still show as an on-time payment on the credit report. Knowing this will hopefully allow you some time and will protect your credit rating too. These tips do not supersede putting food on the table. That is, and should forever remain, the first priority. If there is a decision to be made between eating and a bill, feeding yourself and your family should win the fight.


2.) If you hold a security clearance and experience financial difficulties, you should immediately begin keeping records in a safe place to show the investigator when your clearance is up for review. Show your success of good financial management prior to losing income. Remember that whenever you make an arrangement with your creditors to get it in writing in the event, the credit report reflects inaccurate information. This can be used to show that you are financially savvy and proactive in protecting your security clearance. This same method holds true if you’re not a government employee and lose your job. You should take the same steps to protect your credit file and credit scores.


3.) According to our “medical bible”, webmd.com, the idea that stress is 'in your head' is a common misconception. Stress is an inherent physiologic response to a threat. When you're extremely stressed, your body enters the "fight or flight" mode. Adrenaline (a hormone that increases heart rate, pulse, and blood pressure) races through your veins during a stress reaction and you either want to utilize this adrenaline to 'fight' through the current situation or take 'flight' by running away, or avoiding the situation as much as possible. Physical responses occur inside your body when you're stressed, regardless of the cause, and they can drastically affect your body and lead to severe health issues even if you're not aware of it. Pay attention to what your body is telling you.


Don’t suffer in silence because there are many resources available to assist you during your hardship. For assistance with your financial-related stress, Coach JP would be more than happy to help you relieve some financial pressure. Book your appointment today!

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E: info@jpcreditconsulting.com

P: (309) 550-5744 

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Copyright 2020 Janice Parker. Board-Certified Credit Consultant and Financial Educator

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