Budgeting For Your Career Search

How exactly are you going to pay your bills until you are employed again? Unemployment insurance will help alleviate some of this concern but it by no means will be able to support you. This is especially true if you have an extended period of unemployment.

What you need to do at this point is to create a budget for yourself. This will help you to determine when your “need to have a job” date is.

Add up all of your bills that you pay in a month. If you pay for services such as insurance six months at a time, be sure to calculate how much it would be for one months worth and add that into your monthly total.

Next, calculate how much income you will have coming in for each month. Add in your monthly unemployment benefits and any other reoccurring monthly income you bring in.

If you have any one-time lump sum income such as severance pay, you can do one of two things. If the severance pay is nine months worth of salary or more, you can consider it as income and figure it into your monthly income for budgeting purposes.

If it is less than nine months, you should consider it as savings. The reason you should consider less than nine months worth of income as savings, is because as of May 2011 the average duration of unemployment is 39.7 weeks according to the Bureau of Labor Statistics.

Now take your monthly income number and subtract the amount of your monthly bills. In my case I was bringing in around $700 per month in income and I was paying approximately $1400 in bills at the time. That left me with a deficit of $700.  Since I knew it was going to take me two years to finish my degree that meant I was going to have to pay a minimum of $16,800 before I was going to be gainfully employed.

If you have a deficit like I did, you are going to have to find out where that money is going to be coming from or figure out how you can cut your spending down to equal your monthly income. I did a combination of both; I cut spending and used my savings to cover the remainder.

So how do you calculate how long your savings will last you? One way you can determine how long the cash you have will last is to take your total cash value and divide it by the monthly deficit you figured out earlier. Here are the formulas I use:

Monthly Income – Monthly Expenses = Deficit
Cash (savings, CD’s, severance pay, etc.) / Deficit = Months You Savings Will Last

To use a simple example, let’s say you have a monthly income of $1000, monthly expenses of $1200 and savings of $2000. The formulas would look like this:

$1000 – $1200 = -$200
$2000 / $200 = 10 Months

If you would like to use the simple budget sheet that I used, I’ve provided it here as an excel sheet download.

Legal Disclaimer: Please keep in mind that I am not an accountant or financial advisor. None of the information I am providing is intended as financial advice. I am only demonstrating the calculations I used when I was unemployed.