Having a financial plan can help when the clock is counting down unemployment. (iStock)
The coronavirus pandemic has had a significant financial impact on American households, with nearly 40 million unemployment claims filed during the months of April and May. The overall unemployment rate is estimated to be around 13 percent, but it can eventually reach 20 percent. While the latest jobs report shows the economy added 2.5 million jobs in May, high unemployment rates may continue for a while.
“In addition to the obvious changes with interviews and direct contact, the biggest difficulty in finding work will be the number of jobs available due to changes in our economy,” said Rick Myers, founder and president of Integrated Financial Services in Grand Rapids, Michigan.
Some sectors of employment may be more difficult to re-enter than others, as employers must integrate social distancing measures and their own financial challenges into the mix. Adding a recession and getting a job can be even more challenging. If you receive unemployment, it is helpful to have a financial contingency plan for when those benefits are exhausted if you do not anticipate returning to work immediately.
Consider transferring credit card balances
If you have been using credit cards to help pay bills or cover expenses while unemployed, lowering your interest rates can make your debt more manageable.
Balance transfer credit cards can be an easy way to combine balance from different credit cards at low rates and save money. Low credit card rates mean that more of your monthly payment goes to the principal balance, so debt is paid off faster. Use Credible to compare balance transfer credit cards so you can pay off your debt more effectively.
PROS AND CONS OF BALANCE TRANSFER CREDIT CARDS
Be sure to check the terms of the promotion, including interest rates and how long you have to pay before the promotional rate ends. Also note the balance transfer fee, which can be added to the amount you have to pay.
Contact your lenders
If you have credit cards, student loans, a mortgage, or other debts, it is important to keep your lenders informed during financial difficulties.
For example, you may need to take out a small personal loan to cover short-term expenses until you can return to work. You can easily compare personal loan rates with Credible to see what type of interest rates you may qualify for, based on your creditworthiness.
EVERYTHING YOU NEED TO KNOW ABOUT PERSONAL LOANS
In addition to getting a personal loan, you may want to explore a mortgage refinance or a student loan refinance, if you have private loans. It may not seem ideal to get loans while you’re unemployed, but with record interest rates as low as these, it could be a great opportunity to save money.
Again, Credible can be a useful tool for comparing student loan refinance rates. You can easily check student loan benchmark rates from different banks and lenders in one place to find the best loan option for your situation.
Forbearance and deferment periods are another way to manage student loans during the coronavirus. Your lenders or loan managers can tell you what options are available and how to apply for them.
You can save on mortgage costs by taking advantage of low rates with a refinance loan. Take the time to compare mortgage refinance rates and be sure to also consider closing costs.
Find Extended Unemployment Insurance
In most states, unemployment benefits last 26 weeks. Extended unemployment insurance allows states to add 13 weeks of benefits in addition to regular benefit payments when unemployment rates are high. In response to the COVID-19 pandemic, some states offer another seven weeks of benefits, for a total of 20 weeks of extended unemployment benefits.
HOW TO REFINANCE YOUR MORTGAGE
That means you may have a longer window to claim unemployment benefits than you expected. Just be aware that up to $ 600 in weekly federal benefits paid under the CARES Act expires on July 31. Therefore, while you may continue to receive statewide benefits, you may need to adjust your budget to account for loss of federal benefits.
Create a budget
You may have created a basic budget to manage your finances during the coronavirus, but if your income changes again because unemployment is ending, you may need to visit again.
Specifically, take a look at what you’re currently spending to see how you can align as closely as possible with what you expect your income to be once unemployment ends. If you’ve already tackled obvious budget cuts like eliminating takeaways, online shopping, and gym memberships, you may need to expand the network a bit more.
For example, you may be able to downgrade your cell phone plan or switch from contract service to a prepaid phone to save money. Increasing your car insurance or owner’s insurance deductibles or pooling policies could also help add money back to your budget.
WHEN SHOULD YOU REFINANCE YOUR MORTGAGE?
You can also negotiate different payment plans with your utility providers. For example, switching to a flat-rate billing plan with your electric or water provider could help equalize your monthly utility costs to make them more manageable. Or they may allow you to temporarily postpone payments on your account without disconnecting your service if you have financial difficulties related to the coronavirus.
Myers said that if you’ve done those things, you may have to find ways to generate cash flow. Selling things, taking a side business, or borrowing from your retirement accounts are just a few things you might want to consider.
Don’t panic if unemployment is ending
If you’ve relied on unemployment to help you through a difficult time, it’s important to remember that there are financial options for when those benefits end. The more you plan before unemployment runs out, the better, Myers said. Staying in touch with your lenders and bill issuers, considering a personal loan to help you, and comparing refinance rates with Credible can help you plan your next steps once unemployment goes away.
