Cash Burn Rate: Slow Yours Down When Looking for Job
As the economy slowly recovers, it may take a while for you to find a job. In the meantime you need to take measure of your available cash and your monthly expenses. First calculate your "cash burn rate," the amount you spend per month. From there, you can figure out the number of months before you are OOC (Out Of Cash). If you will be OOC in less than six months, you need to do some quick right-sizing of your expenses. For example, say your current monthly expenses total about $5,000 and you have $24,000 in cash savings. You'll need to get your expenses down to $4,000 a month -- and do it fast. Here are some ways to cut your expenses and/or get some cash in the door fast:
- File your tax returns NOW: In the next few days you should receive all of the necessary tax forms you'll need to file your 2009 tax returns. If your income took a hit last year, you are probably set up for a larger tax refund. Most folks receive an average tax refund of more than $2,700. Prepare your tax returns online, file them by using eFile, and select direct deposit for your tax refund. You'll get your tax refund cash in as little as ten days. That's much faster than the four weeks you'll wait when filing by paper and requesting a check in the mail.
- Deduct job search expenses from your taxes: If you've been looking for a job in the same line of work you're currently in, many of your expenses like phone calls, costs of preparing and copying your resume, and career counseling may be deductible. You don't have to be out of work to have some of your costs qualify as a deductible expense, but only expenses that exceed 2% percent of your income count. See IRS publication 529 for details.
- Drop your land line: If you have a cell phone and a land line, then now is the time to cut the cord. Dropping land-line phone service can save about $50 per month or more. Use a service like eFax for fax by email and Skype for long distance and international calls.
- Cut insurance costs: Replace an expensive cash value insurance policy with a low-cost term policy that provides more coverage for a lower premium. Use the cash from the policy to build up your emergency cash. Increase your deductibles for your auto and home insurance (to $500 and $1,000 respectively). Low deductibles are the most expensive insurance and most profitable for insurance companies. And if you buy these policies through the same insurance company, you can save 10 to 15 percent or more.
