As companies continue to assess the damage caused by the coronavirus, job security is a fear many Americans will begin to experience. More than 17 million people have applied for unemployment insurance since March, implying that joblessness has risen to nearly 14 percent, higher than at any time during the Great Recession.
Before you spend all of your time trying to find another job, spend some time assessing your financial situation. Addressing financial issues early on may help alleviate some of the stress associated with job loss. Below are 5 tips to financial survival after losing your job.
Give yourself time to think about the situation. Don’t do something as the result of an emotional reaction that you might regret later. Think positively. You can find another job. You have talents that are desirable and useful and you don’t necessarily have to jump at the first opportunity that comes along.
View your situation as just another challenge. What had been your former work day is now a day you’ll spend looking for work. Consider this time as an opportunity to reassess what you’d like to do as opposed to a job you have to do.
APPLY FOR UNEMPLOYMENT BENEFITS
The Coronavirus Aid Relief and Economic Security (CARES) Act, signed into law on March 27, offers individuals an additional $600 in their weekly checks. Applying immediately can help ensure that you get your check as soon as possible. You can expect to see your unemployment checks within two to three weeks. If for some reason you apply and get denied, give it another shot.
REDUCE YOUR EXPENSES
Depending on your situation, you may find that your income won’t support your current expenses. Aside from reducing your debt by selling big-ticket items like your car or house (which is not typically feasible), there are other things you can do to minimize your living expenses.
One of your first considerations should be to identify and discontinue discretionary expenses. Such items as magazine subscriptions, health club memberships, extra phone services, credit cards you don’t use that have an annual fee, dining out regularly, and extra pay services on your cable television are examples of some of the expenses you can trim from your budget. You also may have to put off that planned vacation until you’re back on your “working” feet.
TALK WITH YOUR CREDITORS
Another way to cut your expenses is to try negotiating with your creditors to lower interest rates on your credit cards, defer a payment or two on your car loan, or reduce your monthly payments temporarily.
On March 21st President Trump ordered foreclosures and evictions to cease for 60 days across the U.S. The Federal House Finance Agency (FHFA) has instructed lenders Fannie Mae and Freddie Mac to allow borrowers to suspend their payments for up to 12 months. Find out if these servicers own your loan by searching Making My Home Affordable’s database. Even if your servicer isn’t on this list, it’s worth reaching out as most offer”goodwill programs” and are only in place during times of economic distress.
Student borrowers’ payments are now suspended until Sept. 30, and even better, interest won’t continue to accrue during this time. Given that this is automatic, you won’t need to contact your servicer, unless you have questions. Those on automatic payments should find that those have been temporarily postponed. Take advantage of this by utilizing that money originally going toward your student loan payments to help shore up your expenses.
This doesn’t apply for private student loans, though some lenders and servicers may be able to work out a payment plan if you’ve lost your job.
BE SURE YOU HAVE CONTINUOUS HEALTH COVERAGE
If your group health insurance ends when your job does, you may be able to continue your coverage if you qualify for COBRA or a similar state-sponsored program. Also, check if you’re eligible for coverage under your spouse’s group plan.
IF YOU’RE REALLY STRAPPED
Your home is another source of savings you may be able to tap into. If you have enough equity in your home, sometimes you can obtain a home equity line of credit even if you’ve lost your job. You’ll only pay interest on the portion you use. But you’ll still have to make a monthly payment, so make sure you’re able to afford the new loan payments before you put your house on the line.
If you’re still strapped for cash, consider withdrawing from your tax-deferred retirement accounts, such as your IRA or employer-sponsored retirement Any money you withdraw from these types of accounts likely will be taxed as ordinary income for the year in which you make the withdrawal. Also, you may have to pay a 10% penalty tax for early withdrawal if you’re under age 59½ unless an exception to the penalty applies.
If you’re considering taking funds from your IRA or retirement plan, you should consult a tax advisor regarding the specific tax treatment of your withdrawal, because not all of it will necessarily be taxable. For example, if part of the withdrawal from your traditional IRA or employer’s retirement plan represents nondeductible contributions, you may not be taxed on that portion of the withdrawal.
ALL IS NOT LOST
A job loss is not the end of the world, even though it may feel that way. Mapping out your priorities and drafting a bare-bones budget can help you come up with your own financial strategy for job loss survival.
This is a difficult time for all of us. We would be happy to schedule a call with you to help you through this challenging time.