Losing your job can be a hard blow. You may be feeling rather emotional about your unexpected loss of a job, and you may also be stressed out about how you will manage your finances until you find a new job. Many workers are woefully unprepared for a layoff, and they often receive no advance notice from their employer so that they can make preparations. The good news is that unemployment insurance is available to help absorb the financial shock that you may be experiencing.
What is Unemployment Insurance?
If you are like many people, you may have a small amount of money that you saved up for a rainy day, and your current event is certainly a financial emergency. However, most people do not want to dig into their savings if they do not have to. Unemployment insurance is a government program that can partially supplement your lost wages if you have been laid off. These benefits are not provided to you if you were fired or if you quit your job. You will need to formally file for these benefits through the proper department in your state government.
How Much Money Will You Receive?
Each state has a different method used for calculating unemployment insurance benefits. Generally, you can expect to receive a percentage of your regular income rather than the full amount of your regular paycheck. Some states calculate this percentage off of your last full year’s annual income, and others may use the trailing six months of income. You will need to research the benefits structure in your state to accurately determine how much income you can receive by filing for unemployment insurance.
How Long Do You Have to Find a New Job?
In most cases, unemployment insurance benefits are paid out for up to 26 weeks. There are some situations in which you may be able to obtain benefits for a longer period of time, and you can discuss this option with your state’s unemployment insurance office. You should be aware that it may take you several months or longer to find a job. While 26 weeks can seem like a long time, this time can fly when you are stressed about trying to find a new job. In addition, keep in mind that unemployment insurance benefits may not be enough to fully pay all of your bills. Therefore, there may be a greater financial urgency to start looking for a job as soon as possible.
Are the Benefits Taxable?
When you calculate your estimated benefits, keep in mind that the full amount of these funds may not be paid out to you. Unemployment benefits are taxable, and you will need to report them on your state and federal tax return. Your state may withhold taxes for you from your benefits, so you may reasonably expect to receive less than the full amount of benefits. However, review your payment stubs carefully. In the event your state does not withhold taxes, you will still be responsible for paying taxes on your full income at the end of the year.
How Can You Stretch Your Benefits?
One of the first steps you should take after losing your job is to calculate the amount of unemployment insurance benefits you may receive. Then, you should review your budget to determine if you will have a cash shortage in the coming months. If so, you can take action now to address the problem. For example, you can eliminate your cable TV service or find a lower auto insurance rate. You may also take your younger kids out of daycare or switch them to a part-time program until you find a new job. Cutting back on expenses can help you to stretch your benefits and prevent you from digging into your savings account balance before it is necessary.
The emotional shock of being laid off can be difficult to bear. You may need to take a day or two to calm down and get your bearings before you update your resume and start looking for a new position. However, during this time, you should also file your unemployment insurance claim so that you can start receiving benefits, and review your budget to make changes where needed. By taking these steps as early as possible, you can more easily manage your finances during this period of time.
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