As unemployment claims filed since mid-March totalled a staggering 30.3 million people, stocks racked up their best performance up nearly 13% in April since 1987.
How can this be?
1. There is an inverse or opposite relationship between the level of unemployment and forward stock returns. That is, the best returns historically come after periods of high unemployment. Charlie Bilello has done superb work in this area. Stocks tend to be forward looking indicators.
2. Stocks still remain a good place to invest given their higher growth profile over the long term. In comparison to stocks, money market securities and bonds are safer but will provide very modest returns. As the economic outlook looks anything but clear, investors should remain diversified with these asset classes as the worst is probably yet to come.
3. The Fed recognized the need to provide substantial liquidity to our financial markets. As such, it has been using its full range of tools. They have brought interest rates to zero, made asset purchases and launched a variety of programs to get money to households and businesses.Their action has provided confidence to the markets even as unemployment is rising quickly and our GDP could drop by over 20% in the second quarter according to these forecasts.
4. Stimulus packages, the largest of which is The Cares Act at $2.2 trillion has something for many in need. How funding was distributed has been questioned, falling short for apparent goals.
As a result of the coronavirus, there have been new rules and guidance in a number of areas designed to help our financial situation. Read on as there may be something for you that you are entitled to.
8 Ways To Improve Your Financial Situation Due To the Pandemic:
- More people eligible to get unemployment benefits.
- Student loan pauses will help.
- Mortgage loans options are available.
- Access to free Weekly Credit Reports.
- Lower car insurance and home insurance for savings.
- Electric bill cuts for reduced costs
1. More People Are Entitled To Unemployment Insurance Benefits
Normal rules for unemployment insurance benefits have been expanded due to the pandemic. The Cares Act provided more relief for people who are filing for unemployment. Specifically, people will receive an additional $600 per week in unemployment benefits from the federal government until July 31st. The $600 check is granted irrespective of which state you are applying to. This amount is on top of your state’s payments which are extended up to 39 weeks from the standard 26 weeks.
To put that into perspective, the weekly average employment benefits from state coffers were $371.88 at the end of 2019. Those filing in Mississippi receive the lowest weekly amount of $213 compared to Massachusetts where the state is cutting weekly checks of $546. Against that backdrop, the additional $600 is generous. The typical one week waiting person has been dropped. This extra money can help you save money and pay bills.
Filing For Benefits Has Been Difficult
Not everyone who has filed for unemployment insurance has received money yet. According to an Economic Policy Institute survey, the official count of unemployment claims filings may be significantly understated. For every 10 people who said they successfully filed for unemployment benefits during the previous four weeks, up to four people tried to apply but could not get through to the system. As many as 14 million more people could have applied had the process been easier to manage.
Back in March, we were impressed that millions of people were successful in making their claims. Clearly, glitches occurred after having low unemployment rates for so long. This should have been expected. If you applied previously but didn’t get through, try again. Getting unemployment benefits has never been an easy process but you are entitled to these funds.
New Jobless Applicants Allowed
Tradtionally, part-time workers, independent contractors, self-employed, freelancers and gig workers were barred from receiving unemployment benefits. They account for about one-third of our workforce, numbering 57 million people. As part of the CARES Act, the Pandemic Unemployment Assistance program provides benefits if these people lost their jobs or livelihood as a result of the virus. Each state has their own income and other limitations you need to review.
This group of workers are eligible to receive half of the average unemployment benefit in their states plus the extra $600 per week through July 31st. The process has run into some roadblocks. While the intention was to help those who cannot work during the pandemic because of lockdown orders, the reality has proven more difficult. Non-traditional workers such as part-timers generally haven’t been able to collect benefits. State systems weren’t designed to handle these claims. The systems have been deluged, with a resultant slowdown of an already taxed process. Be patient, re-apply if need be. You will receive what you are owed retroactively to mid-March.
College Students May Be Eligible
Generally, college students are not eligible for for unemployment benefits. However, financial relief may be available for students who were impacted by the coronavirus outbreak. If they were working while enrolled in college and their part-time or full-time work ended because either their campus shut down or their employer closed, they may be able to file for unemployment insurance. Many students turn to a variety of programs associated Federal Work-Study or federal loans at on-campus or off-campus facilities to earn money to alleviate the high cost of their education. You may be entitled to receive paychecks or a lump sum amount for up to one year.
If you had a job rescinded as a result of the pandemic, whether you are a college senior or not, you may be eligible for jobless benefits. You will likely need to provide documentation.
Related Post: A Letter To College Students During The Pandemic
Related Post: Why Unemployment Matters
2. Stimulus Checks For You
Most Americans are eligible for a one time stimulus check of up to $1,200 as an individual, with married couples getting up to $2,400 depending on your income. Families with children are eligible to get an additional $500 per child under age 17 years. According to the CARES Act rules, to qualify for the full amounts of $1,200 or $2,400, your adjusted gross income (AGI) must be $75,000 per individual, $112,500 for heads of household or $150,000 per married couple. If you earn more than these amounts, you will receive reduced payments. You won’t receive any payments if you make more than $99,000 for individuals, $136,500 for heads of household and $198,000. Some people are experiencing delays in receiving stimulus checks.
Independent students can get a $1,200 stimulus check (or $2,400 if a married couple) so long as their parents do not claim them as a dependent and their AGI is $75,000 or lower. The CARE Act indicates that those with student loans in default will receive the full stimulus amount rather than a tax refund offset. Students may appeal for emergency financial aid programs through their colleges if more help is needed.
The Adjusted Gross Income Calculation
Adjusted gross income appears on your Form 1040. To calculate AGI, begin with gross income. This amount adds up all your taxable income you report for income tax purposes. That can can be your salary or wages from your job, stock or bond interest income and any rental income if you have any property. Those who are self-employed report their business income less self-employment taxes. If you receive bonuses, tips and such income, add this to the gross income. From this total gross income deduct related expenses and the result is your AGI.
3. Student Loan Pauses
If you are carrying student loans there may be some good news for you. A major part of the $ 2.2 Trillion CARE Act is devoted to easing the student loan payments you owe from its effective date of March 13, 2020 until September 30, 2020. While temporary, Congress may keep some of these beneficial provisions longer or even make them permanent.
Among its major provisions related to student loans are:
- Suspension of involuntary collections of student loan debt, including wage and social security garnishments and tax refund offsets.
- Federal loans will suspend payments automatically on Direct loans and Federal Family Education Loans (FFEL) which account for 88% of federal loans.
- No interest will accrue during the six month period. Paused payments will count toward requirements for Public Service Loan Forgiveness (PSLF) programs and income-driven repayment plans.
- There will be no impact to your credit report as suspended payments will be reported by the US Department of Education to the national credit bureaus (Equifax, Experian, and TransUnion) as if they were on-time payments.
- Expands IRS tax code section 127 to allow employers to reimburse up to $5,250 for most student loan payments which can be excluded from taxable income. SHRM says 8% of US organizations offer this terrific employee perk. More companies may jump on this bandwagon to help employees with these payments in the future.
These changes are automatic. This means you do not have to contact your student loan servicer. That said, if you are unsure, I think it is a good idea to inquire if your loan is covered.
4. Options For Mortgage Payments Relief
If you are not having trouble paying your mortgage, skip ahead to the next section. However, for those having some financial difficulties paying your monthly mortgage, there may some relief. For a short time, you may be able to skip all or part of the loan due. The CARES Act covers federally backed mortgaged for 60 days after its passage. During that time neither your lender or loan servicer may foreclose on your home. If you are facing financial hardship due to COVID-19, you have right to forbearance for up to 180 days.
If your mortgage is not a federal loan, check with your respective servicer or lender as to what they allow and for what timeframe. Keep in mind that this relief is not designed to forgive or erase your debt. However, it may provide a reprieve for a temporary time without interest accruing.
5. Free Weekly Credit Reports Until April 2021
Normally, you can get your credit report free one time per year from each of the three credit bureaus, Equifax, Experian and TransUnion. This means that you can review your credit reports every four months. Reviewing your credit report regularly is important. Many consider your creditworthiness before renting to you, making a loan, providing utilities or even a job. You can now receive your credit report free on a weekly basis through April 2021 from AnnualCreditReport.com.
If you are having financial hardships, reach out to your lenders. They are being encouraged to consider temporarily lowering your interest rate, payment amounts or pause your payments for a period of time. This is probably a good time to seek flexibility. Lenders can be forgiving about late payments, collections and forbearance. Creditors will look at your case individually.
Related Post: 6 Ways To Raise Your Credit Score
Remember to stay vigilant when you are reviewing your credit report for errors or signs of fraud. You can find common errors found on your credit report and how to fix it on the Consumer Finance Protection Bureau checklist. In times like these, fraud tends to rises as it did during the Great Recession. If you spot a scam or feel something isn’t right, the Federal Trade Commission provides instructions to help you.
6. Negotiate For Lower Car Insurance
During the pandemic, you probably have not been driving as much because you have been encouraged to stay home. With more than 90% having been affected by idle cars in their driveways, people have called their providers to find out about lowered prices and options. Many auto insurance providers have been quite vocal publicly with providing their customers with discounts. If you haven’t called your company, reach out to them for more information. By the way, don’t cancel your plan or switch at this time.
Many auto providers have showcased their ads and willingness to give back some amount to their customers or give the discounts for the reduced driving (eg. 10%-15%). These savings are valuable if even for the short term. Look at parts of your auto insurance for potential reductions in liability coverage for bodily harm and property damage, personal injury protection, collision, theft and vandalism.
7. Home Insurance Costs May Be Reduced
While you are in negotiation mode, call your home insurance providers to see if there is any flexibility to lower your rates. The rationale for asking for a break is that you and your family are at home more (certainly your dogs have noticed) and there is likely less burglaries in your neighborhood or damage to your home. For example, you may need less personal liability coverage for slip and falls in your home as you probably aren’t getting any visitors these days. Any money saved can be helpful.
Life insurance providers may not necessarily be giving breaks on their policies due to the virus. In fact, you may face greater scrutiny if you are a new applicants buying life insurance. As usual, roviders will want you to provide a statement of good health from your doctor who may be difficult to schedule now. However, providers may have increased concerns related to your future overseas travel plans. They will be more cautious of those seeking new life insurance policies. You may be subject to sharing where you have been and where do you travel overseas for work.
Related Post: 8 Types of Insurance We Need
8. Lower Electric Bills
Check with your fuel provider for price reductions. Oil and gas prices have dropped significantly in recent weeks so you may be entitled to some money back. From an economic point of view, there has less global demand for fuel. Also, we are driving significantly less with reduced commuting to work, school, and vacations. As a result, electric bills should be less and appropriately brought down. Reach out to your provider to see what they can do. Many providers have proactively dropped their rates, depending on the type of plan you have.
These are difficult times and easy to be overwhelmed. You may have been affected by a loss of a job or had to close your business. There may benefits you are entitled to that were not offered in the past. Ask for help from lenders and providers in the way of lower rates or more time to pay bills. This may be a better time to ask for flexibility but you need to take the first step and inquire. Accessing money you are entitled to can add to your savings and your ability to pay bills on time.
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With a passion for investing and personal finance, I began The Cents of Money to help and teach others. My experience as an equity analyst, professor, and mom provide me with unique insights about money and wealth creation and a desire to share with you.