Creating a Personal Budget During a Time of Career Transition
March 03, 2011 by Careerminds
by Raymond Lee
Too often I see job seekers jump right in to their search immediately after losing their job without any financial planning. The reality is, most people need to make minor to major modifications to their spending as a direct result of lower to no income before starting their job search.
Creating a simple montly budget is a great way to get a snapshot of your financial picture to determine how to budget yourself and/or your family until you get back to work.
Here are a few tips to consider when developing a budget:
Step 1: Keeping track of job search related expenses: The job search itself can cost money; track your job search expenses separately. Most expenses related to your job search are tax deducatable. Computers, cell phone use, printing, fax, travel, and even home office space may all qualify. Be sure to talk with your accountant about how to claim your job search expenses; it can get tricky and you may decide it is not worth the headache.
Step 2: Consider all income and possible income adjustments: If you are receiving unemployment, it serves as a steady stream of income while you’re collecting, but remember to use after tax numbers along with your spouse’s income if applicable. If your spouse is contributing to a 401K, you may want to temporarily stop contributions if you are really strapped for cash. Be sure to consult with your financial advisor first;you don’t want to lose out on any free matching contributions that his or her company may offer.
Step 3: Creating the budget. Above is a picture of what a simple family budget may look like. You can create this as a table in a word processor like Microsoft Word, or in an Excel Spreadsheet like we did here. We know that “Excel” can be a scary word for someone who doesn’t use it all the time, but it doesn’t have to be!
Enter the categories like we have here, adding any additional categories or sub-categories of expenses that you may have.
Save the spreadsheet on your desktop or somewhere that will be easy to locate. We suggest saving a new file every month so that you can track your expenses. Consider creating file names that read something like “YourlastnameFamilyBudget_Feb2011 or “YourNameBudget_Feb2011”.
Step 4: Here’s the big one – Reduce expenses where appropriate: Part of creating a budget is to avoid having to dip too much in to your savings account for cash to cover expenses. Once you identify your sources of income after tax and withholdings and you have made any adjustments needed to increase your family’s take home pay, it is time to trim expenses. First, you must list all of your and/or your family’s expeneses, such as gas, groceries, phone, utilities, cable, travel, entertainment, etc.
Depending on how much you are in the red will determine how much you will need to cut. We often advise looking at entertainment first, because it is often considered discretionary spending. Entertainment spending covers eating out, weekend trips, movies, and any other extracurricular activities. We are not recommending totally eliminatating everything, but we suggest that you consider scaling back. For example, you may go from 3 nights out a week to 1 or 2.
Once you create a budget that works for you and your family, try to stick to it. This will reduce the amount of money you will take from savings to cover expenses. You will also find it easier to stay focused on finding your next opportunity because your finances are stable.
Careerminds provides scalable, strategic solutions to organizations seeking affordable, web-based outplacement services. Using a Web 2.0 e-learning platform that delivers affordable, online career transition services, Careerminds provides a high-tech and high-touch blend of on-demand career transition education supported by senior-level career consultants to help displaced workers reenter the workforce quickly.
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