How to Budget During a Job Search

Carter's career was speeding ahead at an enviable pace. Working in tech, he had landed a senior vice president gig in his mid 40s. By most accounts, he looked poised for wealth.

And that's when he quit. The company culture had become toxic. He didn't want to wake up a decade later, wondering what he'd done with his career. From the outside looking in, Carter's decision seems brash. But he and his wife had developed a plan to withstand the economic impact of his job hunt, even with two children running around the house. They discussed what expenses they could cut until he had a salary coming in again, developing a new budget based on these assumptions.

"You have to have a plan on every level," says John Tarnoff, the career coach Carter turned to during his search. "A lot of people get anxious because they don't have a plan."

Whether you are one step out the door at your current office or find yourself unemployed, taking measures to budget your finances can prevent you from feeling like you have to grab the first job that comes along, even if it seems like a horrible fit. That's all the more important as job searches stretch out. The average job opening receives 250 applications, meaning the average interview process takes 23 days-up from 13 in 2010, according to one study. Here's how to create a financial plan that's flexible and will prevent desperation from seeping in.

Create a realistic rainy-day fund.

We all hear it: have enough funds in place in case something goes awry. But the truth is, it really helps and it's easiest to do when you're gainfully employed. Traditionally, financial advisors suggest having at least six months of income saved in case you suddenly find yourself out of work. That's the minimum, though. Career pros often use this ballpark method: for every $10,000 you make, tally a month for the search. An $80,000 job, for example, would take around eight months. And for employees 55 and older, expect longer; AARP found it takes professionals in that age bracket about a year to find the next gig.

Find ways to reduce your expenses.

Finding a job costs money. Whether you're spending on travel for interviews, signing up for premium job sites like LinkedIn's upgraded service, or simply sprucing up your attire, you need to expect to spend during your search.

Thus, you'll need to pare down to the essentials. Maybe it's time to cut the cable cord or reduce your monthly Amazon shopping. Whatever you can cut will create flexibility in how you spend your money during the search-say, attending a networking event that could expand your connections. "You might need to live lean for a little bit, but remember: it's not forever," says Eric Roberge, a financial advisor and founder of Beyond Your Hammock advisory.

Don't tap your retirement accounts.

There's an impulse when things get tight to tap the 401(k) or IRAs, since there's potentially hundreds of thousands of dollars sitting there. But this is a cardinal sin, career pros say; since you're likely not of retirement age when you're going through a job search, you'll have to take a penalty for withdrawing from the accounts. You're also missing out on the opportunity cost of continued investing. You should look at it as a "very last resort," Roberge says.

Instead, look for short-term opportunities to help fund your job search, whether it's freelancing, consulting, or taking odd jobs. That way you aren't sacrificing your long-term financial picture.