Recently so many of us found ourselves faced with complete uncertainty by the sudden loss of income due to the events unfolding around us. Learning how to survive a pay cut is difficult but not impossible if you look at your finances realistically and make the necessary changes from the get-go.
For numerous reasons, you may find yourself in a situation where you need to adjust to a cut in pay. Maybe you’re looking for a job with less stress or you may just want a shift in careers. In other cases, you may be forced into a pay cut for various reasons.
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Dealing With a Pay Cut
No matter the circumstance, taking immediate action will help you manage your money effectively and efficiently. Changing your lifestyle to fit with your financial situation is a must.
The sooner you act on scaling your expenses back the better your outcome will be.
Let’s face it, when your income is reduced you must reduce your expenses. There’s no way around this.
Determine Essential and Nonessential Living Costs
This is not always easy. There are plenty of luxuries we feel we can’t live without…but you know you actually can.
Sit down and make a list of all of your monthly expenses. I find the best way to do this is to use a budget calendar to track not only your expenses but also your due dates. This is a great first step for any budget and a great way to see how your expenses fit with your pay schedule.
Once you have all of your expenses in front of you, create a list of essential and nonessential living costs. This will give you a good start on what you can easily cut right off the bat.
Be honest with yourself on what is actually essential.
Examples of essential living costs:
Cutback on Nonessentials
Dealing with a loss of income is stressful no matter how it happened. But, even though it’s difficult, it’s necessary to get your finances under control ASAP when you’re learning how to survive a pay cut.
I know it’s tough to find areas you can cut back on but unless you’re already using a bare-bones budget, you have unnecessary expenses.
When you look at your budget you must have more coming in than going out. Remember this.
Now is not the time to incur additional debt trying to hold onto your previous lifestyle. You might even find that you don’t really miss it all.
I cut my cable years ago and can’t imagine adding this bill back into my budget now. I love the savings and I’ve found I spend less time tied to the television now.
But don’t forget to look at all of your expenses including memberships and subscriptions. These little forgotten about charges could throw off your entire budget when they’re automatically deducted from your account.
Create A New Budget
Now that you know a few areas you’re ready to cut and know the basics you need to live, you need to get started with creating a budget based from your brand new monthly income.
If you are new to budgeting, you can follow my step-by-step guide on How to Start a Budget When You don’t Know Where to Start.
Knowing exactly where you stand with your essential expenses and your income makes it easier to weed through your nonessential spending. As you work through your budget, if you find yourself having more going out than coming in, go back and cut more from your non-essentials. Do this until you’re able to find a way to live without creating additional debt for yourself.
Look For Other Ways To Save Money
Finding additional ways to reduce spending will help during your time of income loss.
Save money on food purchases
Finding ways to reduce food costs are easier than you think.
- Purchase food in bulk
- Meal plan
- Buy generic labels
- Shop local sales
- Have meatless suppers
- Stop buying processed
Lower your utility payments
Any adjustment can help you save money on your utilities.
- Adjust your thermostat by 2 degrees
- Unplug items you aren’t using
- Use energy saving lightbulbs
Lower your transportation cost
There are so many ways you can save money on transportation.
- Use public transportation
- Ride your bike
Save money on housing
This one is a little trickier but not impossible.
- Downsize if you must
- Rent out extra rooms
If you’ve cut your expenses down to the bare minimum and are still having a hard time making ends meet, you might want to ask yourself the hard questions posed in How to Save Money When You Have No Money.
Find Ways to Make Extra Money
Millions of Americans have side hustles or a second job. Why shouldn’t you do the same?
Think outside the box when you are looking for ways to earn extra money. Do you have a hobby you’re able to turn into an income stream? Do you do something exceptionally well that others would pay you to do? Do you enjoy being outdoors and have a green thumb?
Your options are endless.
Taking a pay cut can be a blow but it’s not the end of the world. Learning how to survive the pay cut is doable when you follow these tips.