Though experts say the job market is very healthy in America, and remains one of the major keys to preventing a full-blown recession, there are still a large number of unemployed workers across the country.
According to the latest data from the U.S. Department of Labor, as of Nov. 4, the current number of unemployed persons is 6.1 million, up about 0.2% in October and still holding strong to the 3.5-3.7% total unemployment rate since March of this year.
As well, of those 6.1 million, there are currently 1.6 million open unemployment insurance claims. Unemployment insurance provides money to eligible persons on a weekly basis when they lose their job. Typically most W2 jobs meet the requirements since those workers have a dollar amount taken out of every paycheck as insurance for if (or when) they become unemployed — through no fault of their own — as in a layoff, per the Center on Budget and Policy Priorities.
Most states also allow 26 weeks of benefits and sometimes offer an extension if there is a high rate of unemployment (as happened during the pandemic) and the candidate has shown a good faith effort at finding work.
So, what is the best method for budgeting out your unemployment funds, should you find yourself in this situation?
Determine the Bills That Take Priority
First you’ll want to assess what bills are essential to pay — such as food, housing and utilities — and always make those a priority. If you have credit card debt you were looking to pay off and had been doing so regularly before becoming unemployed, you’ll want to adjust to perhaps just making the minimum payments if you don’t have a lot of money left over after paying the necessary bills.
Rent and mortgage payments in particular are key since the pandemic-era eviction moratorium is now over — and banks can consider you in default and possibly pursue foreclosure proceedings in as little as 30 days, per Forbes.
When it comes to necessities, there may be ways to cut down costs to recoup more of your benefit money for other bills. That might include shopping at discount grocers like Aldi and switching to generic medications where possible.
Take Proactive Steps With Creditors
As mentioned above, credit cards should be a lower priority bill than housing or food. While you never want to miss a payment and be put into collections, you might want to temporarily pay the minimum amounts due until you regain financial stability.
Another thing you can do is call your credit card companies and explain the situation as it relates to your unemployment. You might then ask for a forbearance or hardship agreement. In many cases, some kind of provision can be considered. According to Fox Business, credit card companies “may be willing to defer payments or reduce your interest rates temporarily, especially if you have a positive payment history.”
Ensure You’re Taking Taxes Out of Benefit Payments
Unemployment benefits are considered taxable income by the federal government, though you can defer to having no taxes taken out and pay at the end of the year instead. However, that should only be done in extreme circumstances where you don’t have savings and are struggling to pay monthly bills: You don’t want to be saddled with a large tax bill when filing season comes around.
Rather, you can fill out IRS Form W-4V and allocate 10% of the benefit payment towards taxes — though even then, you might want to set aside more funds for taxes owed at the end of the year.
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Save Some Paid Benefits for an Emergency Fund
If you can take even $50 out of your unemployment benefits every week, it could create a modest financial safety net. As of now, most states offer 26 weeks of benefits and, unless there’s a statewide or federal need to extend due to high unemployment rates, those 26 weeks will be the full extent of your benefits period.
If you still haven’t found work in that time, you may be facing increased financial hardship without income. Should you save $50 every week for a full benefits period, you’ll have at least $1,300 to fall back on while you search for a new job.
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