By Kimberly Lankford
Millions of people lost their jobs in 2020 and discovered how difficult it was to find new work when entire industries were affected by COVID-19. Some emergency relief helped people stay afloat for a few months, but many of those bill-paying extensions and hardship programs have ended. If you lose your job now, you may need to take some extra steps to cover your financial obligations and find out about resources to help.
“The first thing everybody should do when they lose their job is take a step back and then start to make plans and think about your process,” said Katie Krumpter, senior financial counselor at the New York Legal Assistance Group. Krumpter works on the New York City Financial Empowerment Center project, which provides free one-on-one financial counseling for people of all income levels. “It’s really important not to panic.”
Think strategically about how you’re going to spend the money you have and how you will reduce your bills or increase your income until you find another job. Ask about special programs that can help you right away.
“Focus on two things: Your financial commitments and your income — whatever income you may have left from other sources — and making the most of the money you have,” said Bruce McClary of the National Foundation for Credit Counseling. Set your priorities for spending your limited income before raiding your retirement savings, missing payments, landing in high-interest credit-card debt or making other mistakes that could jeopardize your finances over the long-term.
Apply For Unemployment Benefits
“The first thing you should do is apply for unemployment, even if you’re not sure if you qualify,” Krumpter said. “There’s no downside to applying. Be truthful in your application, and then they will check with your employer and determine if you are qualified.” The eligibility criteria have been expanded in many states because of COVID-19. For more information and links to each state’s unemployment agency, see the U.S. Department of Labor’s Unemployment Insurance Relief During COVID-19 Outbreak page.
If you qualify, it can take several weeks before you receive your first payment. You’ll eventually receive all the money you were eligible for retroactively, but you may need to find a way to cover your bills for more than a month until your payments begin. “It can take from three to six weeks to come,” Krumpter said. “That’s why it’s important to apply as soon as possible.”
Make a Plan for Your Essential Bills
“List every expense you have and separate need vs. non-need,” Krumpter said. Your needs include your housing (such as your rent or mortgage), electricity, gas and food. “Figuring out your expenses and what is most important and what you have the money for is key,” she said.
Even though you may eventually be able to pay these bills if you end up receiving unemployment benefits, you may have a difficult time covering your living costs until then, especially if you don’t have an emergency fund. Contact your landlord or mortgage company and utilities before you miss a payment. “Tell them you’ve lost your job, you’ve applied for unemployment and you’re concerned that rent is due in two weeks and you don’t have the money,” Krumpter said. “Let them know that you can start paying the rent once you start getting unemployment, and that you’re doing everything you can.”
Ask your utilities about your options. Your electric company may have a discount program for low-income individuals or promise not to cut off the electricity for a certain period of time and work out a payment plan, Krumpter said. “It can be pretty easy to negotiate with the utilities.” She also recommends looking into signing up for SNAP benefits to help with food costs. See the U.S. Department of Agriculture’s Food and Nutrition page pour plus d'informations.
Find the Best Health Insurance Deal
If you lose your job, a big new expense may be health insurance. If you had health insurance through your employer, you can usually continue that coverage for up to 18 months after you lose your job through COBRA, a federal law that applies to companies with 20 or more employees (many states have similar requirements for smaller employers). You keep your current coverage and providers, and any money you spent toward the deductible so far this year still counts. But the premiums can be very high: You have to pay both the employer’s and the employee’s share of the premiums.
If your spouse has coverage through work, you may pay a lot less by joining his or her policy as a dependent. Another option is to sign up for individual health insurance on your state marketplace within 60 days of losing your employer-based coverage (most states are also offering a special enrollment period from Feb. 15 to May 15, 2021, for anyone to sign up — go to Healthcare.gov to get started). You may qualify for a substantial subsidy to help pay the premiums based on your income for the year, and if your income has dropped significantly you may also qualify for a cost-sharing subsidy that reduces your deductibles and copayments. See the Kaiser Family Foundation’s subsidy calculator to estimate your costs. Or you may qualify for low- or no-cost coverage from Medicaid, depending on your state, based on your monthly income. See the Medicaid Screening Tool at Healthcare.gov for details.
Triage Your Other Bills and Ask About Payment Options
Prioritize your other expenses after housing, utilities and food. For example, it may be important for you to keep a cellphone and internet access to search for a new job. Contact your providers and find out if you can switch to a lower-cost plan, or shop around for a better deal.
Ask your lenders and other providers about your options, too. “I recommend reaching out to everyone with whom you have a financial commitment and talking about ways that you can mitigate the most severe impacts of your circumstances,” McClary said. “Let them know everything that happened, when it happened and the steps you’re taking to get back on track. Also ask what options are available.”
Some lenders still have special COVID-19-related relief programs. For example, the principal and interest payments on federally held student loans are suspended through Sept. 30, 2021. Other lenders may offer temporary hardship programs for people who lose their jobs — if they know to ask. “Even before the pandemic almost every major creditor had some kind of temporary hardship program they could make available to people who were struggling financially,” McClary said. For example, some gave relief on the payment amount or interest rate, or the option to skip a payment for 30 days without penalty. He recommends asking about these special programs even if you don’t need to take advantage of them yet and using that information to help prioritize your bills. “Ask in a way that is open-ended – ask if there are any options to keep your accounts on track if you run into a situation where you can’t make the full payment or if there are any options to restructure your account,” he said. You’ll have more options if you have this discussion with your lenders before you miss any payments.
Reassess Your Budget
Scour your expenses for ways to cut back. “Get creative, brainstorm and come up with your action war plan,” said Ana Gonzalez Ribeiro, an accredited financial counselor with Rise Up Financial Coaching in the Bronx, New York. “Ask yourself these questions: How can I cut my current expenses? What are some things I can do differently? What skills or passions do I have or have been interested in over the past few years that I can pursue and perhaps make them a business? These are questions that will get you thinking about actionable steps that you can pursue instead of focusing on your loss.”
List all of your subscriptions and their monthly costs, and decide which ones to cut first. “Go through all your paid subscriptions for apps, magazines, memberships, etc., and cut out the ones you don’t need now,” Ribeiro said. “It could be temporary until you have enough income again or you might find you no longer need to be paying for these expenses.”
Find More Money
The other half of the equation is to find more money to pay your bills until you get a new job. If you have an emergency fund, this is exactly why you’ve been saving that money.
You may also be eligible for grants to help with your expenses. For example, each branch of the military has emergency relief funds that provide grants or no-interest loans to help with financial hardships — which can include a spouse who has lost his or her job.
Think of creative ways to bring in more income. “I’ve seen a lot of people start their own business in the past year to make some money,” Krumpter said. Out-of-work musicians have been giving music lessons through Zoom, chefs and caterers have started pop-up businesses selling to-go meals and people with all kinds of backgrounds have been tutoring kids who are going to school remotely. You may also earn some extra money, at least temporarily, by renting out a room in your home or taking a part-time job in a totally different field.
Tap Your Retirement Savings Last
Even though it’s easy to have your former employer send you a check for your 401(k) balance when you leave your job, that should be one of your last options. You usually have to pay taxes and penalties if you withdraw money from your retirement savings before age 55 or 59 ½ (although the CARES Act made some temporary exceptions for 2020).
“Explore your other options before considering raiding your retirement savings to get through a financial crisis,” McClary said. “You worked very hard over a long period of time to save that money that you will absolutely need during your retirement years so any withdrawal, no matter the amount, is going to deliver a setback in progress towards your retirement savings goals.”
Publié à l'origine dans Yahoo finance on March 10, 2020.