4 Smart Personal-Finance Moves for Treacherous Times

What could be worse than a government shutdown that closes national parks, furloughs thousands of workers and throws gravel under the wheels of the economic recovery? How about a second shutdown? Or a third?

That’s the sobering prospect facing Americans as another gridlock-generated deadline looms. The compromise that ended the 16-day partial shutdown in October funds the government only through January 15. The government’s borrowing authority was extended until February 7. With lawmakers still deeply divided on spending, borrowing and the Affordable Care Act, more showdowns (and potential shutdowns) appear inevitable. Here’s how to deal with the paralysis.

Adjust your withholding. The October shutdown forced the IRS to delay the 2014 tax-filing season by up to two weeks. Last year’s filing season was held up because of the fiscal-cliff deal. In 2011, itemizers had to wait until Valentine’s Day to file their returns. But it’s only a problem if you expect to get a lot of money back. By adjusting the amount withheld from each paycheck, you can keep more cash year-round and reduce the size of your refund. Use our tax-withholding calculator to figure out how many allowances you should claim. (Also see Ask Kim.)

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Pump up emergency savings. By adjusting your withholding, you give yourself a raise. Use the money to shore up your emergency fund, especially if you’re a federal employee or have a job that’s dependent on the government. The general rule is to have three to six months’ worth of expenses in savings. But you should shoot for six in these uncertain times, says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards. If you have equity in your home, this is a good time to take out a home-equity line of credit.

Nail down a mortgage ASAP. The shutdown postponed approval of some types of government-insured mortgages. Private mortgages were affected, too, because lenders were unable to verify borrowers’ income with the IRS. Applications for government-insured mortgages fell 7% during the week ended October 11, and applications for conventional mortgages dropped 4%, reports the Mortgage Bankers Association. If the shutdown had lasted longer, “it would have been a lot worse,” says Keith Gumbinger, vice-president of HSH, a mortgage consultant. You may already face tough competition from all-cash buyers. A delay in your loan approval could give them an even bigger edge.

Burnish your job skills. Employers have been slow to hire, and lackluster economic growth could be exacerbated by another shutdown. If you have a job, don’t take it for granted. Review job listings in your field on LinkedIn.com to see whether you need to learn new skills. Make sure your credit record is in good shape, especially if you’re looking for a job (or feeling insecure about the one you have). Many employers are looking at applicants’ credit reports, and a stellar report could give you an advantage, says Blayney. You can get a free copy of your credit report from all three credit bureaus at www.annualcreditreport.com.