Some CARES Act Benefits Have Ended. Now What?

By: Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIF®, CRPS®, CMFC®,  AWMA®

Since mid-March, the CARES Act has provided benefits to individuals out of work, struggling business owners and more. As of July 31, many of these additional benefits have expired, leaving those affected by COVID-19 in a difficult situation. Americans can now expect their unemployment checks to be reduced to their state’s typical payout, with a national average of about $378 per week.¹ This means a sudden cut in income for jobless individuals. 

The Paycheck Protection Program has granted forgivable loans of up to $10 million to about 4.5 million businesses that employ up to 500 workers. These loans intended to cover eight weeks of payroll, rent and utility costs, which was set to end in mid-July.² While the deadline to apply for a PPP loan has been extended to August 8, it will be difficult for unemployed individuals to rejoin the workforce as businesses continue to struggle.³ 

Because of these continuing difficulties, it’s important to plan ahead financially and develop a plan to stay afloat without these additional benefits. 

Use Your First Unemployment Check Wisely

Due to out-of-date systems and accumulations of benefit claims in many state labor departments, millions of laid-off employees have struggled to file properly for their benefits.⁴ Because unemployment benefits begin on the date a worker was laid off, prolonged first unemployment checks can contain several weeks of benefits. 

It’s important to note that if you haven’t spent, or received, your unemployment benefits yet, be mindful once they do arrive. In order to ensure that they last for the duration of the time that you need them to, start by setting aside a certain amount for future purchases, bills, etc.  

Begin With a Budget

Having a monthly budget is always important, but especially in the case of out-of-work individuals and struggling businesses. Begin by understanding your monthly expenses and developing a plan you can stick to now that you won’t be receiving an additional $600 per week. 

Necessary expenses can be broken down into fixed costs (including your rent or mortgage), discretionary spending (such as groceries or clothes) and savings. By establishing what you need in these areas will allow you the ability to re-evaluate what can be cut or how to reduce some of your expenses. 

Set Aside Taxes

More than a quarter of those who have received unemployment benefits believe that the payments are tax-free - but they are not.⁵ You can avoid an unexpected tax bill by speaking with your state employment office and asking them to withhold taxes from your check. Alternatively, you can pay the IRS directly if you so choose. 

Establish an Emergency Fund

If you haven’t already done so, you’ll want to take some of your unemployment benefits and create an emergency fund. Many Americans are utilizing their savings to survive the pandemic. In fact, one in four families has dipped into their savings or emergency funds to cover their living expenses during this time.⁶ 

Both consumers and business owners have likely been weighing whether they should continue to save or if they should pay their debts. For those without emergency savings, having cash to fall back on may be more important currently than reducing debt. 

No matter your circumstances, you’ve likely been affected by the pandemic in some way. Those who have lost their jobs and struggled to maintain their businesses have experienced changes to their finances they never expected. Although a number of CARES Act benefits have expired, there are a few, including student loan reprieve and foreclosure moratoriums, that will remain in effect for some time longer.