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Budget strategies for a job hunt

Here's the worst thing you can do when you get laid off: Maintain your former, I-have-a-job spending patterns and live in denial that there is a recession and you are part of it. Here is the best thing you can do: Make a job-search budget.

This advice is sad to hear because the first thing anyone does when they get the ax is think, "What can I do to cheer myself up so that I do not cry when I tell people that I'm out of work?" Cheery things that come to mind are vacations in the Caribbean, expensive dinners, bike parts if you are a rugged, a massage if you are not. This advice is sad to hear, but trust me, you are hearing it from a person who followed none of this advice the first time around, and I'm here to tell you that a job hunt turns into a horror film if you run out of money before you find a job.

Job hunting in 3 phases
There are three phases to a job hunt budget:

Phase I is when you think you can get a good job quickly.

Phase II is when you no longer believe in Phase I but you harbor hope.

Phase III is when you will have to take a job that is so awful that you don' t need a resume to get it.

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When you create your budget, keep in mind that the average job hunt takes six months. If you are thinking that your hunt will be faster than average, keep in mind that an average job hunt takes place in an average economy, which is not a recession. If you are still feeling optimistic about that six months, also keep in mind that the average job-hunt estimate takes into account all the people who work at Starbucks. If your salary is above average, then so is the estimated length of your job hunt.

Another thing to keep in mind when you create your budget is that the month you run out of money is a month too late to decide to modify your spending. That's why I recommend creating your three-phased plan from the beginning. And remember two golden rules when you count up your money: Cashing out your 401(k) is a bigger rip-off than credit cards, and credit cards are off limits unless it's a health emergency -- which does not include a facial.

Phase I: Optimism
This is the part of a job hunt we all do most easily. During this phase, you are sending out resumes for jobs that are comparable to the job you just lost. You might send out resumes for jobs that are better than the job you just lost. Given the current market, you would be being very optimistic, but hey, sending out a resume is free. It only takes time, and when you're unemployed, you have a lot of that.

In terms of spending, this is when you adjust your budget, but you don't change your life radically. For example, you still go out to dinner, but instead of spending $40 per person, you spend $20. You can actually get a fine meal for $20 (even in New York City), so the difficult part of this phase is not suffering through self-denial (you still get to go out to dinner), it's self-discipline (you do not get to order the seared mahi special).

Phase II: Reality
You have no job. Probably, you have had no interviews, or if you have had interviews, the hiring manager has said casually, "We culled your resume from a pile of 300 qualified applicants." If you have unlimited money and unlimited patience, you can stay in Phase I forever. If you do not have unlimited money, think about this: Your money needs to get you through at least six months of a job hunt, maybe longer. The longer your money lasts the more of a chance you have to get a job.

So now it's time to adjust your budget so you can last longer, and adjust your job hunt so that you do not have to last too long. Cut your budget as much as you can without losing your housing, your friends or your sanity. Cut your job expectations substantially also. Start applying to jobs that you are overqualified for. If you are a little overqualified, that's great, because it'll get you to the top of the pile -- just be sure to act enthusiastic for the job when you get an interview. If you are way overqualified, change your resume -- change the bullet point that says, "managed sales team of 40 people" to "managed sales team."

Phase III: Austerity
This is when you still have no job and you run out of money. In fact, the day you run out of money is too late to start in Phase III. Because even if you take a job at Starbucks, you can't get a check that day, so you need to have about three week's of money left in Phase II when you realize that it's time to go to Phase III.

In Phase III you are living like a college student. You are living off your Starbucks salary, you are miserable, and you are drowning your sorrows in free lattes. But you are still sending out resumes for a real job that does not involve a cash register, and remember what all our loved one's have told us: "Don't worry, honey, you'll get a job." It is annoying to get advice, and it would be more consoling to get money. Ultimately it is true that everyone finds a job.

Thinking about these phases might make you sad, but think about them at the beginning of your hunt, when you are figuring out how long your money has to last, then you are less likely to end up in Phase III. A key to a successful job hunt is giving yourself enough time to succeed, and in this case, time is money.

-- Updated: March 23, 2004

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See Also
What to do when the pink slip lands on your desk
Create a spending plan
Evaluate credit card debts
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