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5 key moves to make now to protect your financial future if you've been furloughed

Key Points
  • A new study by the University of Chicago's Becker-Friedman Institute claims 42% of the temporary layoffs resulting from the coronavirus pandemic will be permanent. 
  • Compiling a financial report card and applying for unemployment and health insurance now can help relieve some of the financial strain.
How to protect your financial future if you've been furloughed

If you've been furloughed or laid off temporarily during the Covid-19 crisis, rethinking how to pay your bills and replenish your greatest financial asset — your income — are likely among your top priorities. The next moves you make, experts say, should be realistic and strategic to help you manage through the uncertainty.

More than 78% of unemployed Americans told the government that they see their layoffs as temporary and expect to return to work within six months. Some U.S. employers are even more hopeful — about 53% expect furloughed salaried workers to return to their job in three months, according to a mid-April survey of about 950 human resources professionals by the Society of Human Resource Management and Oxford Economics.

Yet a new study by the University of Chicago's Becker-Friedman Institute paints a gloomier picture of how many unemployed Americans will be called back to their jobs, estimating that 42% of these temporary layoffs since March will be permanent as a result of the coronavirus pandemic. 

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"There's a high risk that a good number of jobs that might have been seen returning will not. The longer we go with the new status quo, the more at risk all kinds of enterprises will be," said Mark Hamrick, senior economic analyst at Bankrate. For employers and workers, "it's really a fight for financial solvency or survival." 

So whether you will be staying in your current job or searching for a new opportunity, here are five moves that experts say furloughed workers should make right now during these uncertain times.

1. Apply for unemployment benefits and other relief programs

The state you live in and the amount of money you made over the past year will determine how much you get in unemployment benefits. As part of the $2 trillion coronavirus relief package that was signed into law at the end of March, the federal government will add an extra $600 a week in unemployment benefits until July 31.

"It's not designed to replace your entire paycheck but can certainly help," said certified financial planner Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation. "There will likely be a lag time until you receive your first check, so it's best to file immediately."

Unemployment benefits taxed as ordinary income—How to avoid the tax hit is a good resource for unemployment updates and has links to your state's unemployment insurance website.

Also, reach out to your lenders and creditors to find out what kind of Covid-19 relief programs they are offering. Under the CARES Act, you can delay your monthly payments on federally-insured mortgages for up to one year and stop federal student loan payments — and pay no interest — until September 30, 2020. Many auto lenders and credit card companies will let you extend or defer payments for one month or more without incurring late fees. But you have to ask.

"Be clear with lenders and creditors about whether you will continue to accrue interest during deferment," said Bruce McClary of the National Foundation for Credit Counseling. "If you're in a position to pay, you should. If not, then focus on paying your most vital expenses, like food and health care." 

2. Make sure you have health insurance 

If you are furloughed, your employer generally keeps up with your health benefits while you're not working, although the extent can vary depending on the rules in your state. You are also eligible to file for unemployment without it affecting your health benefits. "If you will still be covered, confirm how you will pay your share since this usually comes out of your paycheck but you won't be receiving one," said certified financial planner Roger Ma, founder of

In most cases, benefits consultants say, you'll have to either send a check to pay as you go. Or some employers may allow the employee to catch up with their contributions once the furlough ends. Either way, you will still be responsible for your out-of-pocket costs if you need medical care. 

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If your spouse or partner has a workplace health plan, you may consider switching to that insurance. The IRS just announced new rules that permit employers to let employees drop their health insurance if they have another option, without waiting until the usual fall enrollment period. Workers can also add family members to their current plan or switch to a different health insurance plan. However, employees can only take advantage of these options if their employer allows it.

3. Compile your 'financial report card'

Ma, who is also author of the new book "Work Your Money, Not Your Life," says compiling your "financial report card" entails figuring out your net worth, monthly living expenses and credit score and offers free money templates on his book website to help you get started. 

"With a reduction in income, it's more important than ever to get a handle on your expenses," Schwab-Pomerantz said. "You can't determine how much you need to survive until you know how much you have, what you owe and how much you spend." 

Common cause of financial stress and anxiety during the coronavirus pandemic

Group your living expenses into two buckets - "need to have" and "nice to have," Ma said, and "temporarily stop as many of the "nice to have" expenses as possible." You may be able to lower some of those "need to have" expenses, too. "Focus particularly on essentials — your mortgage, utilities, phone, Internet, groceries, health insurance premiums, car payments — anything you need to cover to stay afloat and move forward," Schwab-Pomerantz said. You may be able to negotiate your rent, internet and phone plans, downgrade cable plans and cancel some subscriptions. 

Your financial report card also should include a snapshot of your savings. Continue to save a little, if you can, said certified financial planner Lee Baker of Apex Financial Services. "If you find yourself in a situation to take some of these forbearances (delaying mortgage payments, etc.) but never got around to creating that 'rainy day' fund, skip a payment and use those dollars for savings or to eliminate other (higher-interest) debt," said Baker, who is also a member of the CNBC Financial Advisors Council. 

4. Avoid raiding your 401(k) or workplace retirement account

Furloughed workers can retain their employer-sponsored 401(k) accounts, although they won't be able to contribute to them while they are not being paid. Ideally, this is long-term savings, not for emergencies. You may want to dip into taxable accounts first. To figure out your "financial runway," Ma says, you should "look at the value of your cash and taxable investments and divide that by your monthly living expenses. That's your runway — how many months you'd be able to fund your life without a salary." 

Yet many unemployed workers have no runway. They're stuck on the tarmac. Dipping into their 401(k) is their last or only resort. "If you find yourself in a situation where you need to tap your retirement savings, this is a fortunate time to do it with a waiver of a 10% penalty and three years to pay taxes on it," Baker said. 

The CARES Act has increased 401(k) loan withdrawal limit—Here's what you need to know

Under the CARES Act, you can take a withdrawal of up to $100,000 from your retirement savings, including 401(k)s or individual retirement accounts, without the typical penalty. These "coronavirus-related distributions" are only available this year. You can pay taxes on the money you take out over a period of three years or pay no tax if you pay it all back. The new law also allows you to borrow up to $100,000 from your 401(k) and delay payment for up to one year. Here's the catch: Your employer has to implement these provisions — and not all employers are doing so. And if you borrow from your 401(k) and permanently lose your job, your entire loan balance is generally due within 60 days. 

So again, consider this a last resort. "While present circumstances may be difficult, I'd counsel anyone to avoid jeopardizing their future retirement unless absolutely necessary," Schwab-Pomerantz said. "You may not appreciate the full consequences until much later."  

5. Evaluate your current job and job prospects

Even if you are optimistic about being called back to your job, take this time to see what other opportunities may interest you — and not necessarily in your current industry.

"Sometimes being furloughed or laid off allows you some time to take a step back from the daily rush to think about what you want from your career and life," said Ma of

Assess your current job and envision your ideal job. Think about what's missing from your job and brainstorm careers that may match your skills, interests and compensation requirements. Even if your employment agreement prevents you from working while furloughed, you can still keep your eyes open, hone your skills and update your resume. 

Sometimes being furloughed or laid off allows you some time to take a step back from the daily rush to think about what you want from your career and life.
Roger Ma
certified financial planner and founder of

"I would suggest to people to actively look right away. Your new job right now is finding a job," said Jack Kelly, founder and CEO of The Compliance Search Group, an executive search firm. "Maybe you'll find a fantastic job you always wanted. If you don't, maybe your employer will take you back. If they don't, then you've hedged your bets a little bit." 

Cultivate your network and come up with a list of companies that you'd want to work with and figure out how you can get your resume in front of a person at that company. "Get on LinkedIn. Get in front of your network right away. Join online meetups," said Kelly, who recently launched WeCruitr, a free social media networking site designed to help people find jobs. "You want to get out there." 

Rewrite your resume so that it is tailored to the specific job you're seeking with keywords that match-up with the skills the employer wants. If you believe there are skills that you're missing, take an online course or find a part-time job to gain skills and replenish your income.

To find a job you can do from home, check out freelance online platforms such as Fiverr, Upwork and People Per Hour, which will allow you to become a freelancer based on the skills you have. Staffing and education companies are among the firms offering the most remote freelance jobs right now, according to Consider online tutoring or developing your own course. 

Keeping an upbeat attitude is also important in this crisis, especially in your job search. "Don't get down on yourself," Ma said. "These are unprecedented times, and you being furloughed is not a dent on your reputation."

Kelly agreed: "You don't have time to mourn the (job) loss," he said. "Focus on your mental, emotional, physical health and well-being. You have to find ways to stay positive, stay focused."   

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