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No Emergency Fund and No Job. Now What?

By Catherine Brock – Apr 17, 2020 at 7:00AM

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Short on income and cash? Here are five steps you can take now to manage through this crisis.

Caught in the crossfire of economic meltdown? Unfortunately, you're not the only one. In the last week of March, nearly seven million Americans filed for unemployment. That number shatters the previous peak of 665,000 claims filed the week of March 29, 2009, during the Great Recession.

The cause, of course, is the ongoing effort to contain the spread of COVID-19. Much of the U.S. is under some type of stay-at-home order, and nonessential business are closing their doors and often laying off workers as a result. The explanation, though, doesn't take the sting out of losing your job -- particularly if the job loss comes at a time when you're low on cash savings.

Worried-looking woman resting her forehead on her hand

Image source: Getty Images.

You might feel panic, desperation, embarrassment, or some combination of all three. You can and should acknowledge those feelings, but then find a way let them go. Your energy is better spent planning your next moves to keep food on the table. Here are five to get you started.

1. File for unemployment

Panic has a way of cluttering the mind, so I'll state the obvious. As a first step, file for unemployment. Before this pandemic, most states had a waiting period of about a week before you could receive unemployment benefits after a job loss. But in the wake of COVID-19, many states are waiving that waiting period. Double-check your state's guidelines on its unemployment website, which you can find on the U.S. Department of Labor's CareerOneStop Unemployment Benefits Finder.

To file for unemployment, you'll need your Social Security number, recent pay stubs, a copy of the communication you received about the layoff, your employer's contact information, and the dates you worked at that job. You should also have your banking information on hand for setting up direct deposit, which may expedite your payment.

Try filing your claim online first. But know that state unemployment websites have been unstable because of the high demand. You might have the best luck at an odd time, like 3 a.m. If that doesn't work, call and sit on hold until you reach someone.

2. Call your creditors

Several major financial institutions are authorizing payment deferrals for debtors who are affected financially by the coronavirus. Call each and every one of your creditors, from the bank that issues your credit card to the company servicing your mortgage. Or, if you rent, call your landlord. Be open about your situation. See what you can negotiate to get your recurring monthly bills as low as possible for at least the next six months.

3. File your tax returns

If you made less than $75,000 last year as a single filer, you should qualify for a coronavirus stimulus check of $1,200. Married couples can receive up to $2,400, and parents can receive an additional $500 for each child under 17. You'll receive the money quicker if you have direct deposit information already on file with the IRS from your 2018 or 2019 tax returns. If you haven't filed for 2019 yet, do it now and include your banking information.

Without your banking account number on file, the IRS will have to mail your stimulus payment as a physical check. Pull out the last tax return you filed and check the address you provided. If you've moved since filing, you need to update your address right away. You can do that by filing Form 8822, Change of Address, or by writing to the IRS. Be sure to include your Social Security number on that correspondence.

Finally, bookmark and check for updates. The website may have the option to provide your banking information and current address online.

4. Redo your budget

You might not want to look at your budget, for fear of confirming that your situation is hopeless. Push through that. You're not entirely without income, since you'll have unemployment benefits coming in. According to the 2019 UI Replacement Rates Report, unemployment benefits replace, on average, 45% of workers' pay. On top of that, the coronavirus stimulus package authorized an additional benefit of $600 weekly through July 31, 2020.

If you follow a 50-30-20 budget, you already have your essential bills trimmed back to 50% of your pay -- and your unemployment check will almost cover that. Plus, sheltering in place naturally has you spending less on things like gas, haircuts, and child care. Review transactions for the last few months to understand your baseline spending. Subtract discretionary expenses and the debt payments you are deferring. Compare the result to your estimated unemployment benefit to understand your monthly cash shortfall.

Quick ways to help close a cash flow gap include:

  • Buying cheaper food, such as oats, beans, pasta, and rice
  • Canceling all subscriptions, including streaming services
  • Switching to a cheaper cell phone plan, if you can do so online
  • Reducing your car insurance coverage temporarily, if you're not driving anywhere (remember to raise them back up later, though)
  • Adjusting your thermostat and wearing a sweatshirt inside, instead of using the heater

5. Ask your family for help

You may hate this idea, but asking a family member for help is an option. Only do this after you've crunched your own numbers and understand your situation in depth. That way, you can approach your relative with a clear plan of how much you'd like to borrow and how the payment terms will be arranged.

You likely don't know when your income will be restored, so you'll have to be open-ended about the timing of repayment. But you can be clear on whether you'll pay interest, what needs to happen for you to begin repayment, and how often you'll provide an update on your situation. Put everything in writing to minimize confusion or misunderstandings.

You can do this

These are unprecedented times in our economy. The only good news is that you won't be the first to call up your credit card company and ask for help. Heck, you might not even be the first relative to ask your wealthy aunt for a loan.

Don't waste any time getting your financial house in order. File that unemployment claim, make sure the IRS has your current information, and dive into that budget to cut out every expense that isn't absolutely necessary. It won't be easy or fun, but you can survive this crisis.

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