You’re not alone. 2020 has taken us from one of the LOWEST rates of unemployment in history to the HIGHEST since the Great Depression, in a matter of only three months. With about 15% of eligible workers jobless at the moment (a rate that will likely continue to increase for a short time), know that you are one of nearly 40 million Americans that find themselves suddenly without work, and therefore without a paycheck, to no fault of your own.
If you are someone that has recently lost your job due to this crisis, expect that you may soon, or you know someone that has, we’ve put together some important things to consider as you sort through this difficult time.
Don’t panic. You will get through this!
Losing your job can have an awful stigma around it, but the truth is that job loss is something most people will experience at some point in their life, and it can be particularly painful when it is unexpected and of no fault to you whatsoever. Everything may feel uncertain right now and you may feel a sense of defeat, but take a deep breath and understand that there are a few things you can do immediately to get your finances and career back on track, or even on a new track altogether!
File for unemployment
There’s no shame in it. This is what unemployment insurance was created for. If you have lost your job due to no fault of your own, you are likely going to be eligible for unemployment benefits, which have temporarily been extended and increased in most cases, thanks to the CARES Act.
In most states today, unemployment filing can be done online or over the phone. Many states have also added their own new rules, in addition to those in the CARES Act, to provide additional relief. To get started online, you can learn more about your state’s benefits on the Department of Labor website or by searching here.
By far one of the most important benefits of employment is employer-sponsored health insurance. Losing your job, even if temporary, means you will have some big decisions to make if you want to continue to have coverage. And a global Pandemic is certainly one of the worst times to take the risk of you or your family going without health coverage for any amount of time.
If you were covered by your employer’s health insurance plan, you will likely be able to continue that same coverage through COBRA. However, while COBRA lets you stay on the same plan, the portion of the premium paid by your employer will become your responsibility, and you may be much better off finding a short-term alternative.
Visit the Healthcare.gov website for more information on health coverage available for the recently unemployed.
Revisit your spending
Budgeting is hard. And there are many schools of thought on how to approach a proper budget. Set all of that aside for a moment and keep this simple. Regardless of how you have been handling your monthly expenses prior to today, now is the time to simply revisit your spending habits and cut out the fat. Look through the last three months of bank and credit card statements or use an online personal finance app, like Mint, to evaluate trends and areas you can easily find some extra cash each month.
You’ll be shocked at how quickly several small, harmless purchases can add up. Just being more aware of this can not only save you some extra money, but also give you a better sense of control at a time when things may feel like they’ve never been more out of your control.
Along with health insurance, many people’s only source of retirement savings comes through their access to an employer-sponsored retirement plan, like a 401(k) or 403(b) at work. While a job loss means you are no longer eligible to contribute to the plan, in most cases, you can keep that money right where it is if you want to.
It can be VERY tempting to dip into your retirement account(s) in a time of crisis, especially with all the uncertainty surrounding the crisis we happen to be in at the moment. But taking money out of retirement accounts early should be your very last resort, in most cases.
While the government has temporarily waived penalties on withdrawals up to $100k from retirement accounts like 401(k)s, we would strongly discourage doing so in most circumstances, unless you truly have no other alternative. Taxes will still be owed on any withdrawals and taking money out of the market in the middle of an historic decline will lock in losses and ensure you won’t be able to participate in any eventual recovery. In short, the long-term cost of an early distribution is likely to be much higher than any short-term financial benefits.
Another option is to rollover that money to an IRA account, where you can avoid costly administrative fees, and you can generally find better investment options. Not sure how to set up an IRA, looking for help picking and managing the investments in an IRA, or prefer to just leave the money alone for now and have someone make sure it’s invested appropriately? Give us a shout. That’s what we’re here for!
Keep your head up
It’s a bit cliche, but these challenging moments can actually end up being the most pivotal in your life and certainly your career. Losing your job unexpectedly can be devastating in the moment, but when you finally have a chance to gather your thoughts, let the dust settle, and you get a plan in place to weather the storm, you may just find that this is the nudge you needed to reevaluate your passions, rediscover your talents, and maybe even get started on a new career path altogether.
You WILL get through this. And we’re here to help if you need us. Don’t hesitate to reach out.
Disclaimer: The information is provided for discussion purposes only and should not be considered as advice for your investments. Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.