July is shaping up to be a stressful, anxiety-ridden month for millions of Americans. Although many people were hoping to return to work as the coronavirus pandemic subsided, some parts of the country may need to return to lockdown as cases surge in states like Texas and Florida.
The U.S. is still "not in total control" of the outbreak, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and a White House health advisor, recently told a Senate panel. And Fauci warns that things could get worse before they get better, too, with cases topping 100,000 per day if more stringent measures aren't taken.
While policymakers still grapple with getting the outbreak under control, it's been three and a half months since the CARES Act was signed into law, offering $2.2 trillion in stimulus measures to American households and businesses. Perhaps most importantly, the CARES Act included $1,200 stimulus checks for most households and beefed up aid for those receiving unemployment benefits with an extra $600 per week.
But the extra $600 in supplemental aid is set to expire at the end of July. And so far, there's no concrete plan to continue or replace that aid. Eviction and foreclosure protections are also soon expiring (or have expired) in states and cities across the country.
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Altogether, experts say it amounts to an "income cliff" for many households. For perspective, if the $600 supplemental benefit does expire, it "would be equivalent to getting a 50% to 75% pay cut overnight to a huge chunk of the American population," Ernie Tedeschi, an economist who served under the Obama administration, recently told The Washington Post.
Because these stimulus measures have, in large part, propped up the economy over the past few months, the big questions are this: What happens if, or when, these measures expire? And what can you do to financially prepare?
There are some current proposals to help remedy the situation. Back in May, for example, Democrats in the House passed the HEROES Act, a $3 trillion stimulus bill that would've provided American households with a second round of stimulus checks and extended the $600 unemployment benefit until the end of January 2021, among other measures.
But that bill stalled in the Senate, as Republicans have, so far, been unwilling to take it up for a vote due to concerns about the law's potential fiscal impact.
This week, Democratic Senator Chuck Schumer called for an extension to the $600 unemployment benefit, and wrote in an op-ed for left-leaning think tank Data For Progress that the benefit should be tied to the unemployment rate as a part of a new stimulus proposal — the American Workforce Rescue Act.
"Our proposal would tie unemployment benefits to a specific indicator, or 'trigger' — in this case, a state's level of unemployment — meaning the benefit amounts are adjusted to account for fluctuating economic conditions, not arbitrary political calculations in Washington," Schumer writes.
Under Schumer's proposal, after July 31, the $600 per-week benefit would "remain in place until a state's three-month average total unemployment level falls below 11%. The extra $600 benefit amount would then begin to gradually phase out by $100 for each percentage point decrease in the unemployment rate, until it falls below 6%."
Schumer says that currently, 33 million Americans are either receiving unemployment benefits or awaiting approval.
Schumer's plan is one of many that have been introduced over the past several weeks aimed at shoring up benefits for the unemployed. Other ideas, such as Republican-backed plans to offer "return-to-work bonuses," seem to have lost steam as states have had to backtrack on reopening plans.
In short, the fate of augmented unemployment benefits — and any additional stimulus at all, really — is largely in the hands of Senate Republicans, and specifically, Senate Majority Leader Mitch McConnell. McConnell recently said that Republicans are willing to pass another stimulus bill following the Senate's July recess, but there's no word yet on whether that would include an extension to the $600 unemployment benefit, or another round of stimulus checks. President Trump, however, has said that more stimulus will be coming at some point, and that it'll be "very generous."
Any bill that does pass the Senate, House, and gets the OK from President Trump may come through at the last minute. Congress recently did pass a last-minute lifeline with a vote to extend the Paycheck Protection Program — which offered forgivable loans to businesses if they keep employees on their payrolls — through August 8, just before the program expired.
"Maybe the benefit will extend, maybe not," says Leon C. LaBrecque, a certified financial planner at Sequoia Financial Group in Troy, Michigan. "In either case, plan ahead. It wasn't raining when Noah built the ark."
Given that there's no guarantee the tens of millions of out-of-work Americans will receive an additional stimulus check or beefed-up unemployment benefits past July, it's best to start preparing now for a drastic reduction in income. Here are a few steps experts recommend:
1. Get your budget in order
If you still aren't using a budget to track your spending, it's never been more important to create one and stick to it. "You should have a plan," says LaBrecque. "Set your budget to what you will make when the [extra] $600 goes away," he says, and "live on that."
LaBrecque says you should give yourself some time to adjust to your new income restraints before having to deal with the "sticker shock" of August 1, assuming no additional stimulus measures are passed by Congress. Any savings you can pull together from the difference are likely to come in handy later.
See where you could spend less, especially for nonessential services. Odds are that you've already pared down your expenses during unemployment, but it doesn't hurt to take another look to see if there are other places you can cut.
2. Prioritize your bills
If you do find yourself in a financial crunch come August, you should dip into your savings to do what you can to keep up with your bills. Try to avoid withdrawing from your long-term savings and investments — your retirement accounts, for example.
But if you find that you're financially exhausted, you may be in a position in which you need to pick and choose which bills get paid. That means prioritizing, and your high-priority bills should be those that keep a roof over your head and food on your table.
For the bills you can't pay, be sure to reach out and let the creditor know — whether it's your credit card company, your utility provider, or your student loan servicer. Many companies are remaining flexible with payment options, and are willing to work with you if you let them know you need help.
"Many businesses and lenders are willing to work with you if you simply ask," says Natalie Colley, a certified financial planner and advisor at Francis Financial in New York. "The intent," says Colley, "is to reduce the strain on your cash reserves in order to stretch them for as long as possible, in the event that you are unemployed for longer than expected."
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3. Look for new opportunities to earn money
If possible, see if there are any opportunities to make some money. There are numerous side hustles out there that can be done from home, for example, and you may be able to do some gig work — delivering food, etc. — to help pad your bank account. It may not replace your full-time income, but if you're truly in dire straits, every little bit helps. And remember: Just because you're picking up some work doesn't mean you'll necessarily give up your eligibility for unemployment benefits.
Although the job market is rough, don't give up on full-time work, either.
"There are several companies hiring right now," says Nadine Marie Burns, a Michigan-based certified financial planner at A New Path Financial. Burns says it's best to start now, because finding a new job can be more time consuming than many people anticipate.
"The hiring process takes several weeks and there are openings in most areas of the country now that many have opened even partially," she says.
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