According to the NY Times, over 36 Million jobs were lost between mid-March to mid-May in 2020.1 As the US economy continues to face numerous challenges, so too are personal economies of each of its citizens.
Losing your job or having your hours reduced can be a devastating turn of events. You may have felt it coming, or maybe you were totally blindsided. At the time you are let go, you may feel a bit of panic coming on (or a lot of panic!) about what to do regarding your finances.
If you feel overwhelmed, that’s to be expected, but there are a few things you can do financially to make sure you're giving yourself the best chance of success. Here are some steps to help ease your mind while you get through this trying time in your life.
Step 1: Determine Your Minimum Budget
The “minimum budget” number is the exact (or pretty close) figure you need to get by each month. This includes fixed payments such as your rent or mortgage, car loan, and student loan payments. Other expenses may vary from one month to the next yet can easily be forecasted and controlled. Examples include food, utility payments, and transportation.
Use the following list to help guide your minimum budget.
- Home Supplies
- Personal Items
- Auto Insurance
- Healthcare premiums (COBRA, Marketplace, or spousal benefits)
- Student Loans
- Credit Card Minimum(s)
- Auto Loans
- Personal Loans
Step 2: Cut Out Unnecessary Expenses
That $5-a-day latte habit from Starbucks needs to fall by the wayside for the moment, but you probably already knew that.
If you have a family, now is the time to have a serious talk with everyone about “belt-tightening” for the moment to get everyone on board with the lifestyle adjustments you'll need to make.
U.S. News ran an interesting article in 20192, summarizing the most common expenses that destroy a budget:
- Credit card interest
- Cable bill (vs. streaming services or digital antennas)
- Unneeded insurance
- Gym memberships
- Costly gifts
- Cell phone plan(s)
- Take out and food delivery
- Paying full price for items
Cutting back on unnecessary spending, including the expenses listed above, will help you feel more secure in the present situation.
Step 3: Apply for State Unemployment
Losing your job means a loss of income. Even in dual-income households, a loss of one job can make all the difference in whether your bills are paid on time and achieving other financial goals you have for your family.
Thankfully, Americans who find themselves without a job may qualify for financial help from the government. These benefits can provide temporary income relief while looking for work or waiting to return from furlough.
The first step is to determine if you qualify for unemployment benefits. In general, you must meet two criteria to qualify:
Requirement #1: Your job was lost for reasons beyond your control. This is to say that you weren’t fired due to misconduct, nor did you resign for example.
Requirement #2: You meet your state’s unemployment insurance rules. These rules include requirements around time worked and/or wages earned.
The second step is to ensure you’re actively looking for work while on unemployment. You’ll likely be required to file weekly or biweekly claims and answer some questions about your continued eligibility.
“But wait!” you may be thinking, “aren’t there certain accommodations given the COVID-19 pandemic?” Yes, there are. Whereas the information above is evergreen in nature, the information below is specific to the current pandemic.
The US Department of Labor recently announced guidelines allowing for unemployment insurance flexibility during the COVID-19 outbreak, based on the CARES Act.
Federal law now allows states to pay benefits where employers temporarily cease operations, such as the numerous employees furloughed by business ranging from dentist offices to restaurants. It also extends coverage to individuals that have been quarantined, or those that leave employment due to a risk of exposure.
Here are just a few accommodations that result from the CARES Act, as summarized by Credit.com3:
- Federal Pandemic Unemployment Compensation: FPUC provides an additional $600 per week for those who qualify.
- Pandemic Emergency Unemployment Compensation: PEUC extends benefits for an extra 13 weeks.
- Short-Time Compensation: Employees whose hours have been reduced can receive partial unemployment benefit payments.
- Waiting Week Waiver: Many states require a waiting week after unemployment before benefits begin. States have been encouraged to waive this weeklong waiting period.
- Work Search Requirements: Work search requirements have also been waived by many states.
For additional information on filing or unemployment in North Carolina, visit the NC Department of Commerce (DES) site and review the steps necessary to more you and your family forward in claiming benefits. The DES also has a site dedicated to COVID-19: NC Unemployment Insurance Information.
Step 4: Contact Your Creditors
Prioritizing your debt payments when you lose your job is an important step. If you know you won’t be able to pay on time during any month, it's important that you contact those parties immediately.
Let them know what happened and when you intend to pay on time again, as keeping them in the loop about your circumstances may prevent them from sending your overdue bills to collection agencies.
If you have always paid on time before, they’re going to be more willing to work with you in this emergency. Many creditors have unadvertised “hardship plans” that you may qualify for. Don’t let the bills stack up unpaid before you investigate all your options.
Being let go from a job can be one of the worst experiences to go through. Knowing what to do, however, may be the determining factor of what direction the domino falls next.
And while your emotions are likely running high, it’s important to remember that this is often a temporary bump in the road. It's likely that your future self will reflect back on this as the opportunity, or even little push, you always needed to finally find your dream job.
Here are XXX ways to better prepare yourself to reenter the workforce:
- Keep your resume updated
- Make sure the right recruiters have your phone number
- Begin exploring options through linked.com, careerbuilder.com, glassdoor.com, and zipreqruiter.com.
- Start building (or strengthen) your LinkedIn profile with those that support you the most and can help you get where you need to be
Lastly, don’t take any of it personally. Layoff decisions are based on many factors and even the most valuable employees can be laid off. Don’t let this impact your confidence, you’re still awesome and you know it!
Contact Jeff Stewart directly if you’d like to discuss this information in more detail or determine its application to your situation specifically. Lucid Wealth Planning offers consultation via student loan analysis, budgeting, as well as comprehensive financial planning and investment strategies.
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