If you’ve suddenly found yourself without a source of income as a result of the coronavirus, you’re by no means alone. In the US, it’s estimated that more than 3 million Americans have lost their jobs in recent weeks. As the economy struggles under these new pressures, millions of Americans have been left asking: what now?
We know this is a complicated, and potentially scary, position to be in. Fortunately, there are a few things you can do right now to alleviate some of the financial pressure and feel more in control of your path forward.
File for Unemployment Insurance
Unemployment insurance programs “provide unemployment benefits to eligible workers who become unemployed through no fault of their own.”
In response to COVID-19, the government has loosened those eligibility requirements quite a bit. Now, most gig workers, freelancers, and contractors who have lost their income will be eligible to receive benefits.
Keep in mind that many US states still have a mandatory one-week “waiting period” that applicants must go through before they’ll be able to start receiving unemployment benefits. Some states, however — including New York, Pennsylvania, and Virginia — have waived their mandatory waiting period. Still, no matter where you live, you should make it your goal to apply for benefits sooner rather than later, so that your benefits will be able to kick in as quickly as possible. To get started, visit your state’s website.
Use our guide to to answer common questions and keep your team safe and informed about COVID-19.
Make Sure Your 401(k) is in Order
When you’re employed, a 401(k) is a convenient place to store your retirement savings. But what should you do with that money after you’ve lost your job? You have a couple of options:
Option One: Keep it with your former employer. Most (but not all) 401(k) plans will allow you to keep your money with your employer if you have at least $5,000 invested at the time of your departure. While keeping your ex-employer’s plan will allow your funds to continue to grow tax-deferred, it will also prevent you from being able to make any future contributions.
Option Two: Transfer it into an IRA. If you have less than $5,000, your employer may roll over those funds into an IRA account for you. Alternatively, you have the option of opening an IRA and transferring those funds yourself, no matter how much you have saved at the time of your departure.
Option Three: Withdraw the funds for immediate use. If you’re in serious need of some extra money now, you have the option of withdrawing funds from your 401(k) for immediate use. Keep in mind, this should only be a very last resort: for most plans, any withdrawal before the age of 59 ½ will be subject to tax withholdings and a 10% early withdrawal fee. Note, however, that the Coronavirus Aid, Relief and Economic Security (CARES) Act may allow you to waive or defer these obligations under certain circumstances.
Understand your Health Insurance Options
What if you’ve lost your job and your employer-provided health insurance coverage entirely? After losing your job, you have two main options for finding health insurance coverage:
Option One: Enroll in COBRA coverage. COBRA is a federal program which can enable you to stay on your former employer’s healthcare plan for up to 18 months (or longer under some state laws) after being laid off. In some cases, you may also be able to retain the life insurance policy that you were covered by while you were employed. To learn more about your options for enrolling in COBRA, reach out to your former employer’s HR department.
Option Two: Sign up for an independent plan.Losing your employer-provided healthcare coverage is a Qualifying Life Event, which means that you’ll be eligible to sign up for a new plan outside of the Open Enrollment Period.
Talk to Your Employer about Other Benefits
What about additional benefits like commuter, gym memberships, HSAs, and FSAs? Do all of those just disappear when you’re laid off?
The short answer is: it depends on your employer. In most cases, you can expect employer-sponsored gym memberships and tax-free commuter benefits to be terminated shortly after you leave your job. On the other hand, HSA and FSA funds are generally eligible for rollover or extension under COBRA, so there’s less to worry about there. The bottom line is that you should always speak to your employer to get the details.
Related Article: What’s the Difference Between an HSA and an FSA?
Get Serious about Budgeting
While the $1,200 check that you may soon be receiving from the federal government will provide some short-term financial wiggle room, that’s not going to be enough to get most people through the duration of the crisis.
Here are a few quick and easy tips for building a sustainable budget until you’re able to start working again:
Cancel nonessential online subscriptions. When you’re out of work and under strict orders to stay at home, having a subscription to one or two streaming services — like Netflix or Spotify — is virtually a necessity. That said, most of us have some additional paid subscriptions that we don’t use as often and that we could afford to do without for a few months.
Cancel all nonessential paid memberships. Most gyms, yoga studios, or other exercise facilities have been forced to temporarily close their doors. Still, you should contact any company that you have a paid membership with to ensure that you won’t be charged while they are closed.
Defer as many debt payments as you can. The federal government and many landlords and private lenders have begun to offer payment assistance programs for those who have been financially impacted by coronavirus. But before you stop submitting payments, be sure to contact your mortgage lender, your landlord, and your credit card company to find out what payment assistance programs you’re eligible for.
Reduce, reuse, and recycle as much as possible. Minimizing your use of essential household items (such as paper towels, laundry detergent, and disinfectant spray) will simultaneously allow you to cut back on your spending and on trips to the grocery store.
Calculate how much you’re likely to need over the next three months, and set it aside. Once you’ve completed each of the steps listed above, the next step will be to conduct a no-nonsense financial inventory. Now that you’ve cut out all nonessential spending, it’s time to sit down with a paper and pencil and calculate how much you’re likely to need over the next few months (let’s say through the end of June, just to be safe). You don’t need exact numbers, just well-informed estimates.
Here are some of the monthly expenses that you’ll want to take into account (remember, we should be aiming to minimize — or even waive — each category as much as possible):
Groceries (including food, beverage, and essential household supplies)
Credit card debt payments
Insurance payments (homeowners, renters, auto, etc.)
Online music and video streaming services
Once you have a monthly figure, write it down and put it in a conspicuous place so that you can ingraine it into your memory. Then, put the full amount (three months’ worth of basic living expenses) into a savings’ account, only to be accessed at the beginning of each month.
Take Advantage of Free Financial Advice
In response to the escalating pandemic, a growing number of financial advisers are starting to offer pro bono services to those who have been laid off or otherwise financially affected. To get connected with a financial adviser near you, check out the following pages:
Make Yourself a Priority
During normal times, we might surround ourselves with friends or even go on a short vacation to ease the stress of losing a job. But dealing with this during the current period of physical isolation can make that stress substantially worse. In light of that, it’s more important than ever for each of us to dedicate some time each day to the maintenance and care of our mental health.
Here are a few recommendations to help keep you feeling hopeful, happy, and healthy in the months ahead:* Create (and stick to) a routine. Research has demonstrated that routines are essential for maintaining one’s mental health. Even “little” habits like making your bed each morning or getting dressed at the same time each day can have a big impact on your outlook, attitude, and state of mind.
Try learning a new skill. Maybe it’s time to pick up that musical instrument that’s been collecting dust in your basement. Or maybe it’s time to start writing that novel that you’ve been turning around in your mind for months now. Whatever passion project happens to be calling to you, why not get started now? This is a rare opportunity to focus on something new, and your mind will be grateful to have an engaging project to focus on until it’s time to go back to work.
Make time for FaceTime. Or Skype, or Zoom, or Google Hangouts. Or just a good old-fashioned phone call. Whatever your preferred method of communication, try to make it a habit to reach out and talk to a friend as often as you can. When you do, make it a point to honestly and openly communicate about what you’ve been struggling with and how you’ve been coping.
Make an effort to separate yourself from the internet. It’s important to stay updated with current events, but only up to a point. If you find yourself feeling more anxious at any point during your daily scrolling, that’s a good sign that it’s probably time to disconnect for a while.
Give teletherapy a try. If you ever need to talk to a professional, teletherapy companies (such as Talkspace and BetterHelp) are continuing to offer affordable online therapy services during the coronavirus pandemic.
Explore other resources. Justworks has compiled a public, collaborative list of helpful links for anyone who has recently lost their job due to the coronavirus outbreak.
And last but certainly not least, always remember that you are not alone. There are countless others who are currently struggling with the same challenges, and there are professionals out there who you can turn to when you need some support. In the days, weeks, and months ahead, it will be more important than ever for each of us to limit our spending, to stay financially organized, and to look after our physical and mental health. By attending to these responsibilities carefully and diligently, we may be able to come out of this crisis stronger than ever before.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.