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California Unemployment Budget – Pandemic Edition

I was trying to work out what an unemployment budget would look like in these times for, say, a family of four where one adult WAS working and got laid off in March. The other adult stayed at home to raise the two grade school aged children.

Here’s what I came up with:

One sample, hypothetical budget

Things would be tight under normal circumstances anyway. Pre-coronavirus pandemic, rent was $2,600, utilities run about $300, cell phone (including financing the devices) is about $195, etc.

Now that the “breadwinner” is laid off due to the pandemic, all kinds of things are different from a normal recession.

On the income side, things are a lot different from a typical unemployment cycle (rightfully so):

  • The CARES Act has a one time payment of about $3,400 ($1,200/adult + $500/child), possibly paid in April
  • Unemployment payments go from $450/week (maxed in California) to $1,050/week, let’s assume starting on the first week of April 2020 (might be a couple of weeks’ too optimistic)

On the expense side lots of things are very different, and let’s assume all the moratoriums and other changes extend all the way through June (BIG assumption, I know):

  • Our hypothetical family doesn’t have to pay rent or mortgages until June (but will have to catch up w/in six months of the emergency being lifted, which will blow this budget to pieces)
  • Utilities, normally $300/month, have been reduced (could be zero, but I keep some in in there), but they too will have to be caught up
  • Most (maybe not all) credit card payments are reduced temporarily, normally at least $500/month
  • Medical debt (many folks have it) payments drop for a while, normally about $180/month
  • Student loan payments go to zero for a while (normally, $400/month), let’s assume all the way through June even though that’s not what they announced
  • Netflix and Amazon Prime are practically mandatory in these solitary times, SO DO NOT TOUCH 😉

Other cash outflows stay pretty much the same.

I know we all have our unique numbers, but the stimulus combined with all the moratoriums, at least here in California, might make this survivable in the short term.

The economic quagmire comes later.

Longer term, we’re going to be saddled with a lot left over rent and new debt (almost 8,000 for rent in my hypothetical, which works out to $1,333 extra per month for six months) that’s going to be a drag on our economic growth, but seems like, if this only goes through mid summer we might make it…?

What did I miss?



Attorney advertising. Now and then I help people file for bankruptcy under the Bankruptcy Code, but I do a lot more than that for my clients. As such I qualify as a debt relief agency, which I’m proud to say. Michael Rice is responsible for the content. 840 Apollo Street, No. 100, El Segundo, CA 90254

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60 Day Break on Student Loans

Here’s some good news in a sea of panic and scary news. The U.S. Department of Education told student loan servicer to suspend payments on student loans for two months. It’s not automatic though. Read on for how to deal make the most of it.

Before we start

Before we start, if you’re on automatic deductions for your student loan payment, check your payment date!!! As part of my unemployment survival guide, I told you to check your automatic payment dates and stop them right away if possible.

Whatever the date is, make sure you contact your student loan servicer before that date so you don’t get hit with a payment you don’t have to make during this temporary freeze. If the normal payment is the 24th, make the call now or get online. I don’t care how long you have sit on hold or how slow the website is.

When you talk to them, they’ll most likely explain what of what I’m telling you.

Remember: CASH IS KING when you’re surviving unemployment.

That said, let’s get on to some more details about what’s going on.

60 Day Stop on Student Loan Payments

Just yesterday, the United Stated Department of Education announced two key things:

  1. The stopped any new interest charges from being added to your loan for at least 60 days
  2. You have the option to not pay for at least 60 days

If you’re unemployed or getting impacted by the sudden economic downturn, the first point probably isn’t a huge deal. But it’s nice to know that, at least in the long term, you’re saving a little money. The government set your interest rate to zero temporarily, which is nice.

The second point is much more important if you’re suddenly unemployed or struggling to bring in money.

“Right now, everyone should be focused on staying safe and healthy, not worrying about their student loan balance growing. I commend President Trump for his quick action on this issue, and I hope it provides meaningful help and peace of mind to those in need.”

Betsy DeVos

How to stop your student loan payments

During this unfortunate phase we’re going though, anyone who requests an “administrative forbearance” can get one for at least 60 days, which is probably two student loan payments for most of us. Forbearance means you don’t have to pay for a short period of time.

To get it, you have to take action. The payments don’t automatically stop (which is part of why I wanted to mention that you MUST check your auto payments and get in front of it). Use this link to find your student loan servicer and contact them.

To get stop your loan payments for a while, contact your loan servicer. The loan servicer is whoever you make your payment to. Mine, for example, go to Navient.

There are some details

Read these notes while you’re waiting on hold or waiting for that website to load!

If you’re seeking a Public Service Loan Forgiveness, you may want to continue making payments, if you can.

Also, if you’re on an income-based repayment plan, there might be some wrinkles. For example, your payment may have, effectively, been reduced to zero. I think you can probably keep up with that payment. Talk to your servicer to see what their point of view is.

If you’re currently 31 days delinquent on your student loan, then you automatically get the 60 day forbearance. I’m a bit unclear on how this works out… does this mean you effectively get to skip three payments? You might have to double up on a payment to catch up, eventually, but I’m honestly unclear as I write this. If you’re waiting on hold with your servicer, you might as well stay on hold and confirm whether you’re in the 31 day period and what happens after 60 days, if they know.

The suspension of interest charges started on March 13, 2020.

The Department of Education has a pretty good list of frequently asked questions you should review too. Some of their questions might help you with your specific issue.

What about private student loans?

Private student loans don’t get the same protections that federal student loans get, unfortunately. Still, everyone knows what’s going on, and they should be flexible with your loans. Reach out to them to see what your options are.

I tried to check Sallie Mae this weekend, for example, but the website was DOWN. Probably not a surprise under the times.


Things are moving fast. Get on my email list so I can give you the latest, fast breaking updates!


Attorney advertising. Now and then I help people file for bankruptcy under the Bankruptcy Code, but I do a lot more than that for my clients. As such I qualify as a debt relief agency, which I’m proud to say. Michael Rice is responsible for the content. 840 Apollo Street, No. 100, El Segundo, CA 90254

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Guides

Unemployed? How to Survive

A whole bunch of us, maybe 2 million people in America (we’re still waiting for the numbers), are suddenly unemployed or had our hours reduced to the point where we’re basically out of a job. That includes many in Los Angeles.

I wrote this because I was in the trenches helping people just like you during the Great Recession through clinical programs and lots of hands on experience helping everyday working people, like you. These are some of the unemployment survival techniques I learned from 2008 to 2010.

UPDATE (Mar 29): Unemployment budget for the pandemic. Check my math, but it seems like it could be good news.

DON’T PANIC!

This could turn out to be a short-term, temporary downturn. We’ll see. Let’s hope. Even it’s short, it’s going to be (very) hard for a little while. But don’t panic.

In this guide, there are a bunch of things you should do right away, broken up by topics like money, rent and mortgages, debts, unemployment, friends and relatives, etc.

Before you start reading, you should know that these actions bring some legal implications with them. Don’t take what you read here as legal advice because I don’t know your specific situation. Take these as suggestions–not specific advice.

How long do you have to go?

I wrote this guide to try to help in the short term. These are not sustainable techniques for how to live long term or even for four months!

The idea behind this post is that you might have to survive for the next two to three months without a job and with little money coming in, if any.

I’m hoping that we get out of this mess sometime in the summer. (Don’t get consumed in the doom and gloom right now. Focus on what you can do!!!)

Money

☑️ Get serious about the money you’ve got and what sources are available to you in the short term. If you’re like most of us in Los Angeles, you probably don’t have much in the bank. Still, pull everything you can together and treat it like gold. It’s the only resource you can’t make more of in the short term.

☑️ Make an emergency budget of all the stuff you absolutely need to live for a few months? It doesn’t have to be fancy. Write it on the back of an envelope from some old medical bill if you need to 😈 (I’ll make an emergency budget form and send it out to you if you’re on my email list.)

☑️ Your budget is probably more than you have the cash or unemployment income for. So keep reading this guide for ways to survive.

☑️ Believe it or not, the U.S. Government might be issuing cash checks to help out in the next few weeks, somewhere between $1,000 and $2,000 per adult, but it hasn’t been sorted out yet. Get on my email list for immediate updates!

☑️ If you think you can get a tax refund from last year’s taxes, file it soon! (If you haven’t already done it.)

While the checks from the government might help a bit, they’re not going to go far if you live in Los Angeles, or pretty much any big city. I’ll try to keep you up to date on what’s going on with this as quickly as I can.

Unemployment

Applying for unemployment insurance might help your budget. In California, you’re going to contact EDD, Employment Development Department. As I write this, the EDD is getting slammed with requests. The week before last, they had about 58,000 claims, I bet it’s 10 times that number last week (March 16).

☑️ Get copies of your paystubs! Make sure you have these for getting the most you’re eligible for when file for unemployment. This is fairly urgent because, with things being as they are, many employers are shutting their doors. If you’re able to get them through another service like ADP, you might be in better shape. But get as many copies as you can as soon as you can.

☑️ Learn about unemployment insurance (“UI”), if you’re eligible, it can pay you a few hundred dollars per week, somewhere between $40 and $450, depending on how much you were making before. It’s not much, but your cash is critical.

☑️ File a UI claim with EDD immediately. There are two sites: one for your laptop computer and one for your phone. Whatever you’re reading this on, use that link.

☑️ Don’t go to the EDD offices because they’re all closed do to the pandemic. You have to file online.

☑️ Not everyone gets unemployment, which is kind of a mess – to say the least. Soon, I’ll post more details on what this means and what to do if they deny your claim.

You might have heard that the unemployment insurance offices are struggling to handle all the claims. You’re right, they are. They are also running low on money. But don’t panic. Those offices and their money are backed by the State of California and even the U.S. Government, so we’ll find the money!

Other public benefits

There are a whole bunch of other options you should consider. Usually people call these “welfare” and I know some of you might feel embarrassed going to the store and using something like SNAP, but remember cash is king. If it can stretch out how long you can make it, then use it.

And besides, there hasn’t been a moment like this where so many of us are going through the same experience, so don’t worry about judgment or shame.

Unfortunately, this is one of the areas I know the very least about. I’ll come back once I learn more about them and have something more intelligent to say.

Housing

If you work out your budget (from above), and it’s clear that you’re going to have trouble making rent (April’s rent is due for many of us in just a few days!!) consider this:

☑️ Talk to your landlord or mortgage company. Just because you heard something in the news don’t simply stop making payments. At least not yet. First, contact your landlord or mortgage company and let them know about the emergency situation. Literally nobody in America will be surprised by what happened to you.

☑️ There are a lot of legal things going on right now to try to help you with your mortgage or rent, including a temporary ban on evictions and foreclosures (I will write more on this soon), but make sure you talk to your landlord or bank.

After food, housing is the most important thing you need to protect. Make it your top priority, and don’t try to play hardball with your landlords based on what you’ve read in the news right now. They all know what’s going on too and can’t afford to lose tenants any more than you can afford to lose housing.

Bills

Go back and take a look at that budget I told you to write. On that list, what are the most important bills?

☑️ Know this: obviously utilities like electricity, water, and gas seem like the most important. And they are. However, they are often the most flexible in terms of making payments and are usually prohibited from simply disconnecting your service, at least the short term.

☑️ So it might sound strange, but core bills like utilities (not rent!) may be the ones that you can delay in the short-term–but not forever, obviously. Remember, I’m trying to help you get through the next few months.

☑️ Internet service is even more important than it was during the Great Recession, and often doesn’t get the same kind of protection (well sometimes it does; it’s a little complicated), so you might need to make this an important priority in your list of bills.

☑️ Phone service (cellular) has become a critical thing for most of us. Still, odds are that you’re probably paying way too much for it. Call your provider and see if you can scale down to a bare bones plan. You don’t need to be uploading Tik Tocs all day right now.

☑️ Seriously slash anything you think you can live without for the next two to three months. This might be a great time to go through all those subscriptions you signed up for on your iPhone and Android. Do you really need cable TV? You know you’ve been meaning to cancel some of these unneeded things anyway.

☑️ Things like Netflix are not extravagantly expensive and might help you get through your days a bit over the next few months. But be real with yourself about everything else.

☑️ Think about how you’re paying for bills. As a bankruptcy lawyer, I can’t advise you to incur more debt leading up to a bankruptcy by paying for all your bills on credit cards (and I’m not saying this is where you’re going), but when you’re unemployed, you may need to turn to credit to get you through. Treat cash as something you can’t get back for a few months.

Again, can’t say it enough: this is a survival plan. Not a good way to live long term!!

Debt like credit cards and student loans

Debt has to be paid for with cash. So we need to treat this carefully and try to get creative.

☑️ Paying debt by incurring more–like cash advancing credit cards or going to payday loan lenders–might seem like something you have to do. It’s obviously a really bad idea. The better idea is to contact your credit card companies and let them know what’s going on and ask for help.

☑️ Almost every lender in the country announced they’re willing to help you postpone or reduce payments in the short term. It almost un-American to not try to help you, if you ask me. So contact them and see if you can postpone for a while before making a payment!!!

☑️ CHECK AUTOPAYMENTS!!! You might already have scheduled payments. Stop those immediately because they are going to hit your cash. This could be credit card payments, loan payments, whatever. STOP THEM IF YOU CAN.

☑️ Contact your student loan lenders. Most of them are federally backed and they are usually really flexible about suspending payments. If your student loans are federally backed, you can skip at least 60 days of payments and stop interest from accruing due to the pandemic. Read my update on the temporary 60 day stop on student loans for more.

Taxes

It’s crazy, but tax filings are going to be due in just a few weeks.

☑️ Taxes are due when they’re due, that’s the law, but keep in mind that the Internal Revenue Service is one of the laziest creditors around. (They’re also the fiercest, but it takes them a while to come around)

☑️ The government is likely pushing out the due date for taxes anyway, so stay tuned for more on this! (Subscribe to my list.)

Stay tuned for more on taxes!

Don’t rush to bankruptcy

Just because you’re unemployed doesn’t mean you need to file for bankruptcy. In fact, this might actually be the worst time to file for it, depending on your circumstances.

The best time to file for bankruptcy is when you’ve pretty much hit rock bottom, your situation is stable and projected to improve in the future, and need all the protections it provides. (I’ll post an article explaining soon.)

For some of you, who are entering this unprecedented phase with little cash and a lot debt, bankruptcy might make a ton of sense later in the year to emerge from this pandemic stronger than ever, but for many it’s too early for that.

More updates coming!

I first wrote this quickly on Saturday morning, March 21. I’ll keep revising it over the next few weeks.

Please do consider getting on my email list so I send you more updates and important alerts as they come. It’s not like you’re going to come back to this list every day, so get on the list so the updates come straight to you.

Good luck out there. Remember we’re going to get through this. I hope I can help you!!


Attorney advertising. Now and then I help people file for bankruptcy under the Bankruptcy Code, but I do a lot more than that for my clients. As such I qualify as a debt relief agency, which I’m proud to say. Michael Rice is responsible for the content. 840 Apollo Street, No. 100, El Segundo, CA 90254