‘What Are People Going to Do?’ A ‘Soul-Crushing’ Cash Crunch May Be Looming For Too Many Americans
The $600 weekly federal unemployment benefit is set to expire on Friday. We talk to cash-strapped women who are contending with that, and other financial issues.
When Atlanta-native Susie Hill was furloughed from her job at a tutoring company in March, she was concerned, but tried to look on the bright side: She’d get a little rest after so many years of working full time. But then, after failing to secure a loan to stay afloat, the company closed its doors permanently in June. Susie lost her job.
For the past few months, Susie* has been surviving off unemployment benefits and her stimulus check. Every week since she’s been furloughed, she has received about $300 from the state of Georgia, as well as the $600 mandated for workers by the CARES Act. But those $600 checks are scheduled to expire at the end of the month. In April, she received her stimulus check, which she spent to get three months ahead on her car payments. And while she got a $1,000 one-time stipend from her apartment complex to help toward the rent on her one-bedroom apartment, she’s now expected to pay her rent in full.
To save money, she has kept her AC usage down; tries to consolidate errands to save gas; and almost exclusively cooks her meals. Susie says that her expenses are less than $2,000 a month, but even so, surviving on minimal unemployment will be tough. When the CARES Act federal aid likely expires on July 31, she estimates she can last through mid-September on the $300 per week she gets from the state of Georgia, combined with her savings. While she’s actively looking for a job, the interviews have been slow to come in. “I’m stressed knowing that there is probably no chance of me getting a full-time job [anytime soon],” she says. “The anxiety is getting bad.”
For thousands of Americans, Susie’s looming cash crunch is likely eerily familiar. The unemployment rate, while falling from highs earlier this year, still stands at over 11% for women, who have been harder hit during this recession than men. And with shutdowns due to an uptick of COVID-19 cases in 40 states, hunting for a job can be tough right now.
On top of that, these jobless workers also now face the expiration of the $600 in federal aid, which coincides with a number of other soul-crushing dates, including the July 15 tax deadline—which will leave some with a hefty tax bill—as well as the upcoming expiration date to apply for Paycheck Protection Program (PPP) loans for small businesses (even though it was recently extended to August 8). Add this to the looming end of mortgage forbearances—under the CARES Act, some borrowers are allowed to pause mortgage payments without penalty for up to a year—as well as the end of rent breaks for some, and you have a pretty grim economic outlook for too many Americans.
(Of course, we may see another round of stimulus checks, and the extra $600 in unemployment benefits could be extended. But without jobs and facing plenty of other financial issues, many Americans will still suffer.)
Most of them won’t be able to rely on their savings for long either: Nearly three in ten Americans have no emergency savings at all, according to a survey by financial site Bankrate—and even those who do often don’t have much. Fewer than 30% of Americans have more than six months worth of income saved for emergencies.
“You’ve had this artificial holding up by the government,” says Mitchell C. Hockenbury, a financial planner and owner of 1440 Financial Partners in Kansas City, MO, referring to the extra unemployment benefits, tax deadline extension, PPP loans and temporary mortgage relief. “The legislature has got to get something done, or else the coming months will be really hard for many people.”
Malena Jerome and her husband, Tim, thought 2020 was going to be the best year of their lives. After working for many years as a bartender at a five-star restaurant in New York, Tim had just started a 9-to-5 job at a liquor distributor that allowed him to spend more time with his family. Malena, who gave birth to her second child, a boy, in early May, was planning on going back to school in the fall to learn coding—previously, she, too, had worked as a bartender at a local joint in Brooklyn. “It’s wild, all the plans we made,” Malena says. “We woke up one day and it’s like, poof! They’re gone.”
Now the family is considering leaving pricey New York City, as they have a family of four to feed. They’ve been living off some savings and unemployment checks—Tim was furloughed, and the bar where Malena worked has been closed until recently. Those extra $600 unemployment checks have been essential in helping them pay their bills, as has the fact that their landlord has shaved $1,000 off their rent—for now. “If the government is not going to extend the CARES Act, we have to think about money,” she says, noting that they’re considering moving to a state that’s more opened up so they can more easily find work. “Where can we make money?”
For Bailey Leiter, finding work is also proving hard. A DJ who threw regular parties at the Soho Grand Hotel in New York City, she was on track to make $100,000 in 2020, she says. Now, she’s living on unemployment and savings and looking for work every day. She’s gotten some leads on DJ gigs for small parties, but wonders if those are safe as the virus continues to spread. Another thing she’s worried about? People no longer having the money to hire DJs. “If unemployment runs out, I’m going to have to get a regular job, or two, or three,” she says, adding that she keeps signing petitions urging the government to extend the $600 payments under the CARES Act. “I received an email the other day that began with, ‘Congratulations!’” she laughs. “I thought it was extended, but nope, the petition had merely gotten one million signatures.”
What to Do If You Can’t Pay All Your Bills
For many cash-strapped Americans, it may be impossible to pay all their bills. Hockenbury notes that if you find yourself in that situation, first look to refinance your mortgage—if you own a house. Mortgage rates are at historic lows right now. The CARES Act has also mandated that you can now take out up to $100,000 from your 401(k) until December 30 with limited penalties—though you should only do this as a last resort.
If you have neither a 401(k) nor a mortgage—the homeownership rate of millennials in 2015 was less than 40%, and about 66% of the same demographic have nothing saved for retirement—then Hockenbury suggests going through your expenses with a magnifying glass and eliminating anything that is not absolutely necessary for survival, such as a roof over your head and food. Sell things on sites like Craigslist and Letgo, if you can.
*Susie Hill is the sister of Millie’s executive editor, and the inspiration for this story. This story was originally published on July 14.