According to a study, 63% of workers live paycheck to paycheck, so how do you manage finances during a job hunt? There’s no doubt an extended job search strains even the most carefully managed finances. However, with extra planning and expert advice, you can control your financial situation, stay motivated during your job search, and set yourself up for success.
Managing finances is always challenging, even for those in the best financial situation. But it can be incredibly challenging for unemployed people looking for a new job. During a job search, you must have a plan to help you stay on track financially.
Without a steady income, it’s difficult to pay bills, save up money for future use, and maintain your quality of life. However, with careful management of your finances while job hunting, you will be able to cope better with all the financial challenges that come with this transition period.
The importance of managing your finances while job hunting
Keep reading for some of the various reasons why it is crucial to manage your finances while you search for a job.
Reduce financial stress
Being between jobs is a challenging and uncertain time, and it can come with a lot of stress, especially financially. To avoid finding yourself stuck in a tight financial spot, you must be careful with your spending. By managing your finances carefully, you entirely focus on your job search and avoid the stress and distraction of bad financial management.
Sets you up for future success
In addition to helping you steer clear of financial stress, managing your finances during a job sets you up for success once you finally land a new job. If you cope with saving money and paying down debt while you’re between jobs, you’ll be in a much better financial position when you start your new job. This gives you the freedom to focus on your work rather than worrying about your financial situation.
Builds good financial habits
Managing your finances during a job hunt will help you develop good financial habits that will undoubtedly serve you well in the long run. By learning to live within your means and make intelligent financial decisions, you’ll be better prepared to handle future financial challenges.
Related: Recently Laid Off? A Jobseeker’s Guide to Bounce Back Better Than Ever
Expert tips for managing your finances while you job hunt
While managing your finances while searching for a job can be challenging, achieving it is not impossible.
We’re sharing the most effective tips and tricks to manage your finances in the midst of a job hunt a lot easier.
1. Understand your current financial situation
The first and most crucial step in managing your finances while on your job hunt is understanding your current financial situation. By seeing where you stand financially, you will know how much you have available to spend, how much you can afford to save, and what bills and other financial obligations you need to sort.
Jake Hill, Founder of DebtHammer, adds, “Understanding your current financial situation can help you identify any financial problems or challenges you may be facing. For example, if you have a lot of credit card debt, you may need to come up with a plan to pay it off before it becomes a bigger problem.”
Overall, understanding your current financial situation is one of the most important steps to take toward managing your finances effectively while job hunting. It helps you make informed decisions about your money and give you a sense of control over your financial situation, which is especially important during a time of uncertainty.
2. Create and stick to a budget to manage finances during a job hunt
After conducting a detailed analysis of your finances, the next step is to use the information gathered to create a firm but realistic budget. A budget is an organized and detailed plan showing how you will allocate your income to meet all your financial obligations.
If you’ve taken the first step in creating your budget, that’s great! But the hard work doesn’t end there. It would be best if you were intentional about sticking to the budget. Of course, sticking with a budget is also challenging, and it is only possible with the right amount of financial discipline.
Here are a few ways sticking with a budget makes it easier for you to manage your finances while you job hunt.
It helps you prioritize your expenses
A budget allows you to see exactly where your money is going and helps you prioritize your spending. This is especially important when job hunting, as you may need to cut back on non-essential expenses to have enough money to cover your basic needs.
Increases your financial stability
Even when you are not receiving a steady income, you still need to maintain a certain level of financial stability. By creating a budget, you better understand your financial situation and take control of your spending.
Improves your financial planning
During periods of uncertainty between jobs, you must plan for the future by setting realistic financial goals and tracking your progress toward achieving them. Creating a budget helps you achieve this and is a game changer if you are trying to save for a down payment on a house or pay off debt.
If you are determined to manage your finances carefully while searching for a job, creating a budget and sticking to it is not an option — it’s a must!
3. Cut unnecessary expenses to manage finances during a job hunt
While job hunting, you must narrow down on unnecessary expenses and cut your coat according to your cloth. By cutting unnecessary expenses, you reduce the amount of money you are living on and ensure you are only spending money on things most important to you.
Here are a few ways to cut unnecessary expenses:
Look for ways to save on fixed expenses
Can you negotiate a lower rate on your rent or find a cheaper apartment? Can you switch to a cheaper phone or internet plan? Find ways to reduce your fixed expenses to save money for other things.
Cut back on variable expenses
Think about unnecessary things you spend money on. Do you need the expensive cable package, or can you switch to a streaming service and save some money? Can you cut back on eating out or shopping for non-essential items? Every little bit helps.
4. Draw up a savings plan
Everyone needs a savings plan regardless of their financial situation. However, when you are between jobs, a strategic savings plan becomes all the more critical. Drawing up a savings plan helps you plan for the future and gives you a financial cushion to fall back on.
Shawn Plummer, CEO of the Annuity Expert, states, “A savings plan is a roadmap that outlines how you will save your money over a certain period of time. And it is a valuable tool for managing finances while job hunting. Building a habit of saving won’t only help you get through those difficult times when you are between jobs, it will also set you up for life.”
The steps below will give you a detailed guide on how to create an effective savings plan.
Set a goal
Before drawing up a savings plan, you need to have a clear goal in mind, as this will help you stay motivated and focused on your savings plan. Answering the following questions will help you set an actionable goal: What do you want to save for? Do you want to build an emergency fund, save for a down payment on a house, or have some extra money set aside for unexpected expenses?
Take a look at your budget
You need to look at the budget you created to see how much money you have available to go toward your savings.
Choose a savings plan
The next step is to choose a savings plan, and there are various types of savings plans at your disposal, including traditional savings accounts, money market accounts, and certificates of deposit. Consider the interest rate, fees, (if any), and liquidity associated with each option to choose the right one for you.
Automate your savings
To make it easier to stick to your savings plan, it’s a great idea to set up automatic transfers from your checking account to your savings account. That way, you won’t have to go through the stress of manually transferring the money each month.
Monitor your progress
The final step in drawing up a working savings plan is to monitor your progress and adjust your savings plan as needed. If you save more than you originally planned, you can consider increasing your savings rate or adjusting your goal. But If you are struggling to save as much as you would like, think about finding ways to cut back on your expenses or increase your income.
5. Take on part-time work or freelance gigs
It’s a great idea to take advantage of side hustles or freelance work to rake in some extra income. If you have any skill you’ve buried, it’s time for you to dig it back up and put it to good use.
Getting busy with part-time work or freelance gigs can provide you with a source of income while you are not working full-time. That may reduce your financial burden and give you the necessary resources to continue your job search.
There are many reasons why you should consider part-time work or freelance gigs while you are between jobs, including:
Flexibility
Part-time work and freelance gigs offer great flexibility in terms of scheduling. This availability might be helpful to schedule interviews when searching for a full-time job.
Networking opportunities
Up to 85% of jobs are secured through networking. And taking on part-time work or freelance gigs can expose you to immense networking opportunities. You never know who you might meet or what connections could help you in your job search.
Skills development
Another great benefit of taking on part-time work or freelance gigs is developing new skills to add to your resume. Thus, making you more competitive in the job market and increasing your chances of finding a full-time position.
6. Manage your credit responsibly
Many people need to learn how much their credit report and score impact their financial lives.
According to Mark Pierce, CEO of Cloud Peak Law Group, “Your credit report is a record of your credit history and includes information about your credit accounts, payments, and any debts you may have. It’s a good idea to check your credit report regularly. Check there are no errors and look for any fraudulent activity.”
Managing credit responsibly makes it easier to manage your finances during job hunting.
A good credit score makes it easier for you to get approved for loans, credit cards, and other financial products while also helping you to secure lower interest rates. It’s also a factor used by some companies to determine your costs for things like insurance premiums or by landlords to forecast whether you’ll be a good renter.
Here are some of the most effective credit management tips.
Always pay your bills on time
Late payments are bad for your credit score. Be sure to be prompt with your bills, including credit card bills, mortgage payments, and other debts.
Keep your credit utilization low
You must keep your credit utilization low, the amount of credit you use compared to your credit limit. By keeping your credit utilization low, you’ll maintain a good credit score.
7. Avoid taking on new debt
When not working, it’s imperative to be mindful of your spending and avoid taking on new debts you may struggle to pay back. If you keep accumulating debt, you will be putting more financial stress on yourself, and it may even distract you from entirely focusing on your job search.
According to Colin Palfrey, CMO of Crediful, “Taking on new debt while job hunting can be a slippery slope. Not only does it increase your monthly expenses and reduce your ability to save money, but it can also damage your credit score and make it more difficult to secure a job or a loan in the future. By avoiding new debt and being strategic with your money, you can increase your financial stability and set yourself up for success during your job search.”
Here are a few ways to steer clear of the urge to take on new debt.
Use cash or a debit card instead of a credit card
Many people use credit cards to make purchases instead of just using cash or a debit card. Even though credit cards may be tempting, it is also essential to know they come with high-interest rates, making it hard to pay off your balance.
By using cash or a debit card instead, you only spend your available money, which helps you avoid new debt.
Use your savings
Your emergency funds or savings are especially handy during the rainy days when you are job hunting. Use those funds to cover unexpected expenses instead of incurring new debt. By leveraging your stacked-up funds, you can avoid accruing interest, making it easier to manage your finances during this time.
8. Use resources and support systems
No doubt, being unemployed comes with a lot of financial challenges. But luckily, there are a lot of resources and support systems to make it easier to manage your finances during a job hunt. Every additional help or support counts, no matter how little.
Below are some of the best support systems to explore.
Unemployment benefits or government assistance programs
Unemployment benefits and government assistance programs are helpful resources for managing finances while job hunting. These programs provide financial support to individuals who have lost their jobs or are facing financial hardship.
State governments typically provide unemployment benefits available to individuals who have lost their jobs through no fault. To qualify for unemployment benefits, individuals must have worked for a certain period and earned a certain amount.
Once individuals are approved for unemployment benefits, they typically receive a weekly or biweekly payment, which may help cover their living expenses while they search for a new job.
According to Ben Michael, Practicing Lawyer and Founder of Michael & Associates, “In addition to unemployment benefits, a number of government assistance programs can help individuals manage their finances while job hunting. These programs can include food assistance programs such as SNAP (Supplemental Nutrition Assistance Program), housing assistance programs such as Section 8, and healthcare assistance programs such as Medicaid.”
To apply for unemployment benefits or government assistance programs, individuals typically need to submit an application and provide documentation such as proof of income, residency, and employment. It’s important to note each state and program have different requirements and qualifications. It’s a good idea to check with your state’s program for details.
Lean on support from friends and family if necessary
Support from friends and family plays a crucial role in helping you manage your finances while searching for a job. When facing financial struggles due to being unemployed, it is crucial to have friends and family to offer financial assistance, advice on budgeting and saving, and emotional support.
One of the most critical ways friends and family can support is by offering financial assistance. This includes lending money, giving gifts, or providing a temporary place to live.
Another might simply be getting together on a regular basis for a meal at their place. It’s one meal you won’t have to buy, but more importantly, it’s an opportunity to connect. Feel free to set up ground rules, such as ‘let’s talk about anything except my job search, unless I bring it up.’
It may be a welcome respite to think about something other than job searching for a while. Think of it as preserving good mental health.
Another way friends and family might provide support is by offering advice on budgeting and saving. Tips on creating a budget, cutting expenses, and saving money might benefit someone new to managing finances or with a limited income. There are a lot of tactics out there, what works for one person may not be as effective for you, but listen and ask questions.
Take control to manage your finances and the job hunt
Ultimately, managing your finances while job hunting can be a huge pain or source of stress. However, by implementing the listed tips listed, it’s easier to take control of your finances. Plus, you may learn some new strategies to manage your finances when you’re not on a job hunt. Good financial habits are worthwhile regardless of your situation.
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