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The financial challenges of job loss can be overwhelming. Severance (if even available) lasts for a few weeks and then there is unemployment (which does not cover much if you have a family). Finding a new job is your number one priority, surviving financially is a very close second.
Job loss is difficult on many fronts, and the stress is second only to the loss of a spouse. Our job defines so much of who we are, and not being able to provide for your family weighs heavy and can be extremely distracting.
At CareerAlley, we focus on what is important in your job search – resumes, cover letters, social networks, recruiters, etc., but we also need to help you prepare and position yourself for surviving after your job loss and during your job search.
This post focuses on the most important prerequisites for your job search while unemployed – managing your money, creating a budget, financial tools, and resources. The primary goal is to minimize how much you spend versus how much cash is coming in when you are without a paycheck.
This book is about getting one's life in order and moving on after career setbacks. The book shares a number of anecdotes from personal experiences, intending that the book be both instructional and motivational in its tone.
Surviving Job Loss:
There are four things you need to think about to manage your money while out of work:
- What you spend
- Money coming in
- Available cash sources – savings, unemployment benefits, 2-1-1 services, renegotiating debt, discounts, etc.)
The first step is to make a list of where your money goes . . .
- Recurring Bills – This list includes your regular monthly bills (utilities, rent or mortgage, credit card payments, etc.). The best place to start is your checking account statement and any other account where you spend money. If you have any type of savings plan (savings account, 401k, IRA, etc. – see more below on this), these outflows should go on your list as well. For most of us, our biggest outflows are our mortgage and credit card payments. There is also stuff you can do about minimum payments, see “Gorilla Tactics” below. A great resource for managing your debt:
- Discretionary Spend – Next up is a list of your “discretionary” spending. This is either where you spend money (but don’t really have to) or where you spend money but can spend it more efficiently. Some examples of discretionary spending include entertainment, eating out, and vacations (there are plenty more). One you probably have not thought about is your grocery bill. While this is not really discretionary (because we all have to eat), you can be smart about how you spend your grocery dollars.
- Emergency Spend – This category is for those unplanned (but necessary) spends. Things like repairing your refrigerator or your car. while you can’t plan for these, you can be sure something will need to be repaired or replaced. You should have a rough idea of how much you spend in any one year and include it as a placeholder.
Next comes a list (small as it might be) of incoming money.
- Unemployment: The very first thing you must do when you’ve lost your job is to sign-up for unemployment benefits. This is not a hand-out, you’ve paid your dues when you were working and now it’s time to collect. While the maximum benefit is not all that much, it is more than zero. Sign-up and collect. Another benefit of most unemployment programs is training and job search support.
- Savings Plans: This has two parts: First, as a last resort, savings plans can be a source of incoming cash. Whether you have a traditional savings account or a 401k, they can both be a source of cash (be careful with 401ks and retirement accounts – talk to an adviser before withdrawing money from these). Second, if you have a regular transfer to a savings account, you will want to suspend these plans for now.
- Other Sources of Income: Depending on how dire things are, you may want to consider other ways to make some money in the short term. Keep in mind, some of these (like a part-time job) will impact your unemployment benefits. There may be some passive income opportunities that do not.
Creating a Budget and Other Important Information:
Your lists from above are what you are going to use for your job search budget. But your job search budget is just the tip of the “budgeting iceberg”. Even if you have a job (or when you land your new one) you should have a budget, but more on this later.
- Burn Rate: Burn Rate is a term used (especially in start-ups) that calculates the net outflow each month and estimates when you will “run out of cash”. This is a scary concept but it is something you will seriously need to consider and calculate. You need to live on the smallest amount of money possible during your job search. It won’t be the easiest thing to do, but it will help you last longer financially during your out-of-work period. This should be monitored regularly (more on that when we get to the tools piece) but in no case less than once per month. Putting your various lists together will form your budget, but save that until you’ve read the resources section below.
- interview clothes, meals when traveling or commuting to interviews, etc. Again, try to estimate these expenses as best you can.
- Gorilla Tactics: Strange title but definitely appropriate. Another thing you should do as soon as possible is to call your mortgage company and credit card companies. Explain your situation and ask for a modified payment plan that does not impact your credit rating. This will help stem some of the outflows, but keep in mind that you will be paying your balances more slowly and, therefore, increasing the amount of time (and overall cost) of paying down your debt. Once you’ve landed your dream job, be sure to set these payment plans to “normal”.
One important lesson in life is knowing what you don’t know. While I know quite a bit about job search, I am not an expert on managing your money or creating a budget. Therefore, I’ve included some very important links below so that you can consult with the experts on some tips, tools, and specifics.
- Mint – You will have seen the image above on “Mastering Mint“. Mint, for those who do not know, is a tool that you can use to help budget and manage your money. To quote from ListenMoneyMatters.com – “Mint is a free automated set of tools that helps you control your money and focus on building wealth. It takes all of the math out of managing money and just tells you what you need to know when you need to know it”. Their book (“Mastering Mint“) will quickly make you a pro at budgeting for your job search and beyond. T
- Managing Your Money – Let’s face it, unless you are Bill Gates donating your wealth and time to charities (and there is nothing wrong with that), one of the top three reasons (if not the top reason) you are working is to make money. And your goal? Retire rich as soon as possible. The vast majority of us (like 98%) will never get there. But if you want a shot at retiring early then you should take a look at listenmoneymatters.com.
- Your Job Search Journey – Once you’ve read and implemented all of the great information in this article (and trust me, you will feel GREAT when you’ve got your plan locked down), mosey on over to all of the amazing job search resources on CareerAlley.