Unemployment; A Crutch Not a Couch
If you have never had to draw unemployment before, it can be an ambiguous system to navigate. It helps to go in with a few facts on how the program works and reasonable expectations on what it may provide.
Unemployment was designed to be a financial crutch to use during times of unemployment loss through no fault of the employee. A crutch, not a couch so don’t sit down and get too comfy!
The funds available are comprised of a tax that is placed on employers. Only three states also impose a tax on employees as well.
Unemployment varies from State to State and the laws governing those benefits are defined by the State in which an unemployed individual is seeking financial benefit from.
Many oil field workers live and work in two different states so knowing where to file can be confusing, we will try and break it down but ensure you check with your state for specifics.
18+ >months Months of Work in 1 State but you live in another, you file for Unemployment Insurance in the state you worked in.
Months<18 months: Work in 2 States, you may be eligible to claim benefits in two states.
When do you become eligible for unemployment insurance?
What are the eligibility requirements to receive UI benefits?
- You must have earned wages from covered employment during the base period.
- You must have a total gross income of $2,500 earned over two calendar quarters of the base period.
- You must maintain your eligibility while receiving benefits by being able and available for full time work, actively seeking and reporting weekly work searches and registering for work as required.
How are your benefits calculated? The unemployment agency in your state will determine your base. Your base is calculated using the last 18 months of your income. This is formulated into the State’s computation of your benefit amount.
In Alaska, because that is where I live, you can receive a minimum weekly benefit amount of $56 up to a maximum of $370 per week.
If you become unemployed, start the filing process immediately. Why? Two reasons with the same answer: time. It takes time for the unemployment agency to process your request. It also takes time to find and gain new employment.
Assuming your unemployment insurance benefit is $370.00 per week, that is $1,480 a month.
Average oil field worker earns $80,000.00 a year net income - after taxes, that’s your spendable money. This translates into around, $6,666.67 a month.
Obviously, dropping from $6,666.67 a month to $1,480.00 is a dramatic change but if you read last weeks article on “How Much Money is Enough” than you know you have two budgets; one that reflects no lifestyle changes which is called your “As-Is” and one that reflects an “Armageddon” scenario of carving out “wants” and only fulfilling needs.
Your goal was to financially save for the “As-Is” scenario. Six months of cash reserves saved.
Let’s say that using the Armageddon approach, you carved out a realistic 35% of your budget that was being used to fulfill discretionary needs before. That means $6,666.67 * 35% = $2,333.33.
$4,333.34 Balance to meet monthly needs
Assuming the unemployment benefit used above of $1,480.00 we get:
$2,853.54 Balance needed to meet monthly needs
Granted, $2,853.54 is a lot when you’re looking at unemployment but consider how alarming the $6,666.76 number was when you thought of earning $0.00 and needing $6,666.76.
Now, if you’ve followed our advice this far and have 6 months of cash reserves accumulated into your savings account you should have, using the scenario above:
$6,666.67 monthly income X 6 Months = $40,000.02
Using your “As-Is” savings but applying it to your “Armageddon budget” less the income you could receive from unemployment means that you can stretch this emergency savings over several more months than you planned for.
You have six months of cash reserves, in the example above, that means $40,000.02 in savings.
$40,000.02 in Emergency Savings
$4,333.34 need for monthly income ($6,666.67 less 35% in reductions)
($1,480.00) from unemployment income
$2,853.54 needed to supplement
$40,000.02 / $2,853.54 = 14 months of supplemental income available
*Poof* like magic the 6 months of cash reserves just stretched out to 14 months of supplemental income. Of course, it isn’t magic… just math and some good forward planning.
This provides enough money for you and your family to reasonably look for gainful employment within a 14 month period without making any dramatic lifestyle changes.