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The First Steps to Take When You Lose Your Job

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Please see our Help Center for the latest Coronavirus updates related to your Earnest loan.

Finding yourself suddenly out of work can be scary, especially with so much unknown about Coronavirus (COVID-19) and how the economy and job market will fare. While you may not feel like doing much when you’re first let go, reacting quickly can help you minimize major problems that you may face and help you to feel more in control of the situation. 

Here are the first important steps you should take if you lose your job, and prepare for your next job.

Review the New Unemployment Guidelines

Unemployment can be tough to navigate, especially if it’s your first time filing. And even if it’s not, there are some changes that make current unemployment benefits significantly different than they were previously. 

If you’ve lost your job, it’s important to review your severance package provided by human resources and start researching your state’s unemployment guidelines, even if you aren’t sure you’ll qualify for benefits. Unemployment benefits have recently been expanded to help workers who are unemployed in the wake of COVID-19.

As part of the recent CARES Act legislation, the federal government expanded unemployment guidelines that states can adopt. Some of the changes include:

  • More people are eligible for unemployment benefits: If you’ve lost your job and you were previously ineligible for unemployment benefits, you might now be eligible. The CARES Act allows states to offer unemployment benefits to self-employed workers and those with a limited work history.
  • Unemployment checks will be bigger: The federal government is increasing unemployment benefits by $600 per week for up to four months.
  • Unemployment will last longer: Unemployed individuals are eligible to receive an additional 13 weeks of unemployment benefits beyond what their state usually offers.

While guidelines are set by the federal government, unemployment benefits are administered by each state individually. You can find all of your state unemployment information, including changes that have been implemented as a result of COVID-19 by using CareerOneStop.com.

Review Your Health Insurance Options

If you received health insurance benefits through your former employer, you have two main options once you’ve lost your job: sign up for COBRA coverage or buy a plan through the health insurance marketplace.

COBRA gives you the option to stay on your employer’s healthcare plan for a period of time after you lose your job. But be prepared to pay more than you currently do: rather than having an employer chip in to cover part of the costs, you’ll pay the entire premium yourself, plus an administrative fee. Your employer should give you details about the COBRA policy option, including how much you’ll pay.

If you decline COBRA coverage, you can apply for a health insurance policy through the health insurance marketplace. The marketplace is only open for enrollment once per year, unless you qualify for a special enrollment period. Losing your job, and your job-based health coverage, is an event that qualifies you for a special enrollment period. 

Plans through the health insurance marketplace can be expensive, though there are tax credits available. Depending on your earnings for the year, you may qualify for tax credits that can reduce the cost significantly.  

Visit Healthcare.gov and answer a few questions to see if you qualify for a special enrollment period. 

Call Your Lenders If You’re Worried About Missing Payments

If you’re worried about falling behind on your debt payments while you’re unemployed, take a proactive approach. Reach out to your lenders to let them know your financial situation. Some lenders have announced that they will work with borrowers affected by COVID-19 on a case by case basis. 

For example, Ally Bank is allowing borrowers to defer auto loan payments for up to 120 days and Bank of America announced that it is allowing credit card borrowers to defer payments and receive a refund on late fees. These deferments aren’t automatic — you’ll need to talk with your lender to see what options you qualify for. 

These options can be extremely beneficial in the short term. Before you accept an agreement with your lender make sure you understand all of the details. Consider asking them:

  • If interest will still accrue
  • How you’ll repay the deferred payments
  • Whether the deferred balance will be due all at once or amortized over a period of time

Create a New Budget

Your income has taken a cut, so it’s a good idea to rework your spending as well. Even with the increased unemployment checks, your income is likely going to be less than what you were previously making. Spending the same amount as you did before isn’t a great idea. 

Even if you have an emergency fund, consider holding off from withdrawing from it for as long as possible so you have money available to you if it takes a long time to find a job. 

Sit down and take a look at your current monthly spending. Where can you cut back? Drop your gym membership, consider cutting cable, and try to get creative with your cooking to make your grocery budget stretch as far as possible. 

This won’t be your budget forever, so consider making short-term cuts that may feel a little bit painful right now. You can always add back what you’ve cut once you find another job. 

File Your Taxes if You’re Due a Refund

The IRS extended the tax due date to July 15, 2020, which means that everyone gets an automatic extension of three months. But if you’re due a refund, why wait? That could be crucial cash to help make up for your lost income. 

Refunds are still being processed and issued. According to the IRS, the fastest way to receive your refund is by e-file or Free file with direct deposit. 

If you’ll owe the IRS money, you might want to hold off paying your bill. You have an extra three months to do so. If you don’t think you’ll be able to pay your tax bill in three months when it’s due, you can work with the IRS to create a payment plan. Payment plans that are less than 120 days won’t incur any setup fees. 

Update Your Linkedin and Resume

Now that you have some of the basics covered to help you adjust to being unemployed, it’s time to start preparing for your job search. Take some time to update your LinkedIn profile with any new skills since you last made updates. Also update any other social media accounts a potential employer could see. Finally, update your resume and cover letter outline to include your most recent information so you can quickly customize for a hiring manager.

While it may seem like a bad time to start looking for a new job, companies are still hiring and recruiters are looking for talented future co-workers. And companies that currently have a hiring freeze or layoffs may start hiring again in the near future, so take the time now to get prepared for new opportunities. 

Losing your job is scary, especially in the midst of a global crisis. But taking the first steps to protect yourself can help you navigate this uncertain time with more confidence.

Please see our Help Center for the latest Coronavirus updates related to your Earnest loan.

Conquer your student debt. Refinance now.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.