The Smartest Way to Use Unemployment Benefits

Loss of items can confuse your finances, even if you are a meticulous budgeter. You need to re-evaluate your spending and your priorities, and this can be especially difficult because losing your job can have a huge emotional impact.
Expanding unemployment benefits has been a lifeline for millions of Americans during the pandemic. There is no one-size-fits-all solution to surviving on an unemployment budget.
But there are some effective strategies for spending your profits, how to adjust your budget, and what expenses to prioritize.
How Unemployment Benefits Work
The US Department of Labor oversees the unemployment insurance system, but each state has its own program, sets its own rules, and provides most of the funding. A typical statewide unemployment program will replace about half of your average salary for up to 26 weeks during the normal period, but benefits can vary widely.
Average weekly unemployment benefits were $ 387 in February 2020, before job losses were widespread due to COVID-19. Mississippi offered the lowest weekly benefit, at $ 215, while Massachusetts paid the highest, at $ 550 per week.
The Coronavirus Economic Aid, Aid and Security Act (CARES Act) provided $ 600 per week of federal funding to unemployed workers in addition to their regular state benefits. About 76 percent of unemployed workers could earn more from unemployment than they did from the jobs they lost. This weekly supplement expired in July 2020.
A relief bill to help with unemployment was passed in December 2020.2 It supplemented regular state benefits with an additional $ 300 per week, plus $ 100 for some self-employed, and was in effect through March 14, 2021.
The American Rescue Plan, approved in March, provided an additional $ 300 per week through September 6, 2021.
First Fiscal Plan
Your unemployment benefits are taxable income for federal tax purposes, although this rule was waived in 2020. You must report any unemployment benefits when you file your future income tax return. You can elect to have 10% of your tax benefits withheld by filing IRS Form W-4V, but this is voluntary.
There is no guarantee that the 10% will cover your tax obligations and you do not have the option of having more money withheld.5 Thirty-five states also tax unemployment benefits.
Your benefits are not subject to payroll taxes that are funded by Social Security and Medicare.
It may make sense to withhold taxes from your benefits, if you still have enough money to pay for your basic expenses and necessities.
This would save you from some tax obligations in the future. But not having taxes withheld is often the best option if you're having trouble paying bills, according to Leslie Tayne, a New York-based debt settlement attorney and founder of the Tayne Law Group.
"If getting tax-free unemployment insurance prevents you from choosing a predatory loan or having to borrow money at excessive interest, it might make sense to avoid withholding and [owing] money when filing your taxes," Tayne said in an email to The Balance.
It is essential that you file a tax return anyway to avoid additional penalties and interest, even if you cannot pay what you owe at the time of tax payment.
Prioritize your rental
It is essential to prioritize rent in your unemployment budget. The Centers for Disease Control and Prevention (CDC) extended a national eviction ban until September 30, 2021, but the United States Supreme Court struck down that extension on August 26, 2021, ending the moratorium. The Court's decision was made on the basis that the CDC exceeded its authority.
And the moratorium didn't stop unpaid rent from continuing to accrue while it was in effect. It simply decided that the tenants could not be evicted for not paying during this period.
Landlords also had the right to apply fines, penalties, and late payment interest for periods when rent was not paid. Renters may find they owe their landlords a mountain of debt when the moratorium ends. Landlords are free to start or resume eviction proceedings from August.
Create your emergency fund
Losing your job is one of the main reasons for having an emergency fund. Consider putting money in your hard time fund before paying more than the minimum on your debt if you have some money left after taking care of the essentials.
It will provide you with a safety net in case your unemployment insurance expires before you find your next job.
Having a safe home, maintaining utilities, and maintaining adequate food and health care are more important than paying off debt. Saving money now helps ensure that you can meet those unexpected needs or expenses without going into more debt.
We hope you enjoy watching this video about The Smartest Way to Use Unemployment Benefits

Source: Broker Bob
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