The coronavirus has forced thousands of businesses to close their doors, causing massive layoffs and furloughs. Approximately 10 million Americans filed for unemployment benefits in the past two weeks, and according to the Economic Policy Institute, COVID-19 is expected to cost at least 14 million workers their jobs by this summer.
If you're fortunate enough to still be employed right now, it's a good idea to prepare for the worst just in case. There are a few steps you can take to ensure you're as prepared as possible if you lose your job.
Bracing yourself for the worst
Nobody knows exactly how long this pandemic will last, and there's no telling how many more Americans will lose their jobs before this is all over. The best you can do is to prepare for the possibility that you may be out of work for several weeks (if not a few months).
The best way to prepare is by building an emergency fund. It's much easier to set aside some savings when you still have a source of income, so do your best to establish an emergency fund ASAP just in case you lose your job. Ideally, you should squirrel away enough to cover at least three months' worth of living expenses, but anything is better than nothing.
If you're having trouble coming up with extra cash, make a list of all your expenses and cut out anything that's not necessary. Every dollar counts, and you might be surprised at how much you can save when you make small cutbacks in several areas of your budget.
You might also decide to press pause on your retirement savings to build an emergency fund faster. While ideally you should be contributing consistently to your retirement fund, temporarily taking a break is better than having to raid your savings later if you lose your job and don't have a robust enough emergency fund. Just make sure you continue saving for retirement as soon as you can, because taking too long of a break will make it more difficult to catch up later.
Taking advantage of all your resources
Finding extra cash in your budget is only one half of the equation. It's equally important to ensure you're taking advantage of all the other resources available to you.
First, make sure you're parking your money in the right place. You'll want your emergency savings to be in a place where they can grow as quickly as possible, but you can also withdraw your money when you need it. For those reasons, it's best to take advantage of a high-yield savings account. These accounts earn much higher interest rates than your standard savings account, but you can also withdraw your cash at a moment's notice without facing any penalties.
Second, keep up-to-date on all the changing regulations to see if you could be saving more money. For example, as a result of the Coronavirus Aid, Relief, and Economic Security Act, federal student loan payments are suspended until Sept. 30, 2020. If you have student loans, this new regulation could free up some room in your budget so you can reallocate that cash to your emergency fund.
In addition, around 90% of Americans will soon be receiving stimulus checks of up to $1,200 (or $2,400 for married couples who file their taxes jointly). Those who are earning less than $99,000 per year (or $198,000 per year for married couples) are eligible for at least some stimulus money, so it's a good idea to put this cash toward your emergency fund.
You may not have much control over your job status right now, and millions of Americans may lose their income in the next few weeks or months. The good news is that you do have control over how you prepare. By doing everything you can to build a healthy emergency fund, you can ensure you're ready for whatever may happen in the future.