Don’t let finances hold back your job search. Here’s how to get your money in order

One of the hard truths about looking for work and career planning is that so much of the process is tied to your financial health. People with financial cushions can more easily leave toxic jobs. Those people may also feel more empowered to turn down imperfect opportunities. Unfortunately, most of the people I talk with do not have the luxury of making those types of decisions.?

Today’s edition of #GetHired may help if the above resonates with you. Carrie Schwab-Pomerantz, who is a personal finance expert, answered some of my questions about getting your money matters organized to set yourself up for long-term success. Schwab-Pomerantz, who is also the president and board chair of the Charles Schwab Foundation, has her own newsletter that you can find by clicking here.

1.) The finances of a lot of people are probably still in transition due to government assistance, unemployment, fewer student loans and additional pandemic-related support. What’s your advice for people who are trying to understand their current financial situation?

Even in the best of times, money concerns can cause a lot of stress, and that’s certainly been true during the pandemic. According to a recent survey by the National Endowment for Financial Education?, nearly 9 in 10 Americans say that COVID-19 is making money a primary cause of anxiety.

With so many things in transition right now, it’s important to get a handle on your total financial picture by reviewing your income and expenses and taking inventory of what you own and what you owe. In other words, your cash flow and net worth.

Knowing where you stand is the first step to prepare for the unexpected. Whether that’s changes in rent, resumption of student loan payments, increased commuting or childcare costs, look at your finances holistically by reevaluating your financial resources and reassessing your goals. The pandemic has led to different spending patterns for many people, including what we may have previously thought of as “essential.”

Keep in mind that this shouldn’t be a one-time exercise. Regularly reviewing your financial picture will help you get a clear view of where you are today and how close you are to reaching your goals. One way to stay on track is to set a monthly reminder to check in on your financial goals and realities, and discuss them with your spouse, partner, or a trusted friend to share tips and help each other stay on track.

2.) For people who were hit hard financially due to the pandemic, where should they start if they want to rebuild some financial security? Should they address any debt that they took on? Should they save what they can? Should they do both?

I know trying to save and pay off debt at the same time can be overwhelming, but you can do both. Here are four key steps to help you prioritize:

1. Don’t leave any free money on the table. Contribute to your company’s retirement plan and other tax-advantaged accounts up to any employer match. If you don’t have a retirement plan at work or can afford to save more, consider opening and funding an IRA, or if you're eligible, contributing to a tax-advantaged Health Savings Account.
2. Pay down debt with the highest interest rates first. If you have a lot of high-interest debt, it will be hard to get ahead, no matter how much you save or invest. But be sure to always make your minimum payments to help maintain a good credit score.
3. Build (or rebuild) your emergency fund to help avoid borrowing from credit cards or tapping into retirement funds. Aim for $1,000-$2,000 to get started and work your way up to 3-6 months of essential expenses.
4. Create a financial plan so you have a comprehensive overview of your financial goals and the steps you need to take to achieve them. Think of a financial plan as a roadmap for where you want to go, such as paying off debt, saving for a home, etc. You don’t need to have a lot of money to warrant a financial plan.

3.) What should people do if they’re really struggling right now with their finances and living — at best — paycheck to paycheck?

Unfortunately, living paycheck to paycheck is far too common these days. If you’re struggling to make ends meet, make a game plan for the short term that aligns with your long-term goals. First, review your income and expenses and decide what you need to cover. How much are you spending on essentials like housing, food and transportation? What are you spending on nonessentials? Is there anything you can cut back? For example, a lot of people don’t realize how much they spend on streaming services and subscriptions. So be sure to scour your bank and credit card statements for things like that, which can quickly add up.

Next, prioritize your bills, putting essential expenditures like housing, utilities and health insurance at the top of the list. For the time being only, consider paying the minimum on credit card balances, car loans and student loans. Although it’s tempting, be extra careful about reducing or cutting any of your insurance coverage. Being properly insured can save you from financial disaster in the long run.

If you’ve depleted your savings but are still employed, take a hard look at any automatic savings plans. Consider deferring any savings for a child’s college education. If you’re contributing more than the company match to a 401(k), you might reduce that percentage temporarily.

More help may be available to you if you’re struggling, but lenders and service providers can’t help if they don’t know you’re struggling. If you anticipate falling short on your bills, reach out to providers and creditors. Under these unusual circumstances, many are willing to work with you, but it's up to you to let them know.

4.) I’ve seen a lot of people talking about budget hacks online over the past few months. What’s your advice for people who want to start a budget except they don’t know where to start?

If budgeting hasn’t been your thing, the best thing you can do is figure out where your money is going.? Start by using a spending tracker to record your spending every day for a week. (You can do this manually or use an app – there are so many to choose from these days.) It can help you see precisely where your money is going day by day—and give you ideas on where to make changes.

You can also consider starting a “cash diet” – for one week, try to use cash only for your day-to-day expenses, using your spending tracker to keep a written record of where your money goes. That way, you’ll be just a little bit more mindful about how you spend and may uncover ways to cut your expenses that you haven’t considered.?

5.) A lot of people were caught off guard by the immediate economic effects of the pandemic. How can people prepare themselves financially for other unexpected events that may hit their bank accounts or jobs?

If the past two years have taught us anything, it’s the importance of preparing for the unexpected. If you don’t, the unexpected—a job loss, accident or illness—could put you in an even bigger financial bind. I can’t stress the importance of an emergency fund. If you have the means, create a rainy day fund with 3-6 months of essential expenses. If you’re just starting out, aim for $1,000-$2,000 and build from there. If you are close to retiring or have an unstable income, try to aim for two years of expenses.

And while you're thinking about emergencies, don't forget insurance. Health insurance is a must, as well as auto insurance, homeowners’ or renters’ insurance, and disability insurance if you earn a paycheck. While insurance does cost money, it can ultimately save you more money further down the line by protecting you from financial disaster. It’s important to make sure you're financially secure by planning ahead.

6.) A lot of people’s living dynamics changed during the pandemic. Some of them will also have choices going forward when it comes to working arrangements. What’s your advice to people who are trying to figure out what is best for them regarding working from home, commuting to an office, etc.? There are often financial factors related to those decisions.?

As companies approach new ways of working, you may be thinking about your own work situation. If your company is offering long-term remote work options, will you take advantage of that opportunity and move to a new city or state? Will you start going back into the office once in-person work resumes? Make sure to consider both the financial and nonfinancial aspects of changing your working arrangements. As with any big decision, your health, quality of life, and time available to spend with family and friends are crucial considerations.??

The pandemic has changed how many people view their housing situations. If you choose to become a full-time remote worker, you may be thinking about transferring savings from commuting—such as gas, car payments, public transportation, and even dry-cleaning or work apparel—into a down payment on a home.

It’s important to consider the total cost of housing when determining whether to purchase a home—not just the initial purchase price. The rule I go back to—and many lenders do as well—is the 28/36 rule. This rule suggests total housing costs shouldn’t exceed 28 percent of your gross monthly income, and all your debt combined (including housing) shouldn’t exceed 36 percent of gross monthly income. Admittedly, keeping your housing costs this low can be a challenge for many people with the rapid increase we’ve seen in today’s housing costs. I believe that it’s best not to think of your home as an investment, but as your chosen place to live.

7.) In the U.S., a lot of people have benefited from a pause on federal student loan payments. The pause will not last forever, however. What’s your message for the millions of Americans who have federal student loan debt that will come due in a few months?

The pause or forbearance in most federal student loans has been a big relief for millions of borrowers. My main advice is not to wait until your payments resume to figure out what you’re going to do. The time to start planning is now. Start by making a list of all your loans and monthly payment amounts, factoring in your current budget and income. If your federal-loan payment seems unmanageable relative to your income, look into lower-payment options such as a Revised Pay As You Earn Program, which generally limits your payments to 10 percent of your discretionary income, or Income-Based Repayment, which caps payments based on family size and income.

Be careful about consolidating loans. It can simplify things for you and possibly even lower your payments, but it can mean giving up certain contractual provisions and protections from your existing loans like a low interest rate or flexible payment options if you lose your job.

Whatever you do, don’t hide from your loan servicers or ignore any notices about your loans. There are options and help is available if you’re struggling to make payments. Contact your lender.

8.) People get easily overwhelmed by financial planning and money matters. What is the one step people can take to make the biggest impact on their financial futures?

Save early and save often. For the vast majority of people, growing your wealth takes time. The earlier you start saving the sooner you get the wheels of compounding working. Also, don’t be afraid to ask [for] professional help.

What are your top personal finance tips for job seekers? Join the conversation by clicking here.

? Want even more #GetHired?

I go live every Friday at 12:00 p.m. ET from the LinkedIn News page to discuss important issues affecting job seekers and to answer your questions about looking for work. I’ll be talking this week with Carol Fishman Cohen, who is the co-founder of iRelaunch, on #GetHired Live about getting back into the workforce after a break. We’ll also be taking your questions! You can RSVP for the show by clicking the banner below or by clicking here.

? The follow-up

A recent survey shows that most millennials are planning to take a break at some point in their careers. Fortunately, companies are recognizing that this happens and the pool of people returning to the workforce is an incredible source of talent. iRelaunch CEO Carol Fishman Cohen said many large companies now offer return-to-work programs to help people get back into the workforce. Even if a company you’re applying to doesn’t offer one, she said you can suggest a mini “returnship” for yourself by offering to take on a contract role or special project as a trial. Also, Fishman Cohen said in the last #GetHired that people asked about a career break during interviews should acknowledge it without apologizing and then pivot to why they’re the best candidate for the position. Click here to see what people are saying about the advice.

? A lesson learned:

One valuable trait people can harness throughout their careers is cognitive flexibility, which is the ability to mentally switch gears as conditions or demands change. Andrea Bonior, who is a psychologist and author, dives into this trait and offers techniques to help improve your cognitive flexibility in this LinkedIn Learning course. You can watch the course below or by clicking here.

? Up next:

Dorie Clark is one of the best executive coaches in the business. The Long Game, which is her latest book, explains why it’s important to focus on long-term goals despite living in a world that increasingly focuses on short-term rewards. In the next edition of #GetHired, Clark will explain how this applies to job seekers.