The Number One Thing a Financial Planner Says You Should Do If You Lost Your Job
It’s no secret that coronavirus has completely rocked the economy. Unemployment rates reached a historic level of 14.7 percent in April, with the service and hospitality industries being hit especially hard. If you’re among the millions out of a job, or if you’re bracing for a potential layoff, this could be completely uncharted territory. How, exactly, are you supposed to maintain a cash flow?
We asked financial planners what the absolute first thing you should do is if you’ve lost your job in These Uncertain Times.
Perhaps unsurprisingly, filing for unemployment through your state is at the very top of the list. But amid the coronavirus pandemic, there are extra benefits to doing this sooner rather than later.
“If you lose your job during the COVID-19 pandemic, the first thing you should do is apply for unemployment benefits immediately,” says Matt Frankel, a certified financial planner at The Ascent. The CARES Act provides an extra $600 per week in benefits from the federal government on top of whatever you’ll receive from the state. This boost will last through July 31, Frankel says.
“While most of the heaviest traffic has been worked through the system, there are still reports of delays and difficulties in some places, so be prepared for a long hold on the phone or several attempts to get through an online portal,” Frankel says.
But don’t be too put off by the long wait times: Unemployment benefits are generally retroactive, especially if there’s a systemwide delay, Frankel explains.
In addition to applying for unemployment, you’ll want to do your best to keep your health coverage active by applying for COBRA benefits or a plan on the health insurance exchange, recommends Brittney Castro, a certified financial planner with personal finance apps Mint and Turbo. (You can learn more about the options that you have at this time at healthcare.gov.) You may want to ask your human resources manager for options to continue your health coverage, says financial consultant Steve Sexton, president of Sexton Advisory Group.
If you’re newly laid off, you’ll also want to do a deep dive into your budget and set aside time to communicate with the companies or individuals you have bills with, including your mortgage service provider or landlord, credit card companies, student loan providers, and auto loan companies.
Castro recommends calculating how much you need to cover your essential monthly expenses. Then, call your loan and credit card companies, as well as service utility providers, to see if you can pause payments or request a forbearance, which is an agreement that temporarily suspends payments.
“Companies are aware that their customers may need help and they’ve established a process for how to deal with those requests, but it’s important that you are transparent with your situation,” she says.
Make sure to ask if delaying payments will be reported to the credit bureaus or assessed as late charges.
“Once you’ve made the phone calls and set up a plan, go back to your budget and list what is due and when,” Castro says. “This will help you take charge of your money and make a plan for the future.”
Plot a plan for bigger payments that you may receive or have already received, such as your tax refund, stimulus check, or severance pay, Castro says.
As you’re setting up your new budget, Sexton recommends reducing unnecessary expenses.
“Review your checking and credit card statements for the last three months and eliminate anything non-essential,” he says.
Now is the time to reevaluate your cable bill and sign up for affordable streaming services, cancel wine club memberships, app subscriptions, scale back on pre-packaged foods and takeout, Sexton says.
Need to free up some more money in your revised budget? Here are 31 more ways to save money that are expert-approved.