How to Budget During a Job Search
As they face an extended job hunt amid the coronavirus outbreak, candidates need to keep a close eye on their finances.
Dasha wasn’t expecting to look for a job. But in January, her company went through a round of layoffs and she found herself on the hunt. She was optimistic at first, since the job market was roaring and unemployment was at 3.5%. A month later, she still didn’t have a job and, worse, she was running out of money. When the coronavirus outbreak suddenly exploded in the United States in March, she began to feel really stuck.
Whether you are one step out the door at your current office or find yourself unemployed during this uncertain time, taking measures to budget your finances can prevent you from feeling like you have to grab the first job that comes along, even if it seems like a horrible fit. “Channel the power of positivity and a plan,” says Jennifer Zamora, a career coach at Korn Ferry Advance. “Engage your support system to help keep you on track.”
That’s all the more important as a job search stretches out. The average job opening generally receives 250 applications, meaning the average interview process takes 23 days—up from 13 in 2010, according to one study. Here’s how to create a financial plan that’s flexible and will prevent desperation from seeping in while waiting for companies to bounce back from the coronavirus.
Create a realistic rainy-day fund.
We all hear it: have enough funds in place in case something goes awry. But the truth is, it really helps, and it’s easiest to do when you’re gainfully employed. Traditionally, financial advisors suggest having at least six months of income saved in case you suddenly find yourself out of work. That’s the minimum, though. Career pros often use this ballpark method: for every $10,000 you make, tally a month for the search. An $80,000 job, for example, would take around eight months. And for employees 55 and older, expect longer; AARP found it takes professionals in that age bracket about a year to find the next gig.
Find ways to reduce your expenses.
Finding a job costs money. The upside to the travel lockdown is that you won’t be spending on travel for interviews for a while, but you still may want to sign up for premium job sites like LinkedIn’s upgraded service, or spruce up your attire—because looking good for a video interview still matters.
Thus, you’ll need to pare down to the essentials. Resist too much online shopping that’s done out of boredom, or laying in enough groceries to last a year. Whatever you can cut will create flexibility in how long you can look for the perfect job. “You might need to live lean for a little bit, but remember: it’s not forever,” says Eric Roberge, a financial advisor and founder of Beyond Your Hammock, an advisory.
Don’t tap your retirement accounts.
There’s an impulse when things get tight to tap into 401(k)s or IRAs, since potentially hundreds of thousands of dollars are sitting there. But this is a cardinal sin, career pros say; because you’re likely not of retirement age when you’re going through a job search, you’ll have to take a penalty for withdrawing from the accounts. And if you withdraw when the market is down, your money is worth less. Don’t even look at your investment accounts right now, if you can help it. You should consider it as a “very last resort,” Roberge says.
Instead, look for short-term opportunities to help fund your job search, whether it’s freelancing, consulting, or taking odd jobs. That way you aren’t sacrificing your long-term financial picture.