Budgeting While Unemployed
Budgeting is a crucial part of our daily lives. It is a well-defined plan that lets you save a chunk of money from your monthly income consistently, making you more future-proof.
However, the COVID-19 pandemic has brought hard times, with the world in an economic lockdown. And after months on end, it’s still showing no signs of slowing down any soon. Many of us have been receiving substantial pay cuts, yet what's truly disheartening is that thousands of people have been shunned from their jobs, leaving them with little to no income source.
But on the bright side, tough times help us learn as well. The art of Budgeting is exceptionally underrated in modern times as it teaches you some important financial aspects, such as prioritizing essential expenditures and eliminating any unnecessary spendings while you are unemployed,
We have explained some essential aspects of Budgeting in the state of unemployment down below. Our unemployment budget calculator is also listed down, So be sure to utilize it as you progress through the article. That said, lets jump in!
Pre-Planning for Unemployment
For all of you who are still receiving paychecks from your employers, unemployment is just a mail away. Though it sounds harsh, it's the truth of today’s fast-growing world. Nonetheless, we have to do our part to avoid any kind of chaos when unemployment hits.
You can only budget while unemployed if you already have some kind of savings or backup. Starting today, save at least 20% of your total salary, no matter how much you earn. To make the process more straightforward, perform budgeting only after you keep aside your monthly savings.
This will start to set off a chain reaction that will make you more aware of your future expenditures. If your current spending is too much, try accommodating unnecessary expenses such as shopping and traveling into next month’s slot or whenever your books get balanced.
Claiming your Unemployment Benefits
If you can provide proper evidence of your employment, you can enjoy its benefits. However, the reasons you were laid off from your last job will determine how much unemployment income you’ll receive.
Fired Without a Cause
If your employer dismissed you with a valid reason, such as downsizing, lack of business growth, or elimination of your position, you’re probably applicable for unemployment benefits. But you could also be fired due to criminal behavior, theft, sexual harassment, physical violence, or anything non-acceptable in corporate culture. In that case, you will undoubtedly find yourself ineligible for these benefits.
Under most circumstances, you won’t be eligible for unemployment benefits if you quit your job. However, there’s one exception. If you quit your last job due to a proper reason like facing sexual harassment in the office and the illegal working of the company, you are eligible.
Some states even ask the employer to collect unemployment if he/she can no longer work in an office due to severe medical conditions.
Estimating your Unemployment Income
Each state and district uses different methods for calculating unemployment income for eligible citizens. So you may receive around $250 to $800 per week, depending on your territory and number of members in your household. Besides, many states offer better benefits if you are the prime earning member of your family.
Some states even offer monthly or also half-yearly benefits at once. Such variation makes it challenging to settle on a single amount. An important point to note is that the federal government usually steps in the times of global pandemic, recession, or natural calamities, and they can increase the length or the amount of unemployment income.
Prioritizing and Adjusting Monthly Expenses
As soon as unemployment hits the podium, you should be ready with your backup and road-map ahead. Make a list of essential things such as food, groceries, bills, utilities, and transportation, and keep them on a priority check.
Other expenditures such as secondary bills, memberships, and luxury spendings should be squeezed to minimal. Following these steps will help you extend your savings for a more extended period.
Some Frequently Asked Questions about Budgeting while Unemployed:
Q - Can my high income make me qualify for unemployment?
A - No. Most state policies calculate their unemployment benefits on wages paid over the previous four to five quarters. If your earnings came from wages within a single quarter, most states likely qualify you as eligible regardless of income size, though most have a minimum income requirement.
Q - How does unemployment affect your income tax?
A - The government views unemployment as taxable income. At the end of each fiscal year, you will receive a 1099-G tax form from the state unemployment office, noting the amount of unemployment income you earned. However, you can have up to 10% of each unemployment check withheld in taxes.👉 Check out our courses to learn more!