What does that mean for your money?

The federal government was closed on October 1st. Depending on how long the shutdown lasts, it could have a widespread impact on your household finances.

These impacts can include everything from late pay and layoffs for federal workers to widespread impacts on other Americans, such as travel plans disruptions and inability to get mortgages.

The enhanced subsidies of the Affordable Care Act, also known as Obamacare, have also indirectly put a crisis in the face of the inexpensive health plans for millions of enrollees in recent years.

Every year, Congress must pass laws to fund the federal government next year. A shutdown occurs when Congress is unable to close the budgeting process on time.

October 1st marks the start of fiscal year 2026.

During the closure, the government has stopped all unfinanced “essential” functions, writing Monday, Jennifer Timmerman, an investment strategy analyst at the Wells Fargo Investment Institute.

In comparison, she writes that “essential” services related to public safety, such as air transport management and national security, will continue to operate.

Timmerman writes that Social Security checks and Medicare benefits (which are considered “essential” government spending) will continue to flow.

The final shutdown occurred during President Donald Trump’s first term. It was also the longest record in Japan, running for 35 days from late December 2018.

Moody’s chief economist Mark Zandy said the shutdown, which lasts for two weeks, is unlikely to have a material or lasting effect on the US economy and household finances.

In most cases, the economists said federal workers, who were deemed not essential, are determined to be decisive.

Zandi said they will receive their pay retroactively but will not be paid during the shutdown.

From businesses that provide cafeteria services to businesses that provide strategic advice to the government, government contractors begin to feel financial distress after about three to four weeks as they are not paid for the services, Zandi said.

Unlike federal employees, however, federal contractors have historically not received refunds, according to the Responsible Federal Budget Committee.

This loss of income could put financial stress on households that do not have halt funding to survive wages that have missed their wages, particularly those in the DC area.

But if the shutdown is short-lived, the pain should not be so severe, Zandi and other economists said.

“The direct costs of closures are usually negligible, but most last only a few days,” writes Ryan of Capital Economics. According to the CRFB, many shutdowns have been rolling out largely over the weekend, slowing the impact.

Approximately 800,000 federal employees representing lost revenue of around $70 billion (or 0.3% of gross domestic product on annual terms) during the last closure.

This 2018-19 episode was just a government shutdown as Congress passed five of the 12 spending bills before the deadline, Timmerman wrote. The final full shutdown, like what’s looming, lasted 16 days in 2013. About 850,000 workers were attacked that year, according to the CRFB.

The Congressional Budget Office estimates that it could be hit daily with the current government closures.

According to Zandi, this is a good rule of thumb.

“The 10th most important thing, but it doesn’t mean that the world will crash or the economy will plummet into a recession,” Zandi said. “The economy is (now) very fragile, but we’re struggling, especially when it comes to work.”

Hitting hundreds of thousands of federal workers can also disrupt certain services related to nutrition assistance programs, housing assistance, Social Security, Medicaid and veteran claims.

During the closure, the federal flood insurance program will close with new insurance immediately until spending contracts arise, according to Jaret Seiberg, Financial Services Policy Analyst at TD Cowen.

“That means there will be no mortgages requiring federal flood insurance,” Saberg wrote in a September 26 memo.

The financial company could increase mortgage closures ahead of the September 30 deadline and ease the impact, but an extended shutdown “will prevent mortgages from being put into effect,” he wrote.

More details from personal finance:
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Travelers can also face confusion.

For example, federal parks and monuments are closed, and staff deemed essential, such as Transportation Security Bureau officers and air traffic controllers, must work unpaid, Ryan writes.

Some TSA agents may choose to not go to work, as they did during the last closure, causing long lines at the airport, delaying trips and disrupting tourism, Zandi said.

Economists say the release of major economic reports is likely to be delayed as well.

For example, the Labor Bureau will not issue monthly employment reports, which are scheduled to be published on Fridays. The bureau is also scheduled to release its monthly consumer price index on October 15th.

The Federal Reserve, which will then be held on October 28th-29th, will use such data to guide decisions on interest policy.

Zandi said that such data would become “a kind of flight blind” without such data. A closure for more than a month could impact the job market and borrowing costs, leading to “several serious errors,” Zandi said.

For investors, the stock market has generally “demonstrated resilience” in past closures, as investors viewed it past political noise on the company’s long-term earnings outlook, writes Timmerman of Wells Fargo.

In fact, any pullback is short-lived, providing a good opportunity for investors to “gradually add exposure” to certain sectors, she writes.

The S&P 500 stock index rose on average 4.4%, according to a September 29 report by Monica Guerra, US policy director at Morgan Stanley Wealth Management.

However, the long closure could put pressure on investors’ trust in investor governance and add to existing concerns about the relative safe state of US investors’ assets, Zandi said.

Higher education expert Mark Kantrowitz said federal student loan bills will remain due during the government closures.

The country’s $1.6 trillion outstanding student debt portfolio is primarily managed by independent contractors, and these companies should not be too confused if Congress delays reaching transactions to continue government funding.

But applications to the U.S. Department of Education for student loan exemptions, which have already experienced delays in processing, will “be even more confusing,” Kantrowitz said.

Borrowers may also find it temporarily difficult to register with one of the department’s repayment plans or contact someone at the agency to help with the loan.

Normally, shutdowns don’t last long, but this could be drawn out due to political dynamics during play, analysts said.

“The shutdown could go for a while,” wrote Kriskruger, managing director of TD Cowen’s Washington Research Group, on September 29.

Republicans need 60 votes in the Senate to advance legislation that funds the government, and democratic votes to meet that threshold.

Congressional Democrats hope Republicans will make concessions to health policy as a condition of their support.

Specifically, Democrats want to expand their enhanced subsidies for health insurance premiums for ACA enrolled, which are scheduled to expire at the end of the year without Congressional action. If they expire, it averages 114% more premiums, according to KFF, a nonpartisan health policy research group.

Approximately 22 million Americans receive these healthcare subsidies. They are estimated to cost around $30 billion a year to extend the extension. Republicans say negotiations should arise regarding continuing these credits after the Senate approves funding.

Experts say both sides have been dug.

The only “action-enhancing catalyst” to end the shutdown is open registration for the ACA Health Plan on November 1st, Krueger wrote.

Experts said there is another reason the closure could be done differently than others in the past. These are permanent instead of temporary layoffs.

“It’s feed for possible recession in the current context,” Zandi said.

If around 750,000 non-essential workers are fired, the unemployment rate will increase by about half the points, he said.

“I don’t think that’s going on,” Zandi said. “But if that’s the case, it’s a completely different ball game. The impact would be very important and very fast.”

CNBC Personal Finance Reporter Anni Nova contributed the report.