Adulting 101 - Getting Back on Track

Life sure has been different for the past few months. When COVID-19 officially turned into a global health pandemic back in March, states and cities shut down in an effort to prevent the spread of the disease and keep hospitals from becoming overwhelmed. An unfortunate side effect of the actions taken to keep us as safe as possible, is the record amount of unemployment that has followed. There is never a good time to lose a job or be furloughed for an indefinite time period, especially during a global health crisis. As cities and states begin to open back up, however, now is a great time to get your finances back on track. Here are 5 things you can do to get moving in the right financial direction when you get back to work.

1)    Emergency fund: When you’re able to find a new job or get back to your old one, start by working out your new budget. If you spent through your emergency savings during quarantine, create a plan to start stashing cash and building up your emergency reserves. We don’t know if there will be another surge in virus cases, which could cause city or statewide closures again, and you won’t want to be caught off guard. Most advisors suggest aiming for at least 3 months of basic living expenses in savings.

2)    Pay off debt: If you already had debt or went into debt due to delays in unemployment or not enough savings, as you’re creating your new budget, make a plan to pay off your debt as quickly as possible. Don’t sacrifice your emergency cash for this plan. You may need to balance saving and paying off debt at the same time.

3)    Restart your retirement savings: Don’t forget to turn on your retirement savings contributions. If your employer’s plan offers a match, work toward contributing enough to at least receive the full match amount. You may want to start with a small amount, perhaps 1% - 2%, if you’re also trying to build up emergency savings and pay off debt. Most employer plans have an option for an automatic annual savings increase. If you’re starting with a smaller contribution amount, consider using this tool so you don’t forget to increase your savings later.

4)    Check your benefits: If you were furloughed with full benefits, they should have continued as normal during the time you were off work. If you elected for COBRA coverage during a furlough, call your HR department to make sure you understand when your benefits, like medical insurance coverage, start back up. Also, check on things like PTO to find out when that will begin accumulating again and what you still have available in case you need it in the future.

5)    Avoid unemployment benefit overpayments: Or, plan to pay back any amount you were overpaid. Many states require a weekly or bi-weekly filing for unemployment. If you are called back to work or find a new job, your first day of work is the date you are no longer eligible to receive unemployment benefits. Notify your state agency of the date you go back to work to avoid an overpayment of unemployment benefits. Remember, if you receive the benefits in error during an ineligible period, you will be required to pay back the money.

While we are still in a place with a lot of unknowns, it seems many states, including Indiana, are phasing through their re-opening stages. This means many will get back to work and some sense of normalcy. When you do get back on your feet, don’t forget to prepare yourself for another potential emergency, whether it’s related to COVID-19 or some other circumstance.

-Margaret Gooley, CFP®, Worley Erhart-Graves Financial Advisors