According to CNBC, 47 million Americans could lose their income due to the 2020 COVID-19 pandemic. That translates to a potential unemployment rate of about 32%.
Last Monday, I was informed that I was being furloughed until June 8th. That date could extend out much farther, or I could be back sooner depending on what the business needs.
This wasn’t something that was completely unexpected. However, even with that, it was still shocking to actually hear that I was being furloughed for almost two months.
Up until this point, the impact of Coronavirus on our family has been financially minimal. Now, we won’t be able to send anything extra to our mortgage and we’ll also be pausing our aggressive investing strategy until my income is back in full.
Luckily, I get a paycheck and a half because of our pay cycle. Our expenses are so low that my wife’s income can cover all the essential bills. On top of that, we have 10 months of expenses set aside for emergencies such as this. Plus I’m eligible for the enhanced unemployment benefits.
The reality is, I know some of you may not be in a good financial place right now and you may have experienced the same thing and been completely caught off guard. So I wanted to share some of the steps you can take to minimize the impact of a furlough on your bank account.
Here are five money tips to survive a furlough.
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1. Take A Breather
Once you’ve been told that you’re officially furloughed, the first thing you need to do is breathe. It’s totally normal to feel panicked and overwhelmed once you hear that it’s actually happening to you.
For example, even though we’re in such a good financial position, my wife was still shaken up when I actually shared the news with her. That just goes to show that managing money is an emotional thing. It’s almost as much about emotion as it is about logic and strategy.
The first thing you need to do is really just stop and take a deep breath. What I’m not telling you to do is ignore your feelings or emotions because there is value in them. However, before you make any decisions, you need to take time to relax and think these things through.
As you navigate being furloughed, you may find yourself slipping back into those states of being overwhelmed, stressed and anxious. Again, that’s normal during a time like this.
For me, one of my favorite tools to use when I get a little anxious is the Calm app. I found that about 30 minutes a day keeps me in a really good mental space. I’m not saying that this is going to work fully for you or that it will be the cure to all of your problems.
What I am saying is try some different things until you find something that gives you that space to pause and think things through.
2. Ask The Right Questions
When you’re being furloughed, a million thoughts run through your mind, right? You’ve got bills, expenses and taking care of the people you love.
There are a few questions that I asked and you should ask for clarification purposes.
The first thing you need to know is that there are different types of layoffs, so you need to be sure that you’re being furloughed and not laid off. Once you have that clarification, you need to ask how this decision affects your eligibility for the unemployment benefits.
The next thing that I asked was if I had access to my medical benefits? And if so, how will you be expected to pay for the portion that you typically cover?
As we all know, these are big premiums. Your company tends to pay for a portion. You pay for a small portion.
If they’re going to cover you, how are they getting their money back?
Are you going to be responsible for a lump sum when you go back to work?
Are they going to trickle that out of your paycheck?
You need to be aware of these things going into the situation.
The next thing you need to know is what is the timeline for your return? This will help you plan out your finances and it can also give you peace as well.
The answers to these questions and any others that you can think of can give you a clearer picture of the situation at hand, which only helps you make better money decisions.
3. Apply For Unemployment Benefits
With the influx of applicants over the last few weeks, this may be a more difficult task than it typically is. However, do some research on the requirements for your state and get started so that you can get income rolling back in as quickly as possible.
It’s also important that you keep an ear out for any additional benefits you may be eligible for, such as that stimulus check that’s been talked about over the last few weeks.
4. Contact Your Creditors
One of the positive things that’s emerged through this time is the creation of programs to assist consumers by different service providers.
Auto insurance companies are stepping up and giving you money back. Mortgage lenders are suspending payments. Even student loan interest rates are at 0% for the first time in history.
Take a moment to reach out to all the companies that you make regular payments to in order to see how they can help you through this challenging time.
Whether it be waiving late fees, mortgage payments, suspending interest, or something entirely different, don’t be too prideful to take advantage of anything that’s going to help your family survive.
5. Create An Emergency Spending Plan
During a furlough, some of your expenses, like utilities, may go up. That’s because you’re home more. You can offset these increases by cutting back on some of the discretionary spending.
This is especially true if you know yourself to be a boredom shopper. I’ve seen friends and people on social media all the time talking about how bored they are and how they’re spending all this money.
That’s probably like the worst thing you can do at this point.
Pause on your long term goals. We’re not investing or paying anything extra to our mortgage right now. Instead, we’re stockpiling any extra cash to hold us over. As things go back to normal, we’ll go back to working towards those long term goals. For right now, our priority is getting through this season.
Once you’ve hit pause on those goals, you can start your emergency spending plan by listing any income you expect over the next month. This could be remaining paychecks, unemployment benefits, alimony, whatever else you can think of.
You can also earn a little income through a side hustle if you have the ability and the desire right now. One thing I want to say is please prioritize your mental and your physical health before you even think about a side hustle.
At the end of the day, your unemployment benefits should cover some of your salary if you’re eligible. That takes away the need for a side hustle in most cases.
After you project your income, it’s time to list out essential expenses. For the most part, this is going to be housing, utilities and food at home.
Once you have your expenses and income laid out, you’re going to take your expenses and you’re going to subtract that from your income to see what you have left after covering your needs.
Again, this number could be positive, this number could be negative, but you need to know where you’re starting from. Having that clear picture of knowing whether you’re starting from a surplus or a deficit is only going to help you make better decisions.
6. Check Your Emergency Fund
If you have an emergency fund now is the time to use it.
Lower your essential expenses, trim some of the non-essentials and utilize the unemployment benefits you’re eligible for. All of these can help your emergency fund last even longer.
A key thing to remember: Once all of this is over, you need to make sure that you’re able to replace everything you’ve withdrawn.
This is to ensure that you’re prepared for any other emergencies that may be coming in the future.
Don’t allow yourself to feel frustrated over the fact that you’re having to use your emergency fund. I mean, after all, that’s exactly what it’s there for.
This is what all those sacrifices, hard work, and good choices were for.
If this article has helped you or you know someone that’s currently being furloughed, share it!
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