Here's what you need to know before applying for unemployment benefits—and revamping your budget to adjust to less income.

By Larry Stansbury
April 20, 2021
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A year ago, I lost my job due to COVID-19. In addition to perhaps more unexpected job-loss emotions such as embarrassment, my thoughts were also overrun by fears about not being able to pay for my rent, food, and other expenses. So I looked into signing up for New York State's unemployment insurance benefits. At first I was hesitant; I didn't know whether it would hurt me in the long run. Can employers look at a list of people who collected unemployment?! I wondered. (No. No, they cannot.) Ultimately, getting that unemployment money was a fantastic choice—for me, my (newly freelance) career, and my budget. Here's what you need to know before applying for unemployment benefits yourself.

There's a misconception that turning to unemployment benefits is a poor-choice, last-ditch resort—when, in fact, these benefits are a great resource for people who find themselves temporarily without a source of income. In my case, I didn't have the financial backup and the emergency fund I should have (lesson learned). After my job loss, I had no way to pay my bills, and I needed financial help to stay afloat while I looked for a new job. And I'm not alone; there are currently 9.91 million unemployed people in the U.S.

To qualify for unemployment insurance benefits in New York state, I had to fill out an application and disclose a list of all the jobs I'd held in the past. Then, I had to call New York's Department of Labor customer service to get my claim approved by the state. When the Department of Labor approves your claim, they decide how much benefits you receive based on your prior income. They awarded me $400 per week, excluding taxes. I elected for each deposit to take out taxes from the get-go, netting me a total of about $380 per week.

Unemployment Benefits 101

Unemployment benefits are geared towards people who want to work but are currently unable to find a job. When you apply for benefits, in normal times, you also have to look for full-time work while collecting those benefits—a requirement that has been waived in many states due to COVID-19.

Each state has an unemployment insurance benefits program that gives eligible recipients money weekly. Of course, each state program is different, and it can take the state's Department of Labor a few weeks to assess your eligibility. The longer you wait to file a claim, the longer it takes to get the benefits, so if you're looking into it, get started now.

The first step is completing a 30-minute questionnaire to see if you meet your state's benefits qualifications. Take your time to answer each question, since the questionnaire can be tricky—and one wrong answer can disqualify you from the program. (For example, you will see the question, "How many days were you not ready, willing, and able to work?" The keywords here are "not ready"—you want to say you are ready for a job.)

If you are accepted, you will have to fill out a weekly questionnaire to claim your benefits. Not everyone receives the same amount of compensation, since most states calculate your monthly unemployment based on your last job's salary and the length of time you worked there. Once you start getting your unemployment money, most states typically allow you to receive employment benefits for up to 26 weeks; of course, the pandemic has extended that time period for many.

Where does the money come from? Your former employer pays for your benefits, so there's no need to feel guilty for accepting the money—they're the ones who laid you off. If you quit your job voluntarily, however, you will not be eligible for unemployment benefits; if you lost your job unexpectedly because your company is downsizing or your contract ended, you're still qualified.

Budget Like a Boss—Even on Unemployment

Because of COVID, my budget has shifted drastically. Getting paid $380 a week for doing nothing may sound like a dream come true, but it didn't give me any wiggle room for my bills and expenses. Every week, I had to put $275 aside for rent, and then the remaining balance of $105 I used for food, transportation, and miscellaneous items.

No matter how much money you're getting in unemployment benefits, pay your bills first. Make a list of what you need to pay for the month and set a (new and improved) budget to ensure you are able to fund your food, housing, transportation, and other necessities. Learning how to budget now will pay off later. You can use a spreadsheet to set your priorities and track your monthly expenses, savings, and spending. If spreadsheets are not your thing, consider downloading one or more money apps, such as PocketGuard and Mint, to keep tabs on your funds and avoid overspending that much-needed unemployment money.

And don't forget: If your benefits are about to end and you still haven't found work, you need to fill out a claim immediately, and the Department of Labor will extend your benefits if your claim is approved.