Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com.
Dear To Her Credit,
I am a retired military veteran and also draw Social
Security benefits. Both checks are electronically deposited to my bank. If the
debt ceiling is not raised and, if it comes to pass (for reasons I'm not even
going to pretend to understand) that I don't get paid, I will not be able to pay
my mortgages or other debt payments. If I got one check, I'd try to pay my mortgages
first, obviously.
For my entire life, I've always paid my bills, so I've no
clue how to deal with the banks on the mortgages and loans. Because I chose the
military as a career, if the government is broke, I am broke! Should I forewarn
the bank right now that my failing to be able to pay my bills could come to
pass? If so, what do I tell them? (I assume sending the bill to 1600 Pennsylvania
Avenue is not an option! ;-D)
My bank owns my mortgage and loan. Can they just take the
money out of my savings? Can they lock my accounts? I'm just going to assume
that if I get a notice that I'm not going to get paid, or I only get one check,
I should immediately (quietly) go to the bank and withdraw all my money -- it ain't
that much, but maybe I can eat for awhile -- and then I can drop off the keys to
the house as I leave?
I'm smart enough to realize after all this fiasco that if
this passes and checks do go out, that I need to change how I need to manage my
finances so I don't have to ask questions like this ever again.
So, what to do now and "The Day After" if the
checks don't come? -- Naomi
Dear Naomi,
Put away the camping gear, set down the phone and make
yourself a nice glass of iced tea. It's summer, and you've got better things to
worry about than financial Armageddon.
It's true that talk from politicians has been unusually
rancorous lately and even frightening. I'll leave it to political columnists to
comment on which side is mostly to blame, but it's important to remember that
nothing is happening this month or next that hasn't happened before -- over and
over again. We have budget "impasses" almost as often as we have
budgets, and we've raised the debt ceiling so many times it's more of a cloud
than a ceiling. And although the American economy bobs around a bit through the
years, it is still by far the strongest, most stable economy in the world. We
are very fortunate to live here.
If the government were to stop paying Social Security
benefits and military retirement benefits, among other things, the results
would be cataclysmic. That's exactly why it won't happen. It's like kids
standing on the edge of the Grand Canyon, daring each other to take one more
step forward. Eventually, nobody sane is taking any more steps forward because if
they do, the results are far worse than any injuries to pride if they don't.
Another reason you'll still be getting checks next month and
the month after is that the government is far, far from broke. It has the
biggest piggybank it could ever want -- us! Social Security checks are funded
by a dedicated payroll tax. According to the government's figure, in 2010,
total Social Security income was $781.1 billion and expenditures were $712.5
billion. The Social Security crisis you hear about is over 10 years in the
future, when we have fewer workers paying in and more of us boomers and
post-boomers start getting benefits.
The last thing you want to do right now is call the bank and
tell them you won't be able to pay your mortgage next month if the government
checks don't come. Don't withdraw large amounts of money, either, especially if
you don't have a very secure place to store it. (The chances of you being
mugged on the way home or having your house broken into are much higher than
your chances of losing money you have in an FDIC-insured bank!) And dropping
off the keys to the house is a bit premature. If you had to quit making
payments altogether, it would take months for the bank to foreclose -- possibly
nine months to over a year, during which you would still have a place to live.
It's so easy to think everything's OK as long as just enough
money comes in to cover our expenses and debt payments month by month. As you
can see, that's living on the edge. The slightest disruption or fear of
disruption in our monthly income can throw us into a panic when we have no
backup plan. Even a federal budget crisis can have a positive effect, however,
if it helps us all realize we need to manage our finances better so we never
feel quite this vulnerable again.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: July 25, 2011
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