Dear Charlotte,
I’m a freelance copywriter, and before COVID my work was pretty stable. I had two regular gigs that paid the bills, and I occasionally took on larger projects when I had time. But in the past few weeks, I lost one of my contracts with an advertising agency (which also had to lay off some of its full-time staff), and my other boss asked if I could reduce my rates, which I agreed to — what else could I do? I don’t foresee getting any projects soon, either.
Part of it is fine, because my 4-year-old’s day care is shut down and I’m juggling child care with my partner. But he just had his salary reduced too, and money-wise, things are getting tight very quickly. I’ve read that freelancers are eligible for some of the new unemployment benefits, but since I’m still technically doing some work, I don’t know what I can apply for. I also don’t want to be in a position where I’m turning down projects because I’m on unemployment — how does this all work exactly? I’ve just been putting everything on my credit card for now, but I’m worried we won’t be able to pay the bill at the end of this month. What can we do to get more money quickly?
Not to start things off with a lecture (and I’m totally with you in the anxiety department), but I winced when I read about your credit card. Put it away! Delete it from the autofill fields on your browser! The last thing you need this month (or ever, really) is high-interest debt that you can’t pay off.
That said, I understand your instinct. The tendency to run up your credit-card bill is a well-documented symptom of “scarcity mind-set,” also known as the wide-eyed panic that sets in when you fear that you don’t have enough of what you need (which, at the moment, most people can relate to). But the thing about scarcity mind-set is that it makes people act irrationally — hoard, shop compulsively, or make shortsighted financial decisions.
So take a breath, look at your finances, do the math, and see how far your current income and savings will stretch. Consider keeping daily lists of your expenses, which might give you a sense of control (it does for me). If this month’s credit-card bill is really going to wipe you out, look into getting a zero-interest credit card, rolling your current credit-card debt onto it if possible, and paying it down as quickly as you can (and definitely within the time limit of the zero-interest offer). I’m not going to say this will be an easy time, but you can make it easier on yourself by making a plan.
Now for your next steps: Having some work is obviously better than having none, but this weird twilight zone of quasi unemployment is much more complicated to navigate than straight up losing your job. And a lot of Americans, particularly freelancers and small-business owners, are currently in your shoes.
In theory, the government’s stimulus bill, the CARES Act, was tailored to address people like you — those who have “lost income because of COVID-19,” not just people who have been laid off. This means that you’re eligible for financial assistance if you fall into the gray area of a salary reduction or a drop-off in demand for your work because of the epidemic.
To find out which resources are available to you, I called Rafael Espinal, the executive director of the Freelancers Union. He recommended applying for the Paycheck Protection Program (PPP), which essentially provides a forgivable loan to self-employed people so that they can supplement their income and keep making what they regularly earned pre-COVID-19. So, say you normally earned $1K a week, but now you’re earning $600; the PPP loan is supposed to cover that $400 difference through the end of June. (Note: When you read the small print, it may seem like you don’t qualify because you don’t have any employees. But as a freelancer, you’re technically your own employee, on your own payroll. So apply away.)
While you’re at it, you could also apply for an Economic Injury Disaster Loan, or EIDL, which is supposed to provide low-interest loans to businesses and self-employed people affected by the coronavirus. If you qualify, you can also get a $1K cash advance that’s forgivable, meaning you won’t have to pay it back (unlike the loan itself).
Unfortunately, the rollout of the PPP and EIDL programs has been rocky, to put it mildly. And, as of yesterday, they basically ran out of money. Congress is currently working on legislation to top up the funding, but until that gets passed, you’ll have to contact a local lender. Here’s how to find one.
It’s enraging, I know. But Espinal advises patience. “At this point, I have not heard of any freelancers receiving financial assistance yet, but I do know their applications are getting approved,” he says. “Everything is moving very slowly. The federal government hasn’t provided much guidance to the systems that are administering these programs, so it’s going to take some time for them to work the way they’re supposed to.”
Another option is to apply for unemployment insurance, but you only qualify if you’re earning less than a specific amount of money (in New York, it’s $504 a week, but the amount varies by state). If you are eligible, then you can receive supplementary payments up to that amount. For example, say you’re currently making $200 a week; if you live in New York, you’d receive a $304 check each week to make up the difference. It’s not much, but it’s something.
You also asked a good question about how taking on extra work could affect your unemployment payments. After you file for unemployment, you’ll be required to check in and report how much you’ve worked and earned every week. Then the unemployment office will deduct that amount from your benefit payment. It’s in your best interest to take every offer you can get. In my experience, good work begets more work, and I’m guessing that you normally have the capability of earning more than the unemployment office can pay you.
In better news: The CARES Act is also supposed to give everyone receiving unemployment benefits an extra $600 a week through the end of July. But again, the system has been slow out of the gate, so nobody’s seen that money yet. But the rule is retroactive to March 29, so those who have been waiting patiently should get a fat(ter) check soon.
Logistics-wise, it may take a while for your unemployment claim to filter through the system. I’ve read nightmare stories about endless delays and hold times, but friends have told me their claims were processed in a week or two. Each state is its own special kind of mess, but it’s worth seeing what you can get.
Another option, should you need it: If your credit score is decent, you could get in touch with your bank and see if you qualify for a very low-interest personal loan. The government is encouraging (and incentivizing) lenders to dole out every possible kind of financial assistance, and interest rates are rock bottom. It’s scary to borrow money when the economy sucks, but, again, it’s better than running up credit-card debt.
Finally — and this is a last resort — you could cash out money from your 401(k) or IRA if you have one. Normally, this is a big no-no, as it carries harsh tax penalties and hurts your long-term savings prospects. But the CARES Act has waived those tax penalties temporarily for “coronavirus-related” withdrawals up to $100,000, and also created a provision that would allow you to replace those withdrawals over the next three years, even if doing so puts you over the annual maximum contribution. The reason I’d discourage you from doing this, if at all possible, is that this money is probably invested, and cashing out of the market right now (when stocks are significantly down) is not ideal.
I know it’s awful to be at the mercy of so much red tape. These months will be hard, and I have no idea what the other side will look like. But I do know that asking for help — kindly, often, and repeatedly — is essential. So keep doing it.