So, you’re job has come to an abrupt end and you’re wondering what to do since you’ve lost your source of income? First, to use the words of Douglas Adams in The Hitchhiker’s Guide to the Galaxy, DO NOT PANIC! Instead use what follows to create a realistic picture of your expenses in order to see how long you can live without that income. The good news is that some of your expenses will go away! But the bad news is that you’ll have some new expenses. Here’s how to figure it out.
First, look at income that goes away. Obviously, the W-2 after-tax paycheck has gone away, so 
you are losing that income. In addition, those regular payments into savings stop (retirement plan, 401K plan, etc). And if you had a job that came with perks, such as use of a company car, they will go away as well.
Next, look at expenses that decrease. If you were driving to work, or taking the train or bus, much of your gasoline expense, or transportation fares will go away. If you had to wear a particular wardrobe, than those expenses will go away as well. Finally, if you were the type to eat out at lunch every day, that expense will likely go away as you prepare lunch for yourself at home each day. You may be able to reduce your mobile phone plan if you were using it for work and not being reimbursed for it.
Next, take a look at any new expenses you might have. If you were working at a job that had benefits, then you will need to budget in for the COBRA monthly amount. If you have to travel to interviews, then there may be unreimbursed travel expenses. You may want to consider resume and job counseling services, which each cost money. And finally, if you decide to take your profession in a different direction, you may need to take training that will cost money as well.
Finally, look at deferred expenses which you can put off while you are job hunting. Were there any large purchases you were planning to make that you can put off? Are there travel plans that can be pushed back? Can you stay on that mobile phone plan/phone longer rather than getting that new phone? Can you hold off on house maintenance, or car maintenance without costing yourself more later?
Asking yourself these questions will allow you to figure out what your monthly expenses are going to be. So in summary
- Look through your expenses for the past 2-3 months (credit card statements, cash receipts)
- Remove or reduce those expenses that had a job-related aspect to them
- Add in the expense of COBRA, job-hunting expenses, and any re-training expenses
- Add in your normal monthly expenses (utilities, housing, food, etc.)
The result will be your estimated monthly expenses. This number turns out to be pretty interesting as it can tell you two things. Firstly, by dividing this into your savings, you can determine how many months you can live on your savings. Secondly, this can tell you the minimum of how much your net take-home paycheck needs to be in order to live within your means. Hopefully, you will find that you can go at least six months before your next job, and it will pay more than your monthly minimum. But if it doesn’t, the next post will help you figure this out and save for a rainy day when you start a regular income again.