How to Decide If Pet Insurance Is Worth the Cost

Woman deciding if pet insurance is worth the cost

Last fall, our greyhound Tivo refused his breakfast on a Friday morning. He didn’t eat or drink water all day, and we were worried. That night, we took him to the 24-hour emergency veterinarian and Tivo was diagnosed with a bacterial stomach bug and dehydration. We went home with antibiotics, a saline IV, and a $200 vet bill.

Thankfully, we could afford this bill for unexpected emergency care for Tivo. But if he were diagnosed with a chronic condition or needed a very costly intervention, we might find ourselves facing some heartbreaking financial decisions.

Pet insurance is often touted as a solution to these worries. With pet insurance covering some costs of veterinary care, you’re never forced to choose between your beloved pet and your finances. However, does this kind of coverage make sense for most pet-owners?

Here’s what you need to know about pet insurance so you can keep your fur babies bright-eyed and bushy-tailed for years to come.

Premium costs

As with human health insurance, pet insurance charges you a monthly premium for your pet’s coverage. According to Value Penguin, the average monthly cost for canine pet insurance is $47.20, and the average for feline insurance is $29.54 for accident and illness coverage.

Of course, this doesn’t tell the whole story of what to expect from premium costs. Many pet insurers increase premiums with the age of your pet. Which means the $47 per month you pay to keep your 4-year-old pup healthy could rise with his/her age, making the premiums harder to keep up with just as they’re more likely to need age-related medical intervention. In addition, different breeds can have different premium prices, since there are some hereditary conditions that various breeds may be more prone to.

However, even with these potential issues, there are some methods to keep premiums manageable. For instance, some tried and true insurance reduction strategies work just as well for your pet’s health insurance as they do for your own. These include increasing your deductible, reducing the percentage that the insurance reimburses, or limiting the annual payout rather than choosing unlimited coverage.

These strategies can keep your premiums affordable while still helping with big veterinary bills. But you need to be prepared to pay anything above and beyond the coverage limits you set up. (See also: 8 Ways to Lower Your Vet Bills) 

Coverage

It’s also important to note that pet insurance does not necessarily cover every kind of health cost for your pets. To start, unlike (some) human health insurance, most pet insurance will not cover preventive care and annual exams. So you will need to plan for these costs on top of your premiums.

Pet insurance policies generally come in two varieties: accident and illness policies, and accident-only policies. In general, accident-only policies do not raise their premiums as your pet ages, making this kind of insurance more affordable long-term. However, accident-only policies tend to be cheaper because your pet is less likely to get injured than fall ill. If you decide to invest in pet insurance, getting both accident and illness protection will likely offer you more protection.

That said, each insurer gets to decide which illnesses, conditions, and services it covers, and not all ailments are covered. Many insurers also do not cover the diagnostic exam for a particular illness, even if the treatments are covered. Make sure you pay attention to the details of what your potential insurer will cover before signing up for coverage.

As with many types of human health insurance, most pet insurance policies exclude preexisting conditions. Unfortunately, some insurers consider health problems to be "preexisting" if they crop up within a year of the purchase of your policy. Insuring your pet when they’re young is the best way to avert the preexisting condition coverage gap.

Finally, pet insurance coverage is usually handled via reimbursement. That means you’ll be on the hook to pay the vet bill at the time of service, and you’ll submit your receipts to your insurer to receive reimbursement. (See also: 7 Things You Need to Know About Pet Insurance)

Should you buy pet insurance?

With all the caveats, coverage gaps, and reimbursement requirements, pet insurance is not necessarily a slam dunk for everyone. In fact, many consumer advocates recommend that pet owners put aside an amount equal to the annual premium into a savings account each year. This will give you the same peace of mind that you can cover any potential health care needs for your pet while also allowing you to keep the money if you never need to use it.

However, if you struggle with financial discipline, this strategy will leave you in a difficult situation if your furry friend needs an expensive procedure. Pet insurance can provide you with the protection your pet needs even if you struggle with money. 

Show your love with an emergency fund

Whether or not you decide to purchase pet insurance, remember that you’ll have to pay upfront for any veterinary procedures. With insurance, you will get reimbursed for covered care, but you will still need to have access to funds to pay for Mittens’ kidney stone removal or Rex’s arthritis care at the time of care.

This means that one of the best ways you can protect your furry friends and avoid heartbreaking financial choices is to have an emergency fund. With or without pet insurance, set some money aside for the unexpected so you can enjoy your four-legged family members for years to come. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

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With pet insurance covering some costs of veterinary care, you're never forced to choose between your beloved pet and your finances. Here's what you need to know about pet insurance. | #pets #petcare #insurance


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401k Early Withdrawal: What to Know Before You Cash Out

When it comes to making a 401k early withdrawal, there are a number of reasons why it might be tempting. With millions still unemployed due to the pandemic, unexpected expenses are taking a particularly hard toll. One reason why early withdrawal isn’t uncommon in the U.S. might be because it’s easy to assume you’ll have time to rebuild your 401k nest egg.

However, is the benefit of withdrawing your retirement savings early truly worth the cost? For many people, their 401k is their primary method of investing in their financial future. Before making a decision about early withdrawal, it’s important to consider the penalties and fees that could impact you. Read on to learn exactly what happens when you decide to dip into your 401k so you won’t be surprised by the repercussions.

How Much Are You Penalized for a 401k Early Withdrawal?

On the surface, withdrawing funds from your 401k might not seem like a bad option under extenuating circumstances, but you could face penalties. Young adults are especially prone to early withdrawals because they figure they have plenty of time to replace lost funds.

 

401k early withdrawal penalties

 

If you’re not experiencing a significant hardship, 401k early withdrawal probably isn’t the right choice for you. Ultimately, you could lose a substantial portion of your retirement savings if you choose to withdraw your 401k early to use the money to make other risky financial moves. Below, let’s delve further into the penalties that usually apply when you withdraw early.

1) Your Taxes Are Withheld

When you prematurely withdraw from your retirement account, your first consideration should be that you’ll have to pay normal income taxes on that money first. This means you’re losing at least roughly 30 percent of your savings to federal and state taxes before additional penalties.

Even if you only have $10,000 you want to withdraw, consider that you’re automatically giving $3,000 of your cash to the government. In the best case scenario, you might receive some money back in the form of a tax refund if your withholding exceeds your actual tax liability.

2) You Are Penalized by the IRS

If you withdraw money from your 401k before you’re 59 ½ , the IRS penalizes you with an extra 10 percent on those funds when you file your tax return. If we use the example above, an additional $1,000 would be taken by the government from your $10,000 — leaving you with just $6,000. If you’re 55 or older, you could try to get this penalty lifted by the IRS through the Rule of 55, which is designed for people retiring early.

Also, there are exceptions under the CARES Act, which is designed to help people affected by the pandemic. There are provisions under the act that state individuals under the age of 59 ½ can take up to $100,000 in Coronavirus-related early distributions from their retirement plans without facing the 10 percent early withdrawal penalty under certain conditions.

3) You Lose Thousands in Potential Growth

Even if you’re not deterred by tax penalties, think twice before you sabotage your long-term retirement savings goals. When you withdraw money early, you’ll miss out on potential future savings growth because you won’t gain the perks of compound interest. Compounding is the snowball effect resulting from your savings generating more earnings — not only on your principal investment but also on your accrued interest.

Also, if you make a 401k early withdrawal while the market is down, you’re doing yourself a disservice because you’ll be leaving thousands on the table. It’s unlikely you’ll fully recover the lost years of compound interest you would have benefited from. You might need to get creative with a passive income stream to help support you later in life.

 

tips to minimize 401k withdrawal penalties

 

When Does a 401k Early Withdrawal Make Sense?

In certain cases, it actually might be strategic to move forward with 401k early withdrawal. For example, it could be smart to cash out some of your 401k to pay off a loan with a high-interest rate, like 18–20 percent. You might be better off using alternative methods to pay off debt such as acquiring a 401k loan rather than actually withdrawing the money.

Always weigh the cost of interest against tax penalties before making your decision. Some 401k plans do allow for penalty-free early withdrawals due to a layoff, major medical expenses, home-related costs, college tuition, and more. Regardless of your strategy to withdraw with the least penalties, your retirement savings are still taking a significant hit.

401k Early Withdrawal, Hardship, or Loan: What’s the Difference?

Knowing the differences between a 401k early withdrawal, a hardship withdrawal, and a 401k loan is crucial. Due to the many obstacles to make a 401k early withdrawal, you may find you want to keep it untouched. If you’re convinced you still need to use your 401k for financial assistance, consult with a trusted financial advisor to figure out the best option.

When Does This Apply?

Taxes and
Penalties

Early Withdrawal

Your funds are withdrawn to pay off large debts or finance large projects. Your 401k fund is typically subject to taxes and penalties.

Hardship Withdrawal

You’re only eligible for this type of withdrawal under circumstances such as a pandemic or natural disasters. Withdrawals can’t exceed the amount of the need and the funds are still subject to taxes and penalties.

401k Loan

The loan must be paid back to the borrower’s retirement account under the plan. The money isn’t taxed if the loan meets the rules and the repayment schedule is followed.

Additional Considerations

If you’ve left a job and don’t know what to do with your Roth IRA, a 401k transfer is a good option. Most likely, you will save money and have a wider range of investment options when you transfer your funds. 401k fees can be high, and rolling over your funds to a Roth IRA account could be wise in the long run. Also, be aware that the process is more complicated for indirect rollovers. 

In Summary:

  • If you’re one of the millions of Americans who rely on workplace retirement savings, early 401k withdrawal may jeopardize your future financial stability.
  • There are very few instances when cashing out a portion of your 401k is a smart move.
  • In most cases, any kind of early 401k withdrawal is detrimental to your retirement plans.
  • Stick to your budget and bulk up your emergency fund to stay one step ahead.

In short, 401k early withdrawals are usually counterproductive. Prevent compromising your hard-earned savings by using a free budgeting tool that will set you up for success. After all, being prepared and informed are two of the most important parts of maintaining financial health.

Source: SEC

The post 401k Early Withdrawal: What to Know Before You Cash Out appeared first on MintLife Blog.

Source: mint.intuit.com

Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.

For instance, in a recent conversation, a few of my coworkers stated they didn’t have renters insurance. This puts them among the 59% of renters who don’t have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.

Granted, renting comes with fewer property responsibilities than owning. But don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?

If the relatively small cost of a renters insurance premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re completely on the hook for all those costs.

Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.

Months later, there was an electrical surge in the building. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” Espenschied explains. These items were permanently damaged and unusable.

Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.

Don’t put yourself in the same position—get a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.

2. The Temporary Loss of a Habitable Home

Some disasters—such as fires, flooding, and electrical issues—can require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.

Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.

3. Stolen Belongings

Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” Renters insurance will usually be the policy that covers theft of personal items from your car too.

If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important step—filing a renters insurance loss claim will usually require a police report of the theft.

4. Personal Liability for Legal Damages

The most important protection your renters insurance provides, however, might be personal liability protection.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.

The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.

Make sure you understand your coverage. “Every policy is different, so talk to an agent and read your policy terms,” Giulianti warns.

5. An Eviction for Violating Your Lease Agreement

Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlord’s property insurance coverage does not extend to your personal belongings.

If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a “comply or quit” notice and possibly begin eviction proceedings.

If you don’t currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.

Image: istock 

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Source: credit.com

How Much House Should I Afford?

The internet is a treasure trove when it comes to finding information that can help you buy your first home. Unfortunately, searching for “How much house can I afford?” will mostly lead you to online calculators that use an algorithm to come up with a generic estimate.

To come up with a figure, these calculators ask you for details like your zip code, your gross annual income, your down payment amount, your monthly liabilities, and your credit score. From there, they come up with an estimate of your debt-to-income ratio (DTI), or the amount of bills and liabilities you have in relation to your monthly income. 

The truth is, most lenders prefer your debt-to-income ratio to be at 43 percent or lower, although some lenders may offer you a loan with a DTI slightly above that.

Either way, the figures these calculators throw at you are a simple reflection of what a bank is willing to lend you — not an estimate of what you really can or should spend. 

Let’s dig in a bit more to what factors to consider.

Factors that Should Impact Your Home Purchase Price

One of the main factors to consider when deciding how much to spend on a home is how much you want to pay for your mortgage each month. What kind of payment can you commit to without sacrificing other goals?

A mortgage payment calculator is a good tool to use in this case. With a mortgage calculator, you can see how much your monthly payment might be depending on the amount you borrow, the interest rate you qualify for, and the term of the loan. 

While you decide on a monthly payment you can live with, there are additional details you should consider. The main ones include:

  • Down Payment: If you’re able to put down 20% of your home purchase price, you can avoid private mortgage insurance, or PMI. PMI adds an additional cost to your mortgage each month (usually around 1% of your loan amount), although you can have this charge removed from your loan once you have at least 20% equity.
  • Property Taxes: Find out the annual property taxes for any home you’re considering, then divide that amount by 12 to figure out approximately how much you’ll need to pay toward taxes in your mortgage payment each month. Also remember that your property taxes will likely go up slowly over time, which will increase your monthly housing payment along the way.
  • Homeowners Insurance: Your homeowners insurance premiums will also vary depending on the property and other factors. Make sure to get a homeowners insurance quote so you know approximately how much you’ll pay for coverage each year.
  • Home Warranty: Do you want a home warranty that will repair or replace major components of your property that break down? If so, you’ll want to price out home warranties that can provide coverage for your HVAC system, plumbing, appliances, and more. 
  • Other Monthly Bills: Take other liabilities you have into account, and especially the big ones. Daycare expenses, college tuition, utility bills, car payments, and all other bills you have should be considered and planned for.
  • Financial Goals: Are you trying to save more than usual so you can retire early? Or, are you saving in a 529 plan for future college expenses? If your financial goals are a priority (as they should be), then you’ll want to make sure your new house payment won’t make saving for other goals a challenge.
  • Upgrades and Repairs: Finally, don’t forget to come up with an estimate of how much you might want to spend on repairs or changes to your new home. A property that is new or move-in ready may not require much of anything, but money you plan to spend on a major renovation should be taken into consideration along with the purchase price of your home.

Hidden Expenses to Plan For

The factors you should consider when figuring out how much home to buy are pretty obvious, but what about all the expenses of homeownership you can’t always plan for? The reality is, you will need to do some work on your home at some point, and many of the most popular repairs can cost tens of thousands of dollars on their own. 

These repair and renovation cost estimates from Remodeling Magazine’s 2020 Cost vs. Value study are just a few examples: 

  • Garage door replacement: $3,695
  • Vinyl siding replacement: $14,459
  • Wooden window replacement: $21,495
  • Asphalt roof replacement: $24,700

In addition to major repairs like these, you’ll also have repair bills for your HVAC system, mulch to buy for your flower beds, and ongoing costs for maintenance and upkeep to pay for. You may also decide to remodel your older kitchen one day, or to add an extra bedroom as your family grows. 

As you figure out how much you should spend on a home, remember that you won’t know exactly how much you’ll need for home repairs or upgrades. Most people set aside some money for home maintenance in their emergency fund, but you can also set aside money for home repairs in a separate high-yield savings account. 

How to Calculate How Much House You Should Afford

All of the costs we’ve outlined above probably seem overwhelming, but keep in mind that most major home repairs will be spread out over the years and even decades you own your home. Not only that, but you will hopefully start earning more over the course of your career. As your paycheck grows, you’ll be able to set aside more money for emergencies and potentially even pay your mortgage off faster.

So, how do you calculate how much house you can afford? That’s really up to you, but I would start by tallying up every bill you have to pay each month including car payments, insurance, utilities, student loans, and any other debts you have. From there, add in some savings so you have money to set aside for your investing and savings goals. Also factor in money you set aside for retirement in a workplace account.

At this point, you could consider other factors that might impact how much you want to pay for a home. For example:

  • Do you need to build an emergency fund?
  • Are children on the agenda, and should you play for daycare expenses?
  • Do you like being able to save more money for a rainy day? 
  • Do you want to have one spouse stay at home in the future?
  • How long do you want to pay off your home loan?

Once you’ve considered all other factors, you may decide that you should set aside money for some other goals, like future daycare bills or college savings. Maybe you decide you want to pay double on your student loans so you can pay them off early, or that you want a 15-year-home loan with a larger monthly payment instead of a traditional 30-year loan. 

Either way, experts tend to agree that your mortgage payment should be no more than 25% of your income. For a $7,000 monthly income, that means your payment shouldn’t exceed $1,750. If your income is $5,000 per month, your monthly payment should be no more than $1,250 per month. These are ballpark estimates, and your property taxes and homeowners insurance premiums (or estimates) should also be figured into this amount. 

What to Do If You Already Spent Too Much?

If you already overspent on your home, you’re probably wondering which steps to take next. Maybe your monthly mortgage payment is making it impossible to keep up with other bills, or perhaps the home you bought required a lot more work than you realized. 

Either way, there are some steps to get back on track financially if you bit off more than you can chew. Consider these options:

  • Refinance your mortgage. Today’s incredibly low rates have made it so almost anyone can refinance an existing mortgage and save money these days. If you’re able to qualify for a new mortgage with a lower interest rate, you could lower your monthly payment and save money on interest each month. Compare mortgage refinancing rates here. 
  • Cut your expenses. Look for ways to cut your spending on a daily basis — at least until you figure out what to do in the long run. Figure out areas of your budget where you might be spending more than you realized, such as dining out, getting takeout, or going out on the weekends. If you can cut your monthly spending somewhat, you can find more money to use toward your mortgage payment each month. 
  • Get a roommate. Consider renting out your guest room in order to get some help with your mortgage. If you live in a tourist area, you can also rent out a space using platforms like Airbnb.com or VRBO.com. 
  • Sell your home and move. Finally, consider selling your home and moving if you have enough equity to do so without taking a financial loss. Sometimes the best thing you can do in a financial crisis is cut your losses and move on.

The Bottom Line

How much house you can afford isn’t always the same as how much you should afford. Only you know what your monthly bills and liabilities look like each month, and only you know the goals and dreams you really should be saving for.

When it comes to buying a home, you’re almost always better off if you err on the side of caution and borrow less a bank will lend. Buying a modest home can leave you with a lot more choices in life, but buying a home you can’t really afford can leave you struggling for years to come.

The post How Much House Should I Afford? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

7 Money Steps to Take Before 2021

With the end of the year rapidly approaching, it’s a good time to take stock of your financial situation as you head into 2021. 2020 has been a strange year, and a difficult year for many people. With many people’s health and/or economic livelihoods affected by COVID-19, many people’s situation looks very different than it did back in January. As we head into a new year, here are a few things that you can do to improve your finances before the end of 2020.

#1 Put at least $1000 into an emergency fund

If you don’t have an emergency fund set up to handle unexpected expenses, that is a good first step to putting yourself on a solid financial footing. $1000 may not be enough to handle every possible thing that could go wrong, but it can be enough to handle your car breaking down or an unexpected home expense. If you don’t have at least a minimal emergency fund in place, make a plan for how you can start one before the end of the year.

#2 Fully fund your retirement accounts

401k, IRAs, and other retirement accounts have an annual contribution limit that caps the amount that you’re able to contribute each year. Before the end of the year, set aside some time to go through each of your accounts that have an annual contribution limit. Decide for which of those accounts it makes sense to fund before the end of the year.

#3 Consider donating to charity

With the increased standard deduction available in recent tax years, not as many people itemize their deductions. But if you do itemize your deductions, then remember that your charitable contribution may be tax-deductible. If you make that charitable contribution before the end of the year, you may be able to deduct it in this tax year — otherwise, you’ll have to wait an entire year before you’re able to deduct it.

READ MORE: 5 Best Credit Cards When You Make Charitable Donations

If you’ve already made charitable contributions in 2020, make sure that you have them documented and ready to include on your tax return.

#4 Make sure you have a financial security plan in place

Still, using the same username and password on every internet site? It may be time to get a financial security plan in place. With data breaches always a possibility now’s as good a time as any to take some steps to minimize your risk in case of a data breach or a hacker accessing your financial information. One thing that you can do before the end of the year is to set up a password manager to put some variety into your passwords. Another thing is to set up two-factor authentication (2FA) on your important financial accounts.

#5 Review your credit report

Each year you are entitled to a free three-bureau credit report once a year from annualcreditreport.com, and the end of the year can be a good time to do that. If you already have a Mint account, you have access to your credit score at any time, but reviewing your actual credit report can make a big difference to your credit report. Between 10 and 21 percent of people have errors on their credit report, and clearing up incorrect or inaccurate information can raise your credit score.

#6 Use up any money in your FSA

Flexible spending accounts can be a great way to save money on health expenses. An FSA is typically set up through your employer and allows you to make pre-tax contributions. Any money that you contribute to your FSA is not subject to tax, and you can use that money to get reimbursed for many different types of health expenses. The only downside is that most FSA plans are use-it or lose-it plans. So any money that is left in the FSA at the end of the year is forfeited. Check the details of your plan, and make sure that you use all the money in your FSA before the end of the year.

#7 Set your financial goals for 2021

Finally, the end of the year can be a great time to set up your financial goals for 2021. You don’t have to wait until January to start up a new resolution. Meet and talk with your spouse, family, or trusted friends and advisors. Decide where you want to be in one year, in five years and beyond, and start taking the steps to get yourself there.

The post 7 Money Steps to Take Before 2021 appeared first on MintLife Blog.

Source: mint.intuit.com

How to Prepare for the End of Your Unemployment Benefits

Before the coronavirus reached the U.S., unemployment was low and few could have anticipated a global pandemic. However, as the pandemic and ensuing recession took hold, a record-breaking number of people filed for unemployment benefits to stay financially afloat.

“COVID-19 led to an incredible number of American workers being without work,” says Julia Simon-Mishel, an unemployment compensation attorney. “And it’s caused a huge need for individuals to file for unemployment insurance.”

Unemployment insurance, or unemployment benefits, can offer an essential lifeline. But if you’ve never accessed these benefits before, you may have questions about how they work. You might also be asking: What do I do when my unemployment benefits run out and I’m still unemployed?

This article1 offers tips about what you need to know about filing an unemployment claim. It also addresses the following questions:

  • How do you prepare for the end of unemployment benefits?
  • Can your unemployment benefits be extended?
  • What can you do when unemployment runs out?
  • Can you refile for unemployment after it runs out?

A record number of people have filed for unemployment, and many are wondering what to do when unemployment runs out.

If you’re just getting ready to file or need a refresher on the basics of unemployment benefits, read on to have your questions answered.

If you’re already collecting benefits and want to know what happens once you reach the end of the benefit period, skip ahead to “Steps to take before your unemployment benefits run out.”

Common questions about unemployment benefits

Experiencing a job loss is challenging no matter what. Keep in mind that you’re not alone, and remember that unemployment benefits were created to help you.

As you consider how to prepare for the end of unemployment benefits, remember that you're not alone.

While they’re designed to provide financial relief, unemployment benefits are not always easy to navigate. Here’s what you need to know to understand how unemployment benefits work:

What are unemployment benefits?

Unemployment insurance provides people who have lost their job with temporary income while they search for and land another job. The amount provided and time period the benefits last may vary by state. Generally, most states offer up to half of a person’s previous wages in unemployment benefits for 26 weeks or until you land another full-time job, whichever comes first. Requirements and eligibility may vary, so be sure to check your state’s unemployment agency for guidance.

How do you apply for unemployment benefits?

Depending on where you live, claims may be filed in person, by phone or online. Check your state government’s website for details.

Who can file an unemployment claim?

This also may vary from state to state, but eligibility typically requires that you lost your job or were furloughed through no fault of your own, in addition to meeting work and wage requirements. During the coronavirus pandemic, the government loosened restrictions, extending unemployment benefits to gig workers and the self-employed.

When should you apply for unemployment benefits?

Short answer: As soon as possible after you lose your job. “If you are someone who has had steady W2 work, it’s important that you file for unemployment the moment you lose work,” Simon-Mishel says. The longer you wait to file, the longer you’re likely to wait to get paid.

When do you receive unemployment benefits?

Generally, if you are eligible, you can expect to receive your first benefit check two to three weeks after you file your claim. Of course, this may differ based on your state or if there’s a surge of people filing claims.

Can unemployment benefits be extended? Check your state’s unemployment insurance program page for updates.

2020 enhancements to unemployment benefits for freelance and contract workers

In early 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. In addition to other benefits, the CARES Act created a new program called Pandemic Unemployment Assistance. This program provides unemployment benefits to independent contractors and other workers who were typically ineligible. That means that if you don’t have steady W2 income—for instance, freelance and contract workers, those who file 1099s, farmers and the self-employed—you still may qualify for unemployment benefits.

“That program is a retroactive payout,” Simon-Mishel says. “If you’re just finding out about that program several months after losing your job, you should be able to file and get benefits going back to when you lost work.”

Because legislation affecting unemployment benefits continues to evolve, it’s important that you keep an eye out for any additional stimulus programs that can extend unemployment benefits. Be sure to regularly check your state’s unemployment insurance program page for updates.

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“It’s really important to keep on top of all the information out there right now and be aware of what benefits are available to you.”

– Julia Simon-Mishel, unemployment compensation attorney

Steps to take before your unemployment benefits run out

In a perfect world, your job leads would become offers long before you reached the end of your unemployment benefits. But in reality, that’s not always the case.

If you’re still unemployed but haven’t yet exhausted your benefits and extensions, you may want to prepare for the end of your unemployment benefits as early as possible so you don’t become financially overwhelmed. Here are four tips to help you get through this time:

Talk to service providers

Reaching out to your utility service providers like your gas, electric or water company is one of the first steps John Schmoll, creator of personal finance blog Frugal Rules, suggests taking if you’re preparing for the end of unemployment benefits.

“A lot of times, either out of shame or just not knowing, people don’t contact service providers and let them know what their situation is,” Schmoll says. “[Contact them to] see what programs they have in place to help you reduce your spending, and basically save as much of that as possible to help stretch your budget even further.”

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Save what you can

To help prepare for the end of your unemployment benefits, a few months before your benefits end, Schmoll suggests cutting back spending as much as possible, focusing only on necessities.

“If you can try and save something out of the benefits that you’re receiving while you’re receiving them—it doesn’t matter if it’s $10 or $20—that’s going to help provide some cushion,” Schmoll says. Keep those funds in a separate account if you can, so you’re not tempted to spend them. That way you’re more prepared in case of an emergency.

If you hunkered down during your period of unemployment and were able to save, try to resist the urge to splurge on things that aren’t necessary.

“There might be temptation to overspend, but curtail that and focus on true necessities,” Schmoll says. “That way when [or if] you receive an extension on your benefits, you now have that extra money saved.”

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Saving money can be a good way to prepare for the end of your unemployment benefits.

Saving money can be a good way to prepare for the end of your unemployment benefits.

Seek additional financial aid

If you find that your savings and benefits aren’t covering your expenses, and you’re reaching a point where you no longer qualify for benefits, look into other new benefit programs or features designed to help during times of crisis.

For example, there are programs across the country to assist people with rent or mortgages, Simon-Mishel says. Those programs are generally designed to keep those facing financial hardship from losing their home or apartment. You may need to show that you are within the programs’ income limits to qualify, or demonstrate that your rent is more than 30 percent of your income. These programs vary widely at the state and even city level, so check your local government website to see what might be available to you.

As you prepare for the end of your unemployment benefits, explore which government benefits or government agency may be best suited for your needs.

Keep up with the news

During economic downturns, government programs and funds often change to keep up with evolving demand.

“It’s really important to keep on top of all the information out there right now and be aware of what benefits are available to you,” says Simon-Mishel. “You should closely pay attention to the social media of your state unemployment agency and local news about other extension programs that might be added and that you might be eligible for.”

Pay attention to social media and local news as you prepare for the end of your unemployment benefits.

Options for extending your unemployment benefits

If you’re currently receiving benefits, but they’ll be ending soon, you’re likely wondering what to do when your unemployment runs out and asking if your unemployment benefits can be extended. Start by confirming when you first filed your claim because that will determine your benefit end date.

If you’re wondering, “Can you refile for unemployment after it runs out?” the answer is yes, but you’ll have to wait until your current “benefit year” expires. Note that a benefit year is 12 months from when you file a claim. If you filed at the beginning of June, for example, you generally can’t file again until the beginning of the following June.

You may get 26 weeks of unemployment benefits, depending on your state’s rules at the time. Most states extended the payout period to 39 weeks in the wake of the COVID-19 crisis. Check your state’s website for the particulars on what to do when your unemployment runs out.

If your claim is still active but you’ll be in need of additional financial relief after your unemployment benefits run out, here are your options:

File for an unemployment extension

During extraordinary economic times, such as the coronavirus pandemic, the federal government may use legislation like the CARES Act to offer people more benefits for a longer period of time, helping many people concerned about whether unemployment benefits can be extended.

Can you refile for unemployment after it runs out? It can vary by state, so reach out to your unemployment office.

For example, in 2020, for most workers who exhaust, or receive all of, their unemployment benefits, a 13-week extension should automatically kick in, Simon-Mishel says. This would bring you up to 39 weeks total. However, if more than a year has passed since you originally filed and you need the extension, you will likely need to file a short application provided by the government. Details vary by state.

As you’re determining what to do when your unemployment runs out, reach out to your unemployment office. It’s important to do this before your benefits expire so you can avoid a missed payment. You can also confirm you’re eligible and that you can refile for unemployment after it runs out.

Ask about the Extended Benefits program in your state

Can unemployment benefits be extended beyond that? In periods of high unemployment, you may qualify for a second extension, depending on your state.

“After those [first] 13 weeks, many states have added a new program called Extended Benefits that can provide another 13 to 20 weeks of unemployment when a state is experiencing high unemployment,” Simon-Mishel adds. This means you may be able to receive a total of up to 59 weeks of unemployment benefits, including extensions. The total number of weeks of unemployment you may receive varies based on your state and the economic climate.

It’s hard enough keeping up with everything as you prepare for the end of unemployment benefits, so don’t worry if you don’t have your state’s benefits program memorized. Visit your state’s unemployment insurance program page to learn more about what benefits are available to you.

For anyone considering what to do when unemployment runs out, it's important to take things one day at a time.

Beyond unemployment benefits

While life and your finances may seem rocky now, know that you’re not alone. Remember that there are resources available to help support you, and try to take things one day at a time, Schmoll says.

“Realize that at some point your current situation will improve.”

If you find that your benefits aren’t covering all of your expenses, now may be the time to dip into your cash reserve. Explore these tips to determine when it’s time to use your emergency fund.

1 This article is not legal advice and should not be construed as such. Eligibility for unemployment benefits may be impacted by variations in state programs, changes in programs, and your circumstances. If you have questions, you should consider consulting with your legal counsel, at your expense, or seek free assistance from your local legal aid organization.

Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.

The post How to Prepare for the End of Your Unemployment Benefits appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com