Navigating Uncharted Waters With or Without the Extra $600


What’s trending? Lots of chatter about the $600 jobless bonus, or “unemployment insurance supplement.” If you’re receiving it, you know all about it. If you’re not, here’s a little background.

The total number of Americans who filed for unemployment since the coronavirus reached America has been staggering. The San Francisco Chronicle has reported that over 51 million people have filed for benefits since the shelter-in-place orders started in late spring. By mid-July, those with “continuing claims” had dropped to around 16 million. (Continuing claims are those people who are receiving benefits for at least two weeks straight.)

HCR Wealth Advisors has noted that some relief came in the form of the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It significantly expanded unemployment benefits in two ways:

  • Until July 25, 2020, it provided a federally paid unemployment supplement of $600 per week to whatever each eligible person’s state would pay in unemployment.
  • It uniquely stretched the unemployment rolls to include gig workers and the self-employed. Traditionally, only those who had been employed would have been covered.

The extra federal payments were meant to raise unemployment benefits closer to what people were earning while working. (Each state defines the amounts and duration of benefits.)

The Center on Budget and Policy Priorities states that the national average of weekly benefits in April 2020 was $333, but that average benefits varied from $101 in Oklahoma to $531 in Massachusetts. The extra $600 per week raised the average check to over $900.

And a portion of the CARES Act, called the Pandemic Unemployment Assistance program (or PUA), added gig workers, freelancers, independent contractors, and small business owners who could show their income had been affected by the coronavirus. PUA coverage will last until December 31, 2020. (These workers also receive the $600 add-on until July 25.)

CARES provided another protection: it included a temporary moratorium on evictions for many residents who lived in subsidized apartments and those renting homes covered by Freddie Mac, Fannie Mae, and the FHA. Those who couldn’t pay their rent were protected from eviction for 120 days.

What are some collateral concerns?

As firms like HCR Wealth Advisors are aware, the concerns of the individual don’t always coincide with those of the state and the economy. But in this case, they are intertwined.

Individuals want the $600 weekly supplement to be extended until the economy returns to some semblance of its former self. But because the extra $600 means many lower-waged workers are earning more while unemployed than they were when employed, it’s seen as a disincentive for too many people. And, with that, the economy suffers because employers have difficulty re-hiring workers.

Yet, putting $600 in the hands of Americans each week gives them money to spend. And most are spending (rather than saving) it to keep their families fed, clothed, and sheltered. To end those payments would mean ending their stimulating effect on the economy. That stimulating effect means more demand for products and services because people have the money to purchase them. And that, in turn, means more demand for workers in jobs.

What happens when the time-limited benefits end?

If some timely accommodation is not made by Congress to extend the supplemental benefits beyond their expiration in late July, the CARES Act still offers some assistance.

Unemployment benefits traditionally last for 26 weeks in many states, but the CARES Act extends them to 39 weeks. The state pays the initial 26 weeks, and the federal government funds the balance through the Pandemic Emergency Unemployment Assistance (PEUC).

Not all states pay 26 weeks as North Carolina and Florida, for example, each offers only 12 weeks of benefits. To avoid shortchanging residents in those states, PUA kicks in the difference.

Under the law today, neither PEUC nor PUA benefits will be paid after the end of this year. But the federal eviction protections will end much earlier: in late July.

Action steps to consider, regardless of what happens

The coronavirus effect has everyone trying to navigate uncharted waters and regardless of whether or not Congress agrees to a $600-a-week, $300-a-week, or $0-a-week federal supplement to unemployment benefits, HCR Wealth Advisors has identified a few action steps that could be helpful. The pandemic is no individual’s “fault,” so there can be no judgment of someone asking for help.

  1. Those who were furloughed by their employers should check-in to see if or when they might be able to return to work. Whatever the answer might be, any work that brings additional income is helpful, bearing in mind the risk of losing the more valuable unemployment benefits. (This period is about maximizing cash flow to support individuals and families.)
  2. Utilities and some creditors have reached out to offer coronavirus relief programs, whether as forbearance periods or discounts. Auto insurers, for example, have returned some premiums in response to having to cover fewer accidents. After all, people have gone for months without driving their cars. These gestures are worth exploring.
  3. Someone with high-interest debt and a good credit rating might look into transferring credit card balances to more favorable interest rates. These opportunities may be less abundant than earlier in the crisis, but lowering monthly outflows and the interest charges that grow each month is a good idea.
  4. Some credit unions and community banks are making coronavirus hardship loans. Their goal is to offer low-interest rates and relaxed repayment periods, especially to those people who make up part of the community.
  5. If the coronavirus crisis came on top of an already heavy debt load, it could be useful to talk to debt-help professionals who can consolidate or reduce monthly outflows.

As HCR Wealth Advisors looks out over the financial landscape, it seems that some people have benefitted from the coronavirus crisis by being strategically positioned, whether through their job or their business. Others – primarily those salaried in essential or mobile businesses – have remained stable throughout. But many have been economically destabilized by the economic shutdowns – and the fitful start-ups – of the American (and world) economy.

For those who have been negatively affected, the most beneficial solution is to take decisive action as soon as possible, whether or not Congress acts on future stimulus packages or supplemental unemployment benefits.

Back to the basics of budgeting

No one knows how long this pandemic disruption will last and how deep it may go. What’s clear is that everyone – except for those with enough resources to be untouched by the coronavirus’ economic impact – should be revisiting their “needs versus wants” expense lists. Focus on covering needs. Delay as many wants as you have to, for later gratification. It’s a simple matter of immediate versus delayed gratification.

Senator Elizabeth Warren and her daughter Amelia Warren Tyagi wrote a book fifteen years ago that suggested ways to separate needs from wants. It is called “All Your Worth: The Ultimate Lifetime Money Plan.” It calls for spending half your income on your “needs,” and splitting the balance between “wants” (30%) and “savings” (20%). The concept is known as 50/30/20 budgeting.

What is useful here are the methodologies followed to identify needs and wants. Needless to say, they’re arbitrary and individual.

One adherent suggests listing expenses under:

  • High-priority needs
  • High-priority wants
  • Low-priority needs
  • Low priority wants

Another suggests making lists under the headings:

  • Must have
  • Should have
  • Could have
  • Won’t have

Whichever methodology someone uses, the purpose is the same. How does one prioritize the way they spend their limited resources? (The more limited the resources, the more critical it is to make payments starting at the top of a list and working down as far as possible.)

No matter what the level of one’s income and assets, this system is also useful to ensure robust contributions to retirement and other savings. It’s not only valuable in situations of scarcity.

What about revisiting portfolios?

The economic impact of the coronavirus crisis isn’t just limited to income and employment. It has also spilled over into markets such as the Dow, S&P 500, and Nasdaq. That, in turn, influences the financial and retirement planning of virtually everybody.

Working with a qualified financial advisor such as HCR Wealth Advisors, one should have assets and investments balanced according to their risk profile, their goals, and the number of years left to retirement. As markets fluctuate and the economy opens in fits and starts, it is wise to revisit allocations with their financial advisor periodically in case developments might trigger a needed tweak or two.

About HCR Wealth Advisors – Los Angeles-based HCR Wealth Advisors is at its best in times of life’s crucial financial decisions. The pandemic has brought such times to many of its clients as they figure out how economic change might touch their money in consequential ways.

This article is provided for informational purposes only and should not be interpreted as investment advice. HCR Wealth Advisors is not affiliated with this website.