How Does Unemployment Work?

I hope you never have to ask for help because you have no money. And I hope you never have to ask “How does unemployment work?”. But if you ever find yourself between a rock and a hard place, it’s nice to have a basic understanding of how the program operates.

I believe in my heart that the vast majority of people want to earn their own living and abhor having to survive on an unemployment check. But sometimes this is unavoidable. There is no shame in this if you find yourself in such a situation.

By all means, get your basics handled by accepting this temporary assistance and then move heaven and earth to insulate yourself in the future. Get a side business going or start a part time job and turn it into a side business. Do whatever you have to do to create more financial security for yourself and your family. And there is huge silver lining here. If you use this experience of unemployment as the catalyst to launch a new phase in your financial life, you may be able to look back on this period as one of the best things that ever happened to you. Let’s get to it.

The basic idea of unemployment insurance is to help workers who lose their jobs (unless they are fired for cause). The programs are administered by each state. So each state decides what the benefits will be, how long the benefits will be paid and who is eligible. Having said that, each state must comply with Federal law.

How do you qualify for benefits?

Generally you have to work a year and you have to be unemployed through no fault of your own.

That means you may not get benefits if you:

• Quit without good cause
• Get fired for good reason
• Are self-employed
• Quit for health reasons or to go to school

• How long are benefits paid?

Regular benefits are usually paid for 26 weeks. Sometimes that period is extended – usually during periods of economic turmoil and high unemployment. In fact, right now, there is a Federal extension in place that will lengthen the benefit period. Currently you can receive the regular 26 week benefit and up to 73 weeks of extended benefits if you filed your claim before May 6 2012. You’ll get fewer extended weeks of benefits if you filed after May 6. If you file after August 26,2012, you’ll get 47 weeks of extended benefits. The Federal government may discontinue that extension at any time of course.

How much will you receive?

Most states pay half your earnings up to a maximum amount. In New York, the max is $405 a week. In Arizona it’s about half that amount. Suffice it to say that you’re not going to get rich on unemployment. Oh…and by the way, those benefits are taxable income when it comes to the IRS. Just in case you were wondering.

How long does it take to receive benefits?

It can take 2 or 3 weeks to get your check. That’s why you should apply for benefits as soon as you qualify.

How to file a claim?

Depending on where you live, you may be able to apply online or on the phone. You’ll need your Social Security Number and names, addresses and dates of employment for all the places you worked over the last 2 years.

What to do when you can’t survive on your unemployment benefit or it runs out?

As I said above, you aren’t going to receive a king’s ransom in unemployment benefits. Where do you turn when you can’t make it on those payments?

Temporary Assistance for Needy Families

This is Welfare with a new name. Contact this agency if you are in desperate straits. They can help provide help with everything from housing to training and job placements.

Food Stamps

This federal program also has a bright shiny new name called Supplemental Nutrition Assistance Program (SNAP). If you quality, this agency will help subsidize your food expense.

As I said at the start of this post, you may find yourself in a financial crisis right now and there is no shame in asking for help if that describes you. Having said that, you owe it to yourself to put all your energy towards creating more financial security for yourself and your family as soon as you can. Take the steps I suggested at the start of this post to create your own small business and more financial security.