Getting Back On Your Feet And Finding Financial Stability
Tips To Get Back On Track & Achieve Financial Stability
When you lose your job via a furlough or a layoff, any number of thoughts race through your mind. What do I do next? How will I generate income? How do I stay afloat while I search for my next job?
If you’re like most Americans, there’s a good chance that you don’t necessarily have robust savings to fall back on in times of crisis. In these instances, it’s important to use every resource at your disposal to maximize the income you are able to generate.
Applying For Unemployment Insurance
First and foremost, make sure you’ve filed for unemployment insurance in the state where you work. Unemployment insurance is a program funded by payroll taxes paid by employers and administered by state governments, with oversight by the U.S. Department of Labor.
The basic program in most states provides up to 26 weeks of benefits to unemployed workers, replacing about half of their previous wages, on average.
According to the U.S. Department of Labor, “Unemployment insurance is a joint state-federal program that provides cash benefits to eligible workers. Each state administers a separate unemployment insurance program, but all states follow the same guidelines established by federal law.”
Now, it’s important to understand and recognize that unemployment is not welfare. It’s a joint federal-state insurance program funded through taxes paid by employers.
Who Is Eligible?
Program specifics are determined on a state-by-state basis, but given that it is overseen by the U.S. Department of Labor, most if not all states use the following guidelines to determine eligibility.
- You are unemployed through no fault of your own. In most states, this means you have to have separated from your last job due to a lack of available work.
- You meet work and wage requirements. You must meet your state’s requirements for wages earned or time worked during an established period of time referred to as a “base period.” (In most states, this is usually the first four out of the last five completed calendar quarters before the time that your claim is filed.)
You meet any additional state requirements, which can be determined by clicking here.
How To Apply
To receive unemployment insurance benefits, you need to file a claim with the unemployment insurance program in the state where you worked. Depending on the state, claims may be filed in person, by telephone, or online.
When you experience a sudden shock to your financial security, it’s important to stop, breathe, and begin assessing your spending habits. A loss of income means that expenses must be reduced, and that means sticking to a budget.
Unfortunately, many people simply don’t know how to develop a budget that clearly differentiates between needs and desires.
In this section, we’ll explore the basics of budgeting and help you better understand how to cut costs when you’ve been furloughed or laid off.
What Is A Budget?
According to personal finance guru Dave Ramsey, “A budget is just a plan. It’s not a restriction on spending—it’s a plan for what you’ll do with your money. It’s a plan for what’s coming in and what’s going out. When you budget every month, you’re giving your money purpose. You’re taking control.”
When you develop a budget, you’re simply accounting for the planned inflows and outflows of cash each month. In order to get ahead, the income you generate needs to exceed the expenses you incur. It’s as simple as that.
Of course, when you’ve gone through the shock of losing a large part of your income, it’s necessary to adjust your budget and reduce whatever expenses you can.
There are, as usual, a number of tax-related issues to consider when you’re unemployed. Some can help you survive in the short-term, while others will simply add to your expenses. Fortunately, even in these circumstances, the Internal Revenue Service will often work with you to find a solution that gives you a little more breathing room in times of crisis.
Are you owed a refund?
According to Tax Act, “if you’ve been having income tax withheld from your pay for a substantial portion of the year already, you may be way ahead on paying taxes for this year.:
In the U.S. tax system, higher levels of income are generally taxed at much higher rates.
This means that when your employer calculates your tax withholdings, they’re making the implicit assumption that you’re going to earn the same amount throughout the year.
If you’ve been furloughed or laid off and end up making less throughout the course of the year, there’s a decent chance you may receive most if not all of your income tax withheld back as a refund.
Of course, you can’t reap the benefits of these tax refunds right away. You’ll have to wait until the end of the year for that. However, you or your spouse may be able to make adjustments to avoid excessive withholding and give you more cash in your pocket in the near-term.
Can you defer tax payments?
While the words “Internal Revenue Service” strikes fear in the hearts of many, the truth is that they’re remarkably flexible and accommodative for taxpayers experiencing financial hardship.
The key is open communication. If you file your taxes on time and clearly communicate the nature of your situation, you may qualify for an installment agreement.
If you’re a homeowner, you may have another resource available to you in times of financial hardship: refinancing your mortgage.
According to Experian, refinancing a mortgage involves taking out a new loan to pay off your original mortgage loan. In many cases, homeowners refinance to take advantage of lower market interest rates, cash out a portion of their equity, or to reduce their monthly payment with a longer repayment term.
What does it mean to refinance your mortgage?
The process of refinancing your mortgage is virtually identical to the process of securing the mortgage in the first place. Start out by researching various lenders and comparing offers. There’s a chance that your credit score improved since the time you initially secured your mortgage, and if that’s the case you may actually qualify for a significantly lower interest rate this time around.
The most important thing to do at this point is to closely review closing costs. These are the administrative costs charged by the lender. You may save a bit of money on your monthly payments, but if you have massive closing costs then it doesn’t really make a difference.
Why would you refinance your mortgage?
There are a few reasons why you’d want to refinance your mortgage.
- You can lower your monthly mortgage payments.
- You can take cash out if you have equity in the home and use it for living expenses.
- You can change your rate type, shifting from an adjustable-rate to a fixed rate.
- You can change your loan term, securing a lower rate if you choose a shorter term, or lowering your payment by choosing a longer term.
If you’ve been furloughed or laid off, it may be tempting to go with the cash-out option. Be careful though; taking cash out results in a higher loan amount which, in turn, results in a higher monthly payment.
The COVID-19 pandemic has left widespread unemployment and destruction in its path. The economic disruption has caused massive problems for renters and landlords alike. When you’re faced with economic hardship, one of the main concerns you’ll need to address is your ability to pay your rent. Naturally, it makes sense to ask for some form of rent deferral.
While the CARES Act has provided increased relief for homeowners, it has largely left renters without resources. Many states and cities have banned evictions for the duration of the coronavirus crisis. However, no other broad relief has been made available to the country’s 40 million-plus renters.
Renters facing hardship have to work directly with their landlords to make arrangements that are mutually acceptable.
Another major headache for individuals experiencing economic hardship is the looming specter of credit cards, installment, and student loan payments. The pressure of managing these obligations can stress a person to the breaking point, but it’s important to remember that there are options available to help.
The current COVID-19 coronavirus crisis has presented an unprecedented set of circumstances for banks and individuals alike. According to The New York Times, some banks are providing a sliver of relief to customers who are struggling financially, whether by waiving late-payment fees, deferring interest charges, or not reporting missed payments to the credit bureaus.
If you’re struggling to make your credit card payments, contact your financial institution and ask them what options are available to you. You may be surprised by what they can offer.
Open Enrollment Healthcare Options For The Recently Terminated
When life gets challenging, it’s important to remember that nothing is more important than your health. If you’ve been recently furloughed or laid off, the realization that your employer-supported health insurance benefits are now gone may feel like salt in an already painful wound.
Take heart, though. You have important consumer protections on your side, brought to you by the Affordable Care Act, also known as ObamaCare, which is still in effect for now. With a little know-how and research, you can find a health plan to cover you and your family.
Before 2014, you could buy an individual health plan at any time of the year. But now, except for special circumstances, you can purchase individual coverage only during the period known as open enrollment.
The Affordable Care Act
According to Healthcare.gov, you can buy a health plan outside the open enrollment period if you have a “qualifying life event,” such as moving outside your insurer’s coverage area, getting married or getting laid off. You can also buy coverage outside the open enrollment period if you had a special situation that prevented you from enrolling earlier.
Healthcare.gov goes on to say “If you’re unemployed you may be able to get an affordable health insurance plan through the Marketplace, with savings based on your income and household size. You may also qualify for free or low-cost coverage through Medicaid or the Children’s Health Insurance Program (CHIP). Your household size and income, not your employment status, determine what health coverage you’re eligible for and how much help you’ll get paying for coverage.”
Getting laid off can be earth-shattering. You may feel lost, angry, and scared of what the future may hold. Before you give in to these feelings, however, make sure you stop and take an assessment of the resources available to you. Remember, you need to take appropriate steps to stabilize your financial life before you start on the search for new employment. Taking the time to solidify your foundation will go a long way in helping you enter the next phase of your life.