by OI Global Partners - Abentigro
When starting your job search, it’s essential to know your current financial situation. Take stock of all assets, income, spending, severance and unemployment benefits. Knowing where you are — as well as what you need or can afford — helps you move forward realistically.
Developing a Financial Plan
Dealing with a major reduction in income is new to most people. One way to cope effectively with this situation is to take a realistic look at your finances from the start and employ a “worst case” scenario – one that assumes you will be out of work for six to nine months. You may land a job sooner, but what if you do not?
When caught in a financial squeeze, intelligent people often do not rationally think through their options. By addressing financial matters in a very practical way, you can begin to take control of your situation. Working through a financial plan up front enables you to develop a cash flow budget that can successfully sustain you and your family during the unemployment period.
Here are some useful tips.
Use the Financial Worksheet to develop your six-month economic picture. Keep in mind that developing a good financial plan can give you the extra time that you might need to secure your perfect job, rather than forcing you to settle on the first offer. If you have severance pay and unemployment compensation, the reduction in your income will probably be less than you might think. (Plus, your Federal and State taxes may be lower.)
Prepare a household budget. Include both fixed expenses: mortgage, property taxes, loans, credit card payment, child support, etc., as well as variable monthly expenses: food, gas, recreation, car maintenance, household purchases, etc.
Identify income sources. These may include severance pay, unemployment compensation, savings, accrued vacation pay, your spouse or partner’s income, equity in your home and cash value of insurance policies. Identify the amount of money in insurance, retirement funds, 401K, etc., and the exact steps needed to access that money. Apply for unemployment compensation at the appropriate time.
Set priorities for your expenses. List them in order of importance. Mortgage and utilities might head the list.
Prepare a list of creditors. Identify your creditors by name, account number, address and phone, including how much you owe, the interest rate, payment schedule and amount. Determine how much you can pay each month, and notify them in advance of falling behind if you will need to lower your monthly payment. Try to make some payment every month, keeping your overall balance low and perhaps keeping your account from being turned over to a collection agency.
Reduce household expenses. Take a few minutes to assess household expenses. Cut back where it makes sense. If you have included many “extras” in your lifestyle, now is a good time to rethink their importance. Do not panic – but do take the time to analyze what you need and change things that need to be changed.
Budget for some recreation and special treats. Occasionally reward yourself and your family. Rewards can help you remain positive and upbeat.
Track job-hunting expenses. Some are tax-deductible; for example, interview travel and tolls. Note: Expenses incurred while looking for a new job in your present line of work may be tax deductible, depending on how you file. However, expenses associated with looking for a new job in a new trade or business, even if a job is not found, are not deductible.
Please check with your tax professional for advice for your specific situation.