When the government shutdown last Tuesday, we all had two questions: how long will this last, and what will it cost? The answer to the first we know by now is longer than expected. As for the second, almost every media outlet quoted economic consulting firm IHS Global Insight, which came out with the startling figure of $12.5 million an hour.
That’s the toll to the country. But how about the cost to your own wallet? Wallet Hub recently reported on the shutdown’s possible impact on the average American. Small business owners, particularly those who rely on government contracts, are likely to feel it worse than most. Individual investors (i.e. all of us with money in retirement and other accounts) could take a short term hit, but I agree with Mad Money’s Jim Cramer who reiterated this morning on Today that trying to correctly time your way out and then back into the markets again would be a mistake. Still, Wallet Hub says there are measures you can take that will help insulate you from the impact.
Add more to your emergency fund: Adding extra money to your emergency savings account during the shutdown will help you feel more secure, even if you don’t end up needing it. If you don’t have a full three-to-six months worth of living expenses in a liquid emergency stash, continue the effort even after the government is back up and running. You never know when an emergency will hit.
Lock in interest rates: Variable credit card and loan rates may rise as the shutdown continues (and then continue to rise as interest rates head up….eventually). Wallet Hub suggests moving your loans and debts to fixed rate terms to sidestep extra costs.
Apply for additional credit and start a dialogue with your creditors: If you think the shutdown will affect you directly, apply for additional credit now to bolster your safety net in case your emergency money runs dry. And if you’re worried about falling behind on existing credit, keep the lines of communication open. Creditors are more likely to work with you if you’re upfront about your troubles. Pick up the phone and call.
On a more positive note, CNNMoney reported seven things you don’t need to worry about during the shutdown, like Social Security and Medicare, which are both safe.
In other news…
It’s scholarship season
If you have a kid in college – or one gearing up for college – you know that now is the time to hunt for scholarships (I happen to have two children, one in each scenario). Loans and work-study programs are often inevitable, but a different CNNMoney article confirmed that there is a boatload of free money available — $11 billion worth of private grants and scholarships offered annually, according to the article. Sometimes parents and students overlook this. Why? We’re either unaware of its existence, or intimidated by what can be a time-consuming application process. Here are some steps for cashing in:
FAFSA first: Regardless of your family’s financial standing, fill out the Free Application for Federal Student Aid at fafsa.ed.gov. The College Board released a poll earlier this year revealing that roughly 75 percent of families with incomes exceeding $100,000 applied for financial aid for the academic year, according to CNNMoney. Whether or not your family makes more or less, it never hurts to try.
Look nationally and locally: Remember, there are scholarships offered on both national and local levels. For the national ones, have your kids start hunting online. CNNMoney provides some popular scholarship search engines, including Fastweb and Scholars
Be on the lookout for marketing ploys: When you or your kids are on scholarship sites that match their qualifications with available scholarships, be sure to read the fine print before taking any action. Some less than reputable sites can be marketing traps for giveaways and mailing lists.
Protecting their scholarships: A recent National Scholarship Providers Association study found that some students who received private scholarship money lost money from their school-awarded grants as a result. This is called award displacement. In the article, scholarship-managing company Scholarship America suggests asking the school to decrease loans instead.
Have a great week!