How This Government Shutdown Will Affect Your Wallet

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1:15I recently went on a quick beach trip with my husband for a little couple's time, and it was perfect. We sat in the sun, swam in the ocean, and generally just tried to get to that place of deep relaxation where your shoulders actually drop a few inches. Do you know what else can give you that feeling? Co-hosting with Airbnb. Trust me on this one. Hosting your home on Airbnb while you're away from home is a great way to make some extra cash and make sure your home is working as hard as you do. But knowing where to start can feel overwhelming. That's where co-hosts come in. These are local experts who can help make hosting even easier by taking care of all the little details back home while you're off enjoying yourself.

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2:33Well, it would have been time for our weekly update where I share a roundup of the biggest headlines on Wall Street and how they affect you. But then the government shut down, and that is pretty breaking news. So today's episode is going to be all about why Washington is out of the office and what it means for your wallet. If you've been watching the headlines or just trying to renew your passport lately, you probably know by now that the U.S. government officially shut down at midnight Wednesday, October 1st. Why did this happen? So here's the TLDR version of a government shutdown. As we know, Congress makes the laws, creates projects, allocates money to fund these laws and projects, and generally runs the business of the country.

3:09Then they have to pass a budget. It is completely backwards, but more on that later. The budget pays for everything from military salaries to food assistance to air traffic control to national parks. If Congress doesn't agree on how to allocate the money by the deadline, September 30th, then we hit a funding lapse. And when that happens, the government shuts down. And that has happened before. The federal government didn't pass the budget to pay for the stuff it had already approved. So here we are. And if you're wondering, no, we don't have to do it this way. It is as weird as it sounds. Most other countries sign off on funding for laws, public works projects and programs at the very same time that they sign off on the legislation.

3:53But us, we picked the hard way. This is the 22nd government shutdown in U.S. history. The last major one was in 2018 to 2019, and it lasted for 35 days. So obviously a government shutdown is not good for the United States. So there has to be something really sticky in order for us to get to this point. And there is. If you caught my interview with Senator Warren, you probably already know what I'm going to say. Even though Republicans control the House and the Senate, they still need seven Democratic votes to pass the budget. But Democrats are holding out until they have some needs met, specifically more health care spending.

4:29Democrats are asking to reverse the cuts to Medicare and other health care programs and that the tax credit for health insurance premiums is extended. This specific tax credit lowers health insurance costs for people who buy coverage through the Affordable Care Act marketplace. According to 2024 data, about 96 percent of the marketplace enrollees, roughly 19 million Americans, use this tax credit. Without it, around 15 million could lose their health care and another 24 million could see their premiums jump by 75 percent. Republicans say health care subsidies can be dealt with later. Democrats say they need to be addressed now.

5:07And until they find common ground, the lights are off. Technically, it's only parts of the government that aren't considered essential. But even in, quote, partial shutdowns, there is a lot of disruption. Let's talk about what's staying open, at least for now. In the open category, we have Social Security and Medicare. You still get your check, but you should expect delays on new applications or service requests. Your mail is also safe. The U.S. Postal Service runs independently of Congress, so your letters and Amazon returns are safe. SNAP and WIC, the government's food aid programs, will initially keep going, but the longer the shutdown drags on, the more likely it is they will run out of money.

5:52In the last shutdown, the Coast Guard wasn't paid, even though they were expected to keep patrolling American coastlines and putting their lives on the line. Here's another hard one. Airports. TSA and air traffic control workers are on the job, but they're not getting paid, which historically leads to sick outs and delays. So in the pause or delayed category, we have passport and visa applications, mortgage processing for loans backed by the FHA, USDA or VA. The NIH is also halting new clinical trials and most non-essential lab work. Then there's flood insurance through the National Flood Insurance Program.

6:31This insurance is not being issued right now, which delays about 1 ,300 home sales per day. Lastly, student loans. Disbursements, aka payments, continue. But most of the Department of Education is furloughed, so it will be impossible to get a real person if you need support. Government shutdowns always hit federal workers the hardest, and it seems to be worse this time. In an unusual move, the Office of Management and Budget is threatening the mass firing of federal employees whose work is not funded. If you're wondering why the OMB would take such an aggressive step, here's an actual quote from Russell Vaught, the director of the Office of Management and Budget.

7:09He said, quote, we want the bureaucrats to be traumatically affected when they wake up in the morning. We want them to not want to go back to work because they are increasingly viewed as villains. We want their funding to be shut down. We want to put them in trauma. End quote. What the actual what? So what has this trauma looked like so far? It's basically one out of three bad options. Roughly 750 ,000 federal employees, or 40 percent of the federal workforce, are now on unpaid leave. Federal employees deemed essential, like Border Patrol agents, law enforcement and hospital staff, are required to work without pay.

7:50With the exception to that, once there is a resolution, they will get paid for the time spent working during the shutdown. But many contractors, people who do the same work as federal employees but don't get the same protections, won't get back pay when this ends. By the way, members of Congress still getting paid. Different budget process there. Let's add that to the list of the systems that could vastly be improved. Vote for me for president. But seriously, if you're a federal employee or a contractor affected by this, I am so sorry. No one should ever have to work without pay.

8:27landlord, mortgage lender, credit card company, anyone you owe money to and explain the situation. Many will work with you if you're up front. And don't forget, track your hours if you're still working so you can get paid later. If you're not a federal employee or contractor, you might not feel financial effects immediately. But you can expect delays if you're going through any financial process that intersects with the government. So that's delays in federal loan processing, mortgages, student loans, small business loans. If you haven't gotten your tax refund yet, you probably won't be getting it anytime soon.

8:58And interestingly, we'll also see delays in government data releases. There was a big jobs report supposed to come out this Friday, which probably is not going to happen at this point. And as we know, the jobs report is crucial to the Fed's decision-making process around interest rates. Also, the 2026 Social Security COLA cost of living adjustment could be delayed if the Department of Labor does not release inflation data on time, and that affects 74 million beneficiaries. Of course, no one knows how long this thing is going to last, but it's going to be at least three days, if not longer, because the Senate is adjourned for Yom Kippur and won't return until Friday.

9:36Both parties are proposing short-term funding bills, but none of these proposals address the root cause. They just kicked the can a few weeks down the road. Let's zoom out here. This isn't just about one budget bill. It's about a broken system. As of today, the U.S. national debt is hovering around$35.9 trillion, and the government is expected to run a budget deficit of$1.7 trillion this fiscal year. A big chunk of our budget, around 70%, is tied up in mandatory spending like Social Security, Medicare, and interest on that debt. That leaves Congress fighting over the remaining slice of the pie, about 30%, to fund everything else.

10:12This is more than political theater. It's a signal to the rest of the world that we simply can't get our fiscal house in order. And it could make borrowing more expensive in the future for the government and for us. For today's tip, you can take straight to the bank. Guys, I really try to keep this last tip in the episode unique and clever, but I cannot help but plug what is probably feeling pretty obvious right now, but really, really bears repeating. It is so important to keep an emergency fund. This is a chunk of money that would cover your bare bones expenses for three months or better yet, six months.

10:43You want this money in a place where it can grow, but not in an investment that will be difficult to cash out if you need it. A CD would keep your money locked up too tight. A stock could fluctuate in value. So not that, but a high yield savings account, that's perfect.

11:02Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.

11:41Thank you.