How Much Does Unemployment Pay?

I was thrilled to see this article on MSN Money, as I have been wondering about this recently.  Here’s what you need to know.

• Unemployment varies by state; the lowest weekly maximum being $230 (Mississippi), the highest being $628 (Massachusetts).
• Some states increase payments for families with children.
• Unemployment benefits are TAXABLE, although not withheld automatically.
• The new stimulus law exempts the first $2,400 of unemployment benefits from federal taxes.
• Benefits may be paid a maximum of 26 weeks in most states.  The new stimulus law is extending coverage an additional 20 weeks.

Source: MSN Money via State Labor Department Websites

The maximum benefit I could receive living in California is $1,800 per month.  I currently take home around $2,200 per month after taxes/health care/401k contributions.

Detroit, Take Note

I caught this NPR story on the drive home tonight, about a Maine Lumber company hitting hard times and transitioning from manufacturing housewares to toys, in order to compete with overseas competitors.

It’s nice to hear company executives flexing their creative muscles, using their imagination and ingenuity, and taking smart risks.

These people remind me why I have no sympathy for American automaker executives.

The Unspoken Impact Of Unemployment

Last Friday, NPR featured a piece on the emotional/psychological toll some are experiencing as a result of the rampant unemployment we’re seeing in these grim economic times.

We’ve all heard the numbers, but listening to one individual emotionally talk about losing his or her job and searching for work brings the reality into stark focus.

How much a job factors into a person’s sense of self and identity varies greatly, of course.  And, losing one’s job is not always a negative experience.  I’ve had friends whose job eliminations have proven to be a blessing in disguise, as they’ve moved into better positions elsewhere.  Some people take the opportunity to go back to school, or enter into a new career.  For some a lay off can mean a much-needed kick in the ass or a wake up call to readjust expectations and/or goals.

However, in a recession, this silver lining is less likely to be found.  The number of available jobs is greatly disproportionate to the number of unemployed.  Credit markets have come to a grinding halt, meaning companies are struggling to find lines of credit and make payroll, much less add jobs.  In addition, when unemployment runs out, people cannot turn to credit as easily.  Which, in theory, should be positive; but how are they meant to live?  The number of qualified, multi-skilled workers looking for jobs is staggering.  And even more staggering is the number of skill-focused workers who have lost their jobs, most notably in manufacturing/labor sectors.

Silvia Martinez, who was profiled by NPR’s All Things Considered, aggressively looked for work after her human resources administrator position was eliminated,

“I apply for jobs and apply for jobs and no one calls. Nobody. I’ve even gone as far as applying at fast-food places; I’ve applied at Wal-Mart, at Kmart, at Target,” she says.

The anxiety, sense of panic and complete hopelessness people like Martinez feel has become more and more prevalent among the unemployed.  Calls to suicide prevention hotlines have nearly doubled.  There have also been reports of an increase in domestic violence and child abuse.  The extreme stress is taking its toll.

I can’t begin to imagine a solution, aside from time.  I have no clue how the new administration’s stimulus package will play out in the next few years.  I do know that there seems to be some fundamental ideological shifts happening, most notably around spending within one’s means.  How this will impact certain sectors remains to be seen, although we’ve certainly seen an immediate impact on retailers/manufacturing.

Positions were eliminated at my office this morning; for me these considerations are weighing heavily.  My position will be impacted in a way that I am not happy about, but I have my job.  It’s a strange thing, trying to navigate between the sadness, the disappointment and the relief.

Because, I don’t know how I would feel if I were laid off.  Nor do I know what would happen.  Would I easily find another job in my field?  Would I be forced to take a lower-paying administrative job?  Would I need to supplement my income with a retail or restaurant job?  Would I perhaps find a better job?  Would I enjoy not commuting 2 hours a day?  How would I feel?

In the end, I am not worried about myself.  Because there are thousands upon thousands of others in far worse situations.  Jobless, single, with children, without prospects.  What are they doing to do?  And how are we going to help them?

I Would, But The Recession…..

Have you busted out with the recession/economy excuse yet?  The New York Times reports on the apparent upside of a shitty economy:

“Lavish anniversary dinners, the destination weddings of second-tier friends, costly gifts for children, and, yes, obligations to nannies — so often we go along, even when, deep down, we would do anything to get out of them. Now, even if we can still afford such occasional obligations, the recession has provided something of a get-out-of-jail-free card: it’s an excuse with which few would argue.”

– NYT

Personally, each time I’ve recently used lack of money as an excuse, it actually WAS a lack of money, not a “get-out-of-jail-free card.”  Not that I begrudge rich Manhattanites their right to passive-aggressively fire their nannies.

The Broken Economy & Your Retirement – When & How To Switch Gears

This post was originally meant to focus on how the fledgling economy is impacting our philosophies around saving for retirement.  It still will, but with the added layer of job insecurity and prioritizing certain types of savings/investments.

Image: Veer

It’s always seemed so easy and logical for my 20-something (alright, almost 30) self. Sure, retirement is but a wee spot in the distant future, but saving is the prudent and responsible choice. And my 401K was the magic bullet; the ideal savings solution!

I began contributing to my 401K the moment I became eligible at my first full-time job after college. In five years time I had amassed a small sum of money, which has now diminished by half. The same, sad story is echoed across the country,

“My 401K lost 5/20/50/100 thousand dollars! Half of its value!”

While it’s understandably upsetting to see such a large drop in retirement savings, it’s important to weed out some perspective from the current situation. Pulling money from retirement savings, decreasing 401K contributions or drastically changing investment portfolios are options that must be considered carefully and without emotion. Consider this before thinking about touching your 401K; this is a tax-deferred savings account, so depending on your tax bracket, there’s a 25-35% return on the money invested (now) from the get-go. This is before any market returns (or, as we’ve seen, losses) or employer matching.

Income does not decrease that much proportionately when you stop 401K contributions.  I will use myself as an example, as the first thing that entered my mind when I heard about a pay cut was whether I should stop putting money into this account.

Prior to the pay cut I was making $3,560.48 monthly and contributing 3% (not much, I know) toward my 401K, $106.82 per month.  I will now earning $3,382.46 monthly and my 401K contributions would be $101.48.

With Contribution:

($3,382.46 x 0.97) = $3,280.99 Taxable Income

Taxable Income ($3,280.99) x Taxes (27%, 0.73) = $2,395.12

Without Contribution

Taxable Income ($3,382.46) x Taxes (27%, 0.73) = $2,469.20

Please note, I have left medical expenses out of this equation.

If I stop contributing the 3% to my 401K, I will take home an additional $74 per month.  $27.48 will go toward taxes rather than my 401K.

NOTE

Normally, I would NOT recommend that anyone stop contributions.  However, I took out a 410K loan earlier in the year (something I also do not recommend, but….I’ve never claimed to be a financial genius, right?) and I am considering halting contributions for the period in which I will be paying off the loan (6 months).

To be perfectly frank, my total desperation to pay down that high interest B of A card was clouding my judgment when I decided on the 401K loan.  It was a small loan ($1,400) and I have very little in my account anyhow, and I scheduled to pay it down quickly, so I easily justified it.  As I said, it’s bad news to make a habit out of this, so I don’t recommend it.  I just figured I should be totally honest and fess up.

Modifying 401K Investments

We’ve discovered that 401K accounts are not the “magic bullet,” but they are still valuable. The trick is to realize that all accounts are not created equal. I know it can be intimidating and time-consuming, but do some research into your 401K investment options.  The general rule of thumb when investing for retirement is that you should take on less risk as you get older (or, the closer you get to retirement).  This means an investment portfolio heavy in stocks when you’re younger, transitioning into a more conservative portfolio as you get older.

At 29, I’m not all that worried that my 401K has dwindled by 50%, because I have 35+ to ride the market. This is an ideal time to educate yourself and take control of your investment portfolio. Depending on the 401K, owners often have a great deal of flexibility in choosing and diversifying their portfolios. Now is the time to focus on bear market funds and invest more aggressively, if appropriate given your retirement timeline.

Paying Down Debt V. 401K Investments

You can punch the numbers all you want, but I feel that this is a totally personal decision.  One that should be based on the amount of your debt, what you’re 401K account looks like, your age, and how the debt is impacting your psyche.  If paying off your debt more aggressively will push you to remain motivated and make you feel more sane, by all means, prioritize it.  As lines of credit are SO hard to get these days, it might be prudent to halt (or reduce) contributions for a short period of time to focus on debt repayment.

Emergency Savings

I’ve always scoffed at this advice, not because it’s bad advice, but because it’s entirely unrealistic for the greater portion of the population.  How is a person living paycheck to paycheck going to amass a respectable amount of money in an “emergency” savings account?

My opinions around this have changed with the job market being what it is.  Respectable amount notwithstanding, a liquid savings account – even a modest one – is incredibly important to have in this climate.  It could mean the difference between paying rent with cash or withdrawing money from a credit card at 30%.  It could mean groceries for a month.  I could mean having the money for your kid’s dental work instead of begging a family member for a loan.

For me, this means shifting some of the money meant for debt repayment and a vacation into an emergency savings account.

And yes, I am not happy about it.

Job Update No. 2

Alright folks, so here’s the deal.  As I said earlier, it was announced that, effective immediately, everyone in my company would be taking a 5% pay/salary cut.  I am going to keep this fairly vague as it makes me a bit nervous to write about my job.  Some of you know where I work, so I just ask that you don’t say anything in the comments.

There will be layoffs, next week.  I thought this might be the case as next Friday is a payday.  They will happen across the company.  There are two pieces of good news here; one, I am fairly certain that I will not be laid off, and two, I don’t think they can possibly lay more people off after this.  It’s the 8th round of layoffs I’ve witnessed, and I’ve been with company for 5 years.

I didn’t ask who was being laid off and I don’t want to know.  My boss told me that “none of us” will be going, and I asked that that meant those of us (just 3) under him, or those of us in Creative Services.  He answered that between the three of us no one would be going.  This means at least one person will be going from CS.  Which…..fucking sucks.  Just a few years back there were roughly 30 of of us in CS, now there are 10 – including two directors and our VP.

My boss and I have positioned ourselves as pretty valuable assets for the company, luckily.  We’re multi-functional, we actively try to save the company money, we’re good at what we do, and we’re flexible.

That said, we’re on a sinking ship.  We’re on credit hold with most of our vendors and sales are crap.  I would guess that roughly 20% of our stores will be closing in the near future, which is just under 10% of our fleet.

The powers that be ARE doing what they can, but as we’ve seen, it’s certainly not out of the realm of possibility that our company could shut down completely.  I do think that our CEO will fight to the end, it’s privately held, family run company.  And although we’re small to mid-sized, the brand would be missed.

At this point, I am having to reevaluate both my spending, budget and dept repayment goals.  Obviously now that I have a consolidation loan, that will be a large, fixed monthly payment.  I will continue to pay as much as I can toward the other two credit cards that remain open.  However, additional money coming in will need to be saved.  I am worried that I have thrown thousands toward my credit cards in the past few months.  It was GREAT to do so, but I think I need to start building up some emergency savings, just in the case the axe does fall.

However, in case you think I’ve lost ALL perspective, I consider myself to be very lucky.  I still have my job.  I also have parents who can and will help me out if and when I become unemployed.  This doesn’t mean they will pay all of my bills while I leisurely look for a new job, but that’s a HUGE deal, knowing that you have that cushion waiting for you.  Most people don’t have that.

For now, I plan on spending the weekend sleeping, listing some things on eBay and drinking wine.  Next week will likely be quiet here on the blog.

xo

Macy’s Cutting 7,000 Jobs

Not a good time to be working for a retailer.

Keep your fingers and toes crossed for me.

The Great Recession – Companies Ask Employees To Take Some Time Off

I arrived home a few weeks back and began ranting to David about California state workers.  I had been listening to our local NPR station on the way home.  An employee representative was complaining that, due to the tough economic climate, CA state workers are being “forced” to take 2-day-a-month “furloughs.”  Essentially, time off without pay.

“Seriously?” I asked, “I mean…..really?  State workers are so spoiled anyhow, and they’re bitching about having to take a few days off a month?”

“Penny, that’s like a 10% pay cut,” David responded, giving me a searing look as if I had just kicked our cat in the head.

Now, don’t get me wrong, I am sympathetic.  And, I am allowed to make fun of state workers.  I live in the California state capital; I am surrounded by them.  My father is a chemist for the CA EPA.

I suppose my irritation is rooted in the fact that, at the beginning of Q4 last year, my company informed us that we would be taking some mandatory days off.  Actually, it went something like this:

“The office will be closed on XYZ days.  You can take those days unpaid or use PTO.  Have a nice day!”

At first I was pissed.  Really pissed, in fact.  But, eventually, I said “fuck it” and decided to use my PTO and enjoy a few extra days off.  It’s not as if I was saving up for some amazing vacation, anyhow.  I then started to hear murmurs of other companies encouraging employees to take some time off.  Gap, Inc., for example, asked their employees to take a three-day vacation during a slow week during Q4.

This month, I have to take two days off.  A Monday and a Friday, I believe.  I don’t need to, nor do I want to.  But, you know what?  It’s better than the alternative.

So, dearest state workers……please shut up and enjoy the fact that you are not one of the thousands of newly unemployed.