SAN ANTONIO – The U.S. is now seven days away from defaulting on its debt, which could delay the distribution of Social Security checks, veteran benefits and federal workers’ paychecks.
The debt ceiling is like a credit card limit. When you reach the limit, you have to ask for the limit to be raised so you can pay your bills.
The U.S. government reached its limit in January but has found a way to pay the bills so far.
Mannik Dhillon, president of Victory Capital, said the U.S. Treasury would run out of funds to pay essential programs in the coming weeks unless something is done to stop from defaulting.
“If you don’t have money or you can’t borrow money, you have to prioritize, you know, what you spend it on. And that’s the other thing they’re doing right now,” Dhillon said.
When Congress comes to an agreement, bonds with interest rates will likely get paid first, meaning Social Security checks, veteran benefits and federal employee paychecks won’t get in mailboxes on time.
“The challenge is for the everyday consumer. You need that cash on an ongoing basis, and a lot of people don’t have enough saved to where they can dip into that or set it aside,” Dhillon said.
While this isn’t the first time the government has discussed raising its spending limit, Dhillon said the pandemic caused it to spend a lot more. Now, the U.S. has run out of cash for those new programs.
“It’s about coming to an agreement. And if that takes longer, that’s when more and more people are going to feel it,” Dhillon said.
But there is something people can do to prepare for the long run.
“If you have anything a little extra leftover, put it aside, save it. Start taking a look at where you’re spending money, what you can maybe scale back on if you’re relying on those payments every week, every month,” Dhillon said.
Experts recommend that, even without this looming crisis, you should always try to save two to three months of expenses, even if it’s only a few dollars a month at a time.
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