A massive 25 million Americans each could lose $600 a week in federal unemployment benefits by late July the Wall Street Journal reported.
That’s because the extra payments to laid-off workers who lost jobs due to the coronavirus pandemic will end July 31. That stoppage, without an extension of those benefits or a quick action by the federal government, could potentially force scores of individuals and families to find new ways to support themselves.
Actually, when asked how long they could live without that extra $600 a week, nearly 32% of Americans reported “less than one month,” according to a new study by The Ascent. Some 33% said “one to two months;” 25% reported “three to six months;” and 11% proclaimed “more than six months.”
And for those with income loss over the next three months, about 53% are “very likely” to get a side job, 32% borrow money from family or friends, 23% take an early retirement plan withdrawal, 22% take out a personal loan, and 14% borrow against their home.
Another startling finding was that 1 in 4 Americans lost all of their income due to the pandemic economy since early March.
Further, 22% of Americans are confident they’ will get back to their financial state before the pandemic started within three months and 28% think that will happen within six months. About 47% believe it will take more than half a year to recover, and a small but notable number, 3.3%, think they won’t recover at all.
The Ascent surveyed nearly 2,000 Americans in early June who have experienced income loss due to the pandemic to learn how much they’ve lost and what financial moves they are making to endure COVID-19. A Motley Fool firm, The Ascent reviews financial products including credit cards, savings accounts, mortgages, and other items to help people make informed decisions on money matters.
But the report indicated some of these moves could have long-term negative impacts, especially taking a retirement plan withdrawal or a personal or home equity loan. One might do well to consider if those loans are not repaid on time, they could lead to severe credit score damage.
How to Earn Extra Cash
Still, those with income loss possibly could benefit by taking actions to help make up the deficit. Matt Frankel, a certified financial planner at The Ascent, offered tips to Black Enterprise on how Americans can make ends meet without the extra $600 weekly payment provided by the CARES Act.
“There are several ways Americans can get extra cash to help make ends meet—tapping into retirement accounts, using credit cards, and borrowing from family and friends are just a few examples. But if you’re worried about your $600 CARES Act enhanced unemployment benefit running out, it’s important to know which types of borrowing can be smart, and which to avoid.”
For starters, it’s typically a good idea to leave your retirement accounts alone unless you don’t have another option. The CARES Act certainly made it easier to borrow and withdraw from retirement accounts, but you’ll be robbing your future self if you use the money prematurely.”
Credit cards can be a good fallback option, especially if you can avoid interest with a 0% introductory APR offer. This way, if you use the card to help with bills and living expenses for a few months, you at least won’t be accumulating interest on top of it.”
Finally, it’s important to mention that borrowing money and drawing down savings are just one side of the equation. The most effective way to cope with an income interruption could be to temporarily reduce your expenses, and that can be easier than you think.”
For example, most mortgage borrowers are legally entitled to a forbearance of up to 12 months on their mortgage payments right now. Most auto lenders and credit card companies are eager to work with struggling borrowers as well, so if you’re worried about how you’re going to make ends meet once the extra unemployment support runs out, one of the smartest things you can do is to call your lenders and see if you can temporarily reduce your monthly payments.