How to Make the Most of Your Unemployment Benefits

Concerned woman  reading her bills.

If you’ve lost your job, you may be facing the scary reality of living on unemployment benefits. You’re probably going to have to make some tough financial choices. Unfortunately, it’s common to fall behind on your debts during a layoff as unemployment benefits and other cash assistance for unemployed individuals don’t usually match the full level of your salary. Even if you’re receiving benefits, you may find you need a leaner budget and supplemental unemployment support to avoid building up unemployed credit card debt.

To start, if you’re not getting unemployment benefits yet, have you double checked your eligibility?

Eligibility Criteria for Unemployment Benefits

Unemployment support, including cash assistance for the unemployed, and their governing rules vary by state because the benefits are determined at the state level. Generally, you’re eligible to receive benefits for the following criteria:

  • Recent work history. You need to have been working recently and have earned a certain amount in wages during a specified period known as the "base period." The base period typically looks at the last four quarters of earnings.
  • How you came to be unemployed. If you quit voluntarily or were terminated for misconduct, you may not be eligible. Some states, like Washington, take into account whether you quit for a “good-cause” reason like taking care of a sick family member.
  • Are you looking for another job? Claimants are usually required to be available for work and actively seeking employment. This often involves documenting job search activities.

How long you can receive benefits is also varies by state, but the typical length of time is about 26 weeks. During major economic downturns or periods of high unemployment, the federal government may authorize extended unemployment benefits to provide additional weeks of compensation.

If you’re already receiving unemployment support, here are some tips to create a financial plan for your obligations (check out these resources for more help).

Review Your Finances and Set Up a Plan

It’s important to understand your overall financial picture to prioritize your obligations. That includes putting some of them on the back burner. Maintaining good standing with your creditors is important, of course, but it’s probably not going to be your first priority during this period. Here’s what to do.

Review your benefits first

Unemployment benefits are based on your past earnings (usually during the previous year). Every state is different, and everyone’s benefit amount is different (usually unemployment support is salary dependent). In Texas, the weekly benefit amount can be as little as $73 (the current minimum) and as much as $577 (the current maximum).

Figure out your bills and what you have available in savings

You’re going to have a very tight budget to work with, so it’s essential to understand every dollar available and where money needs to go. Once you have your adjusted budget based on your unemployment benefits, you’re really going to have to stick with it. The less money you have, the less you can afford to freestyle.

Prioritize your obligations

Not every bill is equal. Your safety and security come first. Lay out your expenses in order of priority. What expenses can be reduced? What are the potential consequences of not making certain payments? Weigh all of the information before deciding what you can and can’t spend. While you want to keep new debt low on unemployment, it isn’t always possible.

For example, you need to keep your internet operational to job hunt, but you might not need to pay beyond the minimum on your credit card bill. This will increase your credit card debt while unemployed, but it may be necessary if other essential services cannot be reduced or deferred. You may also be able to set up a debt management plan to help recover after reemployment.

Contact creditors and utility providers and ask about unemployment help

They may be able to put you on a short-term hardship plan. Unemployment support may come in the form of deferment, paused or reduced interest or temporarily reduced monthly payments.

Don’t agree to a new payment plan you can’t afford

Any sort of debt repayment plan will be contingent on what you can realistically afford to pay. But if you fail to make the new payments, the creditor will likely revoke the hardship plan and put you back at your regular terms. Do all you can to avoid this situation.

Continue to communicate with creditors

Even if you’re not making loan or credit card payments, it’s critical to monitor your accounts and stay on top of any accruing credit card debt while unemployed. The most important moment is the one you’re living in, but spare some time for thinking about what comes afterward when you’re gainfully employed again. Create a plan around how you’ll recover once you’ve got a steady income stream.

Look for side hustles or gig work and keep your unemployment benefits on track

Make sure you follow all the instructions and requirements to maintain your unemployment benefits—again, these requirements will be different in each state, but many require you to actively look for employment. The most important thing right now is to keep that weekly benefit coming in.

You may also be able to look for supplemental ways to add income while you’re job hunting. Just make sure you check with your unemployment office so you know how any income from contract work or side projects could impact your benefits. If you make more than a certain amount, you may not receive your full benefits, so you’ll want to make sure your side income more than covers what you would otherwise get from unemployment support.

Set expectations in your household

You’ll need your family’s buy-in to be successful with your new (temporary) spending plan. Make sure you’re all on the same page. That includes understanding all your financial obligations, reducing spending where you’re able to, and prioritizing the most important expenses.

Build in some amount of fun and reward

Of course, living on a tight budget isn’t easy. But don’t make maintaining it a punishment. Allow for some fun to help avoid an eventual breakdown and splurge. Of course, if that fun is free or low-cost, so much the better. Look for things around town like free library events or free Parks and Recreation events, or invite friends for a low-cost potluck.

Adjust as you go

This new (temporary) reality may be very different from what you’re used to. Your best guess at how to manage your budget may not work well in practice. Be flexible and willing to change, but don’t lose sight of your financial limitations.

Explore Assistance Programs for Temporary Help

If you qualify for it, right now is a good time to get some government help. Cash assistance programs for the unemployed can take the pressure off your finances and reduce the debt you may be building. Here is a list of government benefits to explore.

  • Supplemental Nutrition Assistance Program (SNAP) provides eligible low-income individuals and families with funds to purchase food at the grocery store. SNAP is administered by the U.S. Department of Agriculture.
  • Temporary Assistance for Needy Families (TANF) provides financial assistance to low-income families with children. It aims to help families achieve self-sufficiency through various support services.
  • Medicaid is a state and federally funded program that provides healthcare coverage to low-income individuals and families. Eligibility criteria vary by state, and coverage may include doctor visits, hospital stays, prescription medications, and more. Many states assess your eligibility through your state Marketplace website.
  • Supplemental Security Income (SSI) is a federal program that provides financial assistance to aged, blind, and disabled individuals with limited income and resources. It is administered by the Social Security Administration (SSA).
  • Low-Income Home Energy Assistance Program (LIHEAP) helps eligible low-income households with their home energy bills, providing financial assistance to help cover heating or cooling expenses.
  • WIC (Women, Infants, and Children) is a federal nutrition program that provides support to pregnant women, new mothers, and young children ages 0-5.

Also, check to see what your state offers for subsidized childcare services. Many states offer a unique list of government benefits that may include childcare assistance programs to help low-income families afford childcare while parents are working or attending school.

Families with school-aged children may also qualify for free or reduced-price school meals. Contact your child's school or the local school district for information on how to apply.

Once you’re back on your feet with a new job and regular income, you can assess how to get back on track with your debt. If you’re ready to do that, we offer credit counseling and debt management plans for anyone looking to reduce debt and do more with their money.

Tagged in Unemployment, Navigating change, Managing a loss of income

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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