For the millions who have been laid off because of COVID-19, one fear probably looms above the rest: staying jobless after their unemployment benefits expire.
As of the first week of June, about 43 million American workers had filed for Unemployment benefits. Well, most of these individuals are currently enjoying an additional $600 every week in Unemployment Insurance (UI) – despite their previous income.
The additional $600 weekly payouts were incorporated in the March stimulus bill as a cushion for those laid off, with disbursements going through July 31. However, an extension of the benefits going past July is looking less likely.
In the event that happens, and you are still jobless, what steps can you take to prepare your finances?
Know what is out there after the Unemployment Insurance runs out
After we are done with July, your weekly payout should go back to what your state was offered before the CARES Act. But this doesn’t mean you will be financially cut off immediately.
Introduced via the CARES Act is the now popular Pandemic Unemployment Assistance (PUA) program that guarantees 39 weeks of benefits in total. Usually paid out to those ineligible for UI, such as independent contractors and gig workers, the provision can be used as a supplement for people who have run out of the usual State and expanded CARES-Act aid.
Some of these things may appear uncertain, especially if you are among those individuals who so far haven’t been able to file a claim. Some states have been inundated by endless applications, many of which have led to website crashes and hours-long waits. Might be is a possibility of backdating that extra $600 for such cases. Meaning, you could still receive your benefits beyond the July 31 deadline.
Budget wisely, and minimize your discretionary purchases
After knowing how long your unemployment benefits will last, it is wise to scrutinize your household balance sheet. Prepare a list of all your expenses, including both the optional and mandatory ones.
Try to identify areas where you can temporarily cut back, including things like subscription services, shopping, dining out, etc. Basically, you will need to develop a prudent spending strategy before the weekly $600 payout runs out.
Contact lenders, servicers where you often have a bill
Discretionary items aren’t the only expenses you can minimize. Many utility companies and lenders have been offering “goodwill” programs that assist those financially affected by the pandemic.
When you prepare a list of your monthly bills, make sure you include companies you pay frequently – anyone from mortgage servicers, credit card issuers, banks, and lenders. Talk to them and see if they can grant you forbearance plans or adjust your monthly bill downwards.
Some banks have suspended overdraft fees, while utility firms such as AT&T and Verizon are waiving late fees or service cancellations. Besides, if you have taken a federally-backed mortgage, you can apply for a payment forbearance plan, thanks to the CARES Act. However, you have to notify the organizations involved in most of these cases before you stop making your payments.
Think out of the box and widen your job search
Finding a new job when the unemployment rate is all-time high is tricky but not entirely impractical. Keep in mind that hiring is continually changing, and the timelines are shifting. Stay hopeful, motivated, and creative with your job search. Keep on applying for jobs. Soon, your efforts will pay off.
Below are handy tips to navigate your job search amid COVID-19:
- Set aside a few hours every day to apply for jobs. As they say, finding a job is a job by itself, especially a time like now.
- Keep your resume and online profile updated
- Ensure your social media presence reflects you positively
- Take advantage of online hiring platforms. Note; some platforms are dedicated to specific industries, which makes your job-search process easier. For instance, Cloud Dentistry serves dentists, dental hygienists, assistants, dental receptionists, and other auxiliary dental staff.
- Be willing to take temp jobs or roles to demonstrate your abilities. In this era of sharing economy, you may consider temping in your field. You would be surprised that you can make a lot of money doing that. Not forgetting the work-life balance this kind of arrangement brings.
- Practice a phone or virtual interview before the actual one happens
- Research organizations that are hiring. Nowadays, the digital job-matching platforms we have talked about have vast databases of companies looking for employees; so, this can be quite straightforward.
Tap into your retirement account
Another idea could be drawing from your retirement accounts. A second CARES Act provision lets people withdraw a max of $100, 000 or 100% of their vested balance, whichever is less. This option is active until Dec 31, 2020, without penalty.
You will still have to pay taxes on that money; however, you can do so over a 3-year duration. You can also pay back a portion of what you owe or the entire amount without being counted against the max yearly contribution limit.
Think of it as borrowing from yourself. Though, it should be exploited as a last resort since it can set you back significantly when it comes to retirement preparation. But, to some extent, it is a more practical option than using a credit card or getting a loan with an unreasonable interest rate.
Ensure you are withholding taxes from unemployment Insurance
Do you know that you are required to pay federal, and in some instances, State taxes on what you get in unemployment taxes? See, withholding that now, as opposed to pushing it forward through a quarterly payment, may help you avoid paying it when you are cash strapped, especially after the weekly $600 benefit runs out. File a Form W-4-V, and withhold these taxes whenever possible.
Always follow the Capital Hill proceedings
If the unemployment rate remains as high as economists project, lawmakers might consider extending the benefits again.
How soon that might happen, or if at all, it will happen, is still uncertain. The House of Representatives on May 16 passed the HEROES Act, an even bigger relief package than the CARES Act. Why then is extending the benefits impractical?
Again, bearing in mind that this is an election year, and there are signs that some Republican Senators are pressing for more immediate action, many would go with the idea that both chambers will approve an additional aid.
No one can foresee the future. That is even truer during a crisis.
That is why implementing these tips – and other recession-proofing steps in general – is critical. Getting your finances right can help you create a solid foundation, in the fateful event that unemployment benefits aren’t extended. That way, you are financially capable of weathering the storm until you land a new job.
Prepare as if you might not get additional benefits again, but regularly monitor the happenings in the economic and political scenes for new developments.