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Managing Your Finances While Between Jobs

Updated on January 6, 2020 Updated on January 6, 2020
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Table of Contents  
  1. Managing Your Money While Out of Work
  2. Budget
  3. Resources
  4. Notes

A job loss is a major life stressor, not least of all due to money concerns. See how to best handle your money until you are back on the career ladder.

A friend of mine called the other day. We used to work at the same company. We talked for awhile, catching up on what was new and the whereabouts of former coworkers and friends. Then he told that he had lost his job and he asked for my help with things like contacts and leads.

What shocked me was that he had lost his job seven months ago and was still looking for a job. Seven months is a long time to go without a paycheck. Severance, when available, lasts only a few weeks and unemployment does not cover much. Especially if you have a family to support.

Too few people have emergency funds and fewer still have funds that will last more than six months.  My friend was already into his savings and unsure how long that would last.

Losing your job is incredibly stressful, second only to the loss of a spouse. What we do defines so much of who we are. Not being able to provide for your family weighs heavily and can be extremely distracting.

We spend a lot of time on things like resumes and cover letters when we’re looking for a job and we spend too little preparing for a possible job loss.

Managing Your Money While Out of Work

There are four categories to managing your money while out of work. Outflows or what you spend. Inflows, the money coming in, budgeting, and available resources.


Burn Rate: This is the first thing you should figure out. Burn rate calculates the net outflow each month and estimates when you will run out of cash. I know that is a scary thing to contemplate but it’s something you must know. You need to live on the smallest amount of money possible until you land a new job. Your burn rate should be monitored regularly, about once a month.

Recurring Bills: This list includes your regular monthly bills, utilities, housing, credit card payments, etc. Go through your bank and credit card statements and see where you are spending.

Discretionary Spend:  This is money you spend but don’t really have to or could spend more efficiently.  Things like eating out, going to the movies, gym memberships.

Emergency Spend: This category is for those unplanned but necessary expenses.  Your car needs repairs or your refrigerator conks out. You can’t predict how much you would need to spend on an emergency but you should leave some room in your budget to allow for the unexpected.


Unemployment: The very first thing you must do when you’ve lost your job is to sign-up for unemployment benefits. This is not a hand-out. You’ve paid your taxes and now it’s time to collect. While the maximum benefit is not all that much, it is more than zero.  Sign-up and collect. Another benefit of most unemployment programs is training and job search support.

Savings Plans: Savings plans and retirement accounts can be a source of  cash but should only be accessed as a last resort . Be careful to minimize tax and penalty implications when withdrawing from these kind of accounts. This will explain how to withdraw money from your IRA penalty free. If you have a regular transfer to a these account, you will want to suspend them for now.

Other Sources of Income: Depending on how dire things are, you may want to consider other ways to make some money in the short term. Keep in mind, some of these, a part time job for instance, will impact your unemployment benefits.

Since you have time now, go through your house and see what you can sell.  It will keep you occupied and make you some fast cash.  Ask friends and family if they have anything you can do for them to make some money.  Babysitting, errands, house cleaning.


Now that you know what is coming in and what is going out, you can create your new budget.

Spending:  It can be tempting to be a bit reckless with your spending when you first lose your job.  You think you will get another job right away.  Or maybe you have a pretty healthy emergency fund.  Or maybe you’re bored or depressed and are spending money to entertain yourself or to make yourself feel better.

Don’t fall into those traps.  You have no idea how long you will be out of work or how much money you will be making once you do find work again.

Negotiate:  Another thing you should do as soon as possible is call your mortgage and credit card companies. Explain your situation and ask for a modified payment plan that will not impact your credit rating.

If you have student loans, contact your lenders.  You will probably be eligible for a period of forbearance during which your payments will be suspended entirely with no affect on your credit score.

Keep in mind that you will be paying your balances more slowly and, therefore, increasing the amount of time and overall cost of paying off your debt. Once you’ve landed your dream job, be sure to set these payment plans to what they were previously.

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One important lesson in life is knowing what you don’t know. While I know quite a bit about job search, I am not an expert on managing your money or creating a budget. Therefore, I’ve included some links below so that you can consult with the experts on some tips, tools and specifics.

Mint:  For those who do not know, is an amazing, FREE tool that you can use to help budget and manage your money.  It takes all of the math out of budgeting and just tells you what you need to know, when you need to know it.

LMM’s book Mastering Mint will teach you how to maximize Mint’s features to get the most out of it.

Ready For Zero: Once you’re back on your feet, Ready For Zero can help you tackle any debt that you were unable to make progress on or new debt incurred during your period of unemployment.

Career Alley:  Career Alley is a great resource to help answer questions you may have and to provide advice to help you find a new job, or even a whole new career.

A period of unemployment is hard, mentally and financially.  The most we can to is to be as prepared as we can to survive it.


Photo Credit:

Andrew Fiebert - Chief Nerd
Andrew Fiebert is a thirty-something soon-to-be father of twins, a self-professed data nerd, and has worked as a Data Engineer for Barclays Capital and iHeartRadio. He's spent the past six years growing LMM into a multi-six-figure business with over 500 hours of free personal finance education that reaches over 1 million people every month. Andrew has a B.S. in Computer Science and has been featured in Quartz, Forbes, Business Insider, and The Telegraph.

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