Businesses all across America have suspended operations in response to the novel coronavirus. While this is necessary to "flatten the curve" (reduce the rate at which infections spread), the unfortunate reality is that millions of Americans are now facing reduced hours or layoffs.
If you're one of the millions of Americans who have lost their jobs due to the coronavirus pandemic, there are a few steps you should take right away to minimize the financial damage this crisis could cause.
1. Check your unemployment benefits
Unemployment benefits can provide much-needed funds when you've lost your job. These benefits may be available both for people without work and for those facing a reduction in hours.
Many states have streamlined the application process and eliminated waiting periods before benefits begin. Some have also waived the requirement that you actively search for work while collecting benefits, as long as you're ready to work and expected to go back to your job once social distancing measures are ended.
A $2 trillion federal stimulus bill also made unemployment benefits more widely available to nontraditional workers, including part-time workers and the self-employed, while also giving beneficiaries an extra $600 per week in income and an extra 13 weeks of benefits eligibility. Maximum benefits still vary by state, though.
Find your state's unemployment office ASAP to begin your application, as there could be a delay in processing your claim due to increased demand.
2. Build a new budget
For most people, unemployment benefits won't replace the entire amount of lost weekly wages. You'll want to make adjustments to your budget based on the money you currently have coming in.
During this time of social distancing, it's easy to make big cuts to your budgets for entertaining, transportation, dining out and children's activities. But you could potentially also reduce spending in other areas too, such as by making efforts to reduce utility bills by changing your thermostat temperature or sealing up cracks in your home.
The more you can tighten your budget, the better off you'll be, as your unemployment benefits will stretch further. If you can continue to save for an emergency fund, though, it's a good idea to do so, as that money may come in handy if you face unexpected expenses later.
3. Check your health insurance options
If your employer provided health insurance, you definitely want to explore how to stay covered. You should have the option of keeping your plan under COBRA, which typically allows you to stay covered by your employer plan for at least 18 months after a job loss. However, employers generally stop subsidizing premiums after a layoff, so your coverage could get much more expensive.
A layoff entitles you to a special enrollment period for a policy on the Obamacare exchange, though. And most lower- and middle-income families get subsidies to help pay Obamacare premiums. If you have little or no income coming in due to a job loss, it's possible your coverage could cost almost nothing.
Depending on your current income and the state where you live, it might also be possible to qualify for Medicaid, which could mean you don't have to pay premiums at all.
4. Assess the status of your emergency fund
After a layoff, an emergency fund can provide the cash you need to cover budget shortfalls and make sure you stay afloat.
If you have to use some of your emergency fund to supplement your unemployment, figure out what you need to draw from it each month by subtracting your essential bills from the income available—then see how long the money will last.
If you don't have an emergency fund or you don't think your fund is large enough, get serious about bulking it up. You might be able to do this using a government stimulus check, if you receive one as part of the recently passed stimulus bill. Or you could use your tax refund if you're entitled to one.
Take swift action after a job loss
Losing a job can be scary, especially during a situation like the COVID-19 crisis, which is unprecedented in modern American life. The good news is that you can take these steps to shore up your finances in the short term. And remember, troubled times always pass, and it's often possible to come back stronger than ever.