What does being out of work cost you every month? If you think you already know the answer to that question, think again. It's probably costing you a lot more than you think.

If you currently find yourself in the serious predicament of being unemployed, trust me, I've been there. It aint pretty. I've had a lot of time to ponder this question. I don't think anyone would argue that the prospect of the economy returning to normal in the near future is a foregone conclusion.

It may surprise you to learn that the true cost of being unemployed has lasting repercussions on your past, present and future employability which you cannot even begin to grasp until you really break it down.

It's widely acknowledged by recruiters that each month that goes by without finding a job makes it that much harder to get back into the game. Most job seekers accept this line of reasoning on its face but still don't understand the true extent of the "hurt" until it's spelled out for them by someone who's experienced the job drought first-hand – or a high-priced outplacement firm for whom unemployed executive is their next meal.

Let me save you the expense. According to the U.S. Department of Labor (Bureau of Labor Statistics), just four years ago, the average time it takes an executive to land a new job is 10 weeks. These were the statistics before the economy took a turn for the worse and it's probably safe to assume that those rates have worsened considerably. Furthermore, 92% of all people who have been out of work for more than 12 months have had to accept a pay cut when they found a new job.

But what if I told you it will cost more than a year's salary during the term of your unemployment? Don't look at me cross-eyed! According to my calculations, you can bank on losing at least 150% of your accrued monthly salary while unemployed. And that's to say nothing of the actuarial costs, such as the money you are spending on transportation and entertainment while you've got nothing to show for your day.

Adding Up the Gross Costs of Unemployment

There's a quick and dirty formula you can use to calculate the true, total costs of unemployment. Apply it to yourself and see if it offers a fresh insight into your situation.

Living Costs + Income Loss + Opportunity Cost + Setback Cost + "Waiting Tax" = True Cost of Unemployment

Here's a quick breakdown of the five "costs" one incurs by being out of work.

1. Income Loss - How much money you could have pocketed at the end of the month if you had kept receiving income. This is the money you count on when you're employed and one of the first costs you notice when you're not.
2. Living Costs - Unless you've figured out how to live for free, these go on whether or not you have an income to support them. Ouch, people usually realize this one pretty quick after they've lost their job too.
3. Opportunity Costs - Now we get into more esoteric, but still very real numbers. This represents all of the things you could have invested your money and time into for the purposes of creating future wealth. Your retirement savings. Life insurance. All the stock investments you didn't make. Even business opportunities you had to turn down because you had neither the time or money surplus to purse them. Oh yeah... it takes money to make money.
4. Setback Costs - This is where it gets really painful. Your setback costs are all the assets you've accumulated over time but had to sell in order to make ends meet today. You worked hard to acquire this stuff, probably paid a pretty penny for it and now you're liquidating it like a furniture store fire-sale. Man, you didn't realize you'd have to backpedal this much.
5. The "Waiting Tax" - Which brings me to the "waiting tax." This is the negative impact on your future marketability by being chronically out of work. Yes, while you're holding out for the "perfect" job, there are people out there staying busy with less-than-ideal work whose future prospects are a little more secure than yours.

It gets worse. Much worse. 

The collateral damage from being out of work for an extended time doesn't stop there. Being out of work takes a psychological and emotional toll that's hard to even quantify. Don't forget that finances are the #1 cause of shakeups in the family, divorce and a huge contributor to adult suicide rates. Being out of work will cost you "time", which you can never get back, "resources" which must be replenished, "momentum", from having to start over again, "opportunities" which you cannot capitalize on, and could even cost you "relationships."

Did it ever occur to you that being unemployed could be so bad? For most people, especially those newly faced with the prospect of losing their jobs, they are just now awakening to the severity of their condition.

Let's take your average, hard-working executive like "Jack" on a good year. What this means is, if he was earning 100k/year base salary before the recession, and it took you 9 weeks (45 business days) to find a new job—the obvious cost of being unemployed is $19,230. But once you take into account all the drastic measures he's taken in order to stay afloat the picture changes...

The Story of Jack & Jill

Jack is a 120k/yr Vice President in Biotech Manufacturing who recently lost his job in a corporate merger. He's been out of work for 6 months. His income stopped, but his monthly expenses haven't—and it's put a strain on his entire family.

Jack doesn't stay unemployed for want of interviews. In fact, he's had several reasonable job offers in those 6 months since he was laid-off. His biggest problem, although Jack doesn't see it this way yet, is that he keeps holding out for a salary that matches his formerly-held sense of largesse and entitlement. He'll be revisiting that notion inside of 6 months.

You see, Jack's no different from the rest of us. As a creature of habit he grew accustomed to the lifestyle afforded by a 120k/yr salary and he doesn't want to "settle" for a lower salary than he used to get—or that he's convinced himself he "deserves." His choices may "feel" right, but that doesn't change the reality that he keeps on holding out for an offer that may or may not ever come.

Meanwhile, his finances are stretched so thin that he's dipped into his kid's college fund in order to make ends meet. He sold his timeshares in the Bahamas for a fraction of the cost of acquiring them. And that nice Mercedes he bought his wife last year? Yeah, he had to sell that too and downgrade the family vehicle to a used Volkswagon (that he now sleeps in—good wife!).

Does this sound like anybody in your life?

Now you tell me, what should he do? Should our esteemed protagonist stay the course and hold out for an offer that matches or, god willing, is an upgrade from his former salary?

What if all the high-paying positions are taken? Is he going to wait another year, or two or three, for the next round of corporate "restructurings" to finally accept a job?

What if the median income dips even lower while he's holding out? Will he regret the time he squandering waiting and wishing for conditions to improve when that was never in the cards?

What if his industry gets taken over by automation or outsourced overseas between now and then? What if the jobs don't come back?

Perhaps worst of all, what if he misses out on an opportunity to meet his current financial obligations with a salary that isn't quite up to par by yesterday's standards but allows his family to live comfortably today?

I'll remind you that this story may be about Jack but it's being retold in innumerable homes across the nation. These are questions being pondered by millions across the country. And day by day, millions of people like Jack are forced to confront the same difficult choices.

If you are unemployed and still unable to find gainful employment, it is crucial for you to understand how much you are actually losing by remaining out of work. Without getting into a political debate, let it also be noted that our current economic climate exacerbates these figures even further by excluding skilled, eager and perfectly employable people from income opportunities in trades they went to school (and probably into considerable debt) to learn.

My Advice to Job Seekers

• Hope is not a strategy. Stable work that pays the bills trumps wishful thinking.
• Keep your monthly expenses as low as possible in order to avoid being taken by surprise. If you must spend money on things other than food and a roof over your head, make sure they are a strategic and intentional investment with a high probability of paying-off.
• Accept a lower income to get you through the door, albeit with the condition of a higher income after you've proven your worth. This gets you a job now without short-changing your income potential in the long term and is a win-win for both you and your employer.
• Brush up on those skills so you don't become irrelevant in the meantime.
• Create your own job. Figure out where the wind's are blowing and get there first. Have a business plan and a cohort of skilled professionals to help you out.

Economic crisis is just the first signs of what is to be a major shift in business. I don't anticipate we'll see things get better for several years.