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Financial Strategies if You Find Yourself Suddenly Unemployed or Furloughed

  • by secure_investors
  • Posted on 14 May, 2020

April brought the highest unemployment since the Great Depression. The U.S. economy has taken a beating as a result of the pandemic and the result is many Americans are struggling financially and emotionally. There are a few provisions that are available to help if you are looking for some relief due to the challenges you are currently facing. Below are suggestions to get you started and as always, we are here to help through any decisions you need to make.

  1. Immediately file for unemployment benefits. Under the CARES Act, if you have been furloughed rather than laid off, you still qualify for unemployment benefits, including an extra $600 per week through the federal government’s aid package to states. The benefit is also available to independent contractors and gig workers, but you must file in order to start receiving the benefit. Some states have a one-week waiting period, but others have waived that.

  2. Health Insurance Options. Find out if you can use COBRA to maintain your health benefits from your former employer. Or maybe your spouse has coverage that would enable you to get coverage under their plan? Losing coverage from an employer qualifies as a life event, allowing you to enroll in a plan even if enrollment is over.

  3. Know your options with your 401(k). If you have been with your employer for any amount of time you likely have a balance.  You may want to consider rolling that balance into an IRA. With the 2020 Cares Act, you can waive the 10 percent penalty for withdrawing money from the IRA and defined contributions plans if you are younger than 59 ½. The Coronavirus related distributions can be taken for the following reasons:
    -You or dependent has been diagnosed with the coronavirus.
    -You have experienced a financial strain as a result of being quarantined, furloughed, or laid off, or your work hours have been reduced.
    -You are unable to work because of a lack of child care.
    -You have had to close or reduce the hours of a business as a result of the virus.
    -Be aware that the 10 percent waiver only covers withdrawals up to $100,000 made on or after Jan. 1. until Dec. 31, 2020.

  4. Retool your budget. Write down exactly how much money is coming each month and when, and how much is going out and when your bills are due. Ask yourself what can be cut out temporarily, for now, such as gym memberships, cable channels, unused subscriptions, etc.

  5. Contact your lenders for relief. It is better to contact them before there is a problem and see what type of relief they are offering. Make sure that you are understanding the relief terms you are agreeing to. If payments are deferred, is interest still accruing? Make sure you read the fine print.

  6. Think about the next steps. Finally, consider immediate forms of financial aid, like personal loans or 0% APR credit cards. Be careful so that you do not overextend your spending on these products, and that you set up a plan so you can repay them on time.

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