Managing Expenses During Job Search

We all have good intentions about budgeting.  We know its value.  But very few of us do it.

But while in transition (in between jobs) it can be critical to the financial and emotional health of your home during hard times.

As I look back at the category listing for this blog, I was surprised to see that this is only my fourth article on the topic of job search expenses.  Seems odd that such an important topic would not get the love that other topics have received.  Shame on me.

Just to catch you up, here are the other articles I’ve written directly on this topic:

When You Are The Sole Breadwinner

Job Search – Avoiding A Personal Bailout

How Much Money Should I Spend To Find A Job?

So this post is about identifying and planning your expenses during job search.  And this includes your regular expenses as well as those specifically focused on finding your next great role.

I updated a tool that I used in my last search and gave it a name.  And now I’m giving it to you.  For your use and, hopefully, your feedback.

Now, to be fair, there are many other tools on the web for managing a budget.  Some more detailed and more high tech than this one.  So, what makes this one different?

1. It includes specific line items for job search expenses (resume help, career coaching, job sites)
2. It allows for financial transitions (severance to other income; company paid insurance to COBRA)
3. It helps you to both identify today’s expenses as well as plan for future ones
4. It allows for incomes from a variety of sources, including severance payments (monthly or as a lump sum)
5. It identifies the expected gap between transition income and total expenses then allows for prioritization of funds to fill the gap.

Is a budget really all that important if I have a severance check coming for the next few months?

Well, yes.  Perhaps even more so.  Whether you have help for a few months or a strong savings account, your goal should be to spend as little of that money as possible.  So, in addition to a strong job search strategy, you’d better have one for your financial situation, right?  The money you save today, may extend you another week or two on the other side.

That includes having a strong knowledge of your current spending habits, a budget that reflects necessities not luxuries and, importantly, includes a smart psychology about the speed in which your job search will end.

A few months ago I wrote about the danger of being an optimist during job search and let me just say that your transition budget is not the place to be optimistic.

Hopes that your search will end weeks or months prior to your severance check drying up can meet with a painful reality.

Instead of making smart cuts in the beginning and balancing out the pain, you either end up making severe and immediate cuts or dig deeper into savings than you intended.

The tool is called ExpenSmart™.

So, how does it work?  Well, it is an Excel workbook with three tabs.  If you’ve never used an Excel workbook, look at the very bottom for tabs that you can click to find each spreadsheet.

TAB 1 – How To Use

If you find the tool via this post (see download link at the very bottom of this post), you won’t need to read this tab unless you need a refresher.  Everything on that tab can also be found here.

TAB 2 – Learning Month – Actuals

This worksheet is here to help you be honest with yourself.  One of the biggest mistakes that we make in budgeting is assuming a bad number.  We think we spend X on food each month when it is actually Y.  Here’s what you do.  Track your actual expenses everyday for a month.  Keep the spreadsheet up on your computer and log in every single expense, cash or credit, into the spreadsheet.  Ask for a receipt.  For everything.  Daily.

Is it painful? Yes.  Does it feel like overkill? Of course.  It will also take a lot of your time to do it right.

But if you think you have a handle on your actual expenses when you have a big paycheck coming in like a fire hose . . . and you are wrong.  You will be especially frustrated with the size of the expenses when the income begins to slow and eventually begins only to drip.

And do not underestimate the emotional tie you have to your ability to spend at will.  Believe me, your pride takes a hit when someone says that you shouldn’t buy something that a few months ago would have been a no-brainer.  Sometimes you will be the one giving that direction to a spouse.  Other times, your spouse (the financial driver in the house) will bring you to your knees with “we can’t afford that (insert something important here)”.

If you can fill this out in advance of your transition beginning, that is ideal.  If you get a heads up on a lay-off.  If not, do the best you can to track your actuals.  And remember that this is one month.  Pay attention to any unique aspects that you may need to adjust for as you begin projecting future expenses.  Was your learning month “back to school month” or a big birthday month for family?  Adjust accordingly.

TAB 3 – Planning Months – Budget

Now that you have a sense of your real spending habits (or at least a real month), you can begin projecting forward based on known expenses and estimated variable expenses (i.e. food, utilities, entertainment).

In Tab 3, you plan out three to six months keeping in mind the time of year and using knowledge of your seasonal spending habits to adjust monthly projections as necessary.

Concerning income, if your transition takes you from two incomes to one or from one to none, the spreadsheet allows you to plan for either scenario and plan for the availability and eventual dissipation of a regular severance check.  If your severance check is a lump sum, look to the bottom of the spreadsheet to identify it along with any other lump sum amounts you may need to tap.

For job search expenses, part of your strategy should be your use of paid resources to help you find your next role.  As I’ve said before, if you plan to use a resume expert or a career coach, do it early and include it in your plans.  Also, make sure to set a budget for yourself re: job search expenses.  Too many meetings at Starbucks and your job search expenses can begin adding up.  Networking coffees are a great way to build a relationships and gain new contacts, but they can also get expensive.

If your search extends beyond your severance, you’ll need to identify your next source of funds to cover expenses.  A cash savings account is commonly viewed as the next best source due to its liquid nature and (hopefully) penalty free access.  For decisions regarding tapping other savings, home equity or 401k funds, please contact your accountant or financial adviser.

Those are important decisions that need to be well thought-out with a professional.

In the end, knowing your own financial reality and planning for your short term future is a critical part of your strategy during job search.  This knowledge will help you understand your real situation.

And even if you don’t like the resulting budget (and its affect on your spending ability), you will have confidence that you are acting on real data.  Not false hopes.

Download ExpenSmart

Written by: Tim Tyrell-Smith
Tags: budgets | expenses | ideas | Job Search | money | planning | savings | severance | transition
Categories: Work-Life Balance