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8 Tips to Survive an Unexpected Pay Cut

April 17, 2024 By Catherine Reed Leave a Comment

In the current economic climate, characterized by rapid changes and uncertainties, an unexpected pay cut can strike a severe blow, unsettling your financial equilibrium. When it happens, immediate and strategic action is necessary to safeguard your financial stability. Here are eight comprehensive tips to help you navigate the choppy waters of an unexpected reduction in income, ensuring you remain afloat and resilient.

1. Assess and Adjust Your Budget

The foundation of financial recovery from an unexpected pay cut lies in thoroughly assessing your budget. This critical step involves distinguishing between your essential and non-essential expenses, enabling you to identify areas where adjustments are not just possible but necessary. Essentials typically include rent or mortgage payments, utilities, groceries, and healthcare, while non-essentials might encompass dining out, entertainment, and luxury services. Streamlining your expenses to focus on the essentials can create a buffer that helps you manage your reduced income more effectively.

2. Strategically Tap Your Emergency Fund

An emergency fund is akin to a financial life raft in the turbulent sea of an unexpected pay cut. If you’ve had the foresight to build such a fund, it can serve as a critical buffer, helping you manage immediate financial obligations without resorting to high-interest debt. If your emergency fund is not as robust as the recommended three to six months’ worth of living expenses, don’t despair. Even a modest fund can provide some relief, so tap into it when the need genuinely arises. Then, once your financial house improves, replenish it to build a new cushion.

3. Open Lines of Communication

Transparency and communication can be powerful tools in navigating the financial strain of a pay cut. Contact creditors, landlords, and service providers to discuss your situation. Many organizations have protocols in place for hardship and may offer deferments, reduced payment plans, or other accommodations to help you manage your obligations. This proactive approach not only helps in managing your immediate financial pressures but also in preserving your credit score and financial reputation.

4. Seek Additional Income Streams

Diversifying your income becomes crucial in the face of reduced earnings. The digital age and the gig economy offer myriad opportunities to supplement your income, from freelance work and consulting to online teaching and e-commerce. These endeavors not only help bridge the gap created by your pay cut but also enrich your skill set and professional network, enhancing your resilience and adaptability in an ever-changing job market.

5. Reevaluate Your Savings Goals

An unexpected reduction in income will inevitably impact your savings goals, necessitating a strategic reassessment. While it may be necessary to pause contributions to certain savings plans temporarily, aim to maintain any investments, especially those in retirement accounts, to leverage the benefits of compound interest. Adjusting your savings goals doesn’t mean abandoning them; rather, it’s about adapting them to your current reality while keeping an eye on the future.

6. Cut Costs Creatively

Navigating a tight budget doesn’t mean sacrificing all enjoyment; it’s about finding cost-effective alternatives that enrich your life. Explore creative ways to reduce spending without diminishing your quality of life. This could mean hosting potluck dinners instead of dining out, enjoying nature and public parks for entertainment, or embracing DIY projects. These cost-saving measures can also foster a sense of community and shared experience among friends and family.

7. Prioritize Your Health and Well-being

The stress associated with financial uncertainty can profoundly affect your physical and mental health. It’s crucial, therefore, to prioritize self-care during this challenging time. Engage in regular physical activity, which doesn’t have to be expensive—think jogging, home workouts, or yoga. Mindfulness practices and meditation can also be invaluable tools in managing stress and maintaining mental clarity. Remember, investing in your health is essential for maintaining the energy and focus needed to navigate financial challenges.

8. Plan for the Future

Use this challenging period as a learning experience and a springboard for future financial planning. Once you’ve adapted to your new situation, focus on rebuilding your emergency fund and reassessing your financial strategies. Consider further education or skill development to enhance your marketability and potentially open new career avenues. Embracing lifelong learning and adaptability can not only help you recover from an unexpected pay cut but also position you for greater opportunities in the future.

You Can Navigate an Unexpected Pay Cut

An unexpected pay cut, while challenging, is not insurmountable. You can navigate this difficult period by taking decisive action to adjust your budget, seeking additional income sources, and prioritizing your health and well-being. Remember, this is a temporary setback. With resilience, creativity, and a proactive approach, you can emerge from this experience financially stronger and better prepared for whatever the future may hold.

Read More:

Being Wise with Your Spending

5 Steps I’m Taking to Lower My Grocery Budget in 2024

Catherine Reed

Catherine is a tech-savvy writer who has focused on the personal finance space for more than eight years. She has a Bachelor’s in Information Technology and enjoys showcasing how tech can simplify everyday personal finance tasks like budgeting, spending tracking, and planning for the future. Additionally, she’s explored the ins and outs of the world of side hustles and loves to share what she’s learned along the way. When she’s not working, you can find her relaxing at home in the Pacific Northwest with her two cats or enjoying a cup of coffee at her neighborhood cafe.

What to Do When You Have More Bills Than Income

November 2, 2020 By MelissaB Leave a Comment

It can happen to the best of us—we have more bills than income. Every person’s situation is unique. Maybe you lost your job, or you had a medical emergency, or you just went through a divorce. The situation doesn’t matter. What matters is that you find yourself in a desperate position. Rather than panicking or ignoring the problem, know that there are strategies to implement to get yourself out of this position.

Steps to Take When You Have More Bills Than Income

The process of getting out of this situation isn’t quick, but finding your financial footing again can be done.

Write Down Your Financials

The first step is to take an honest account of where you are. How much money do you have coming in? How much debt do you have? What are your monthly payments and bills?

Cut Ruthlessly

Now that you have your financials on paper, you need to cut ruthlessly. What do you pay for monthly that you can slash from your budget? Start first with subscriptions like DisneyPlus, Netflix, Amazon, etc. You can get those services back once you no longer have more bills than income.

Next, look at categories you can’t eliminate but can reduce. We all have to eat, but we don’t have to go to a restaurant to do so. If you’re not already cooking all of your meals at home, now is the time to start. Also, make a plan to shift the type of food that you’re eating so you can lower your grocery bill. Now might be the time to eat some beans and rice and vegetarian soups.

Learn how to lower your electric bill. Turn off appliances and devices that you’re not using at night.

Consider switching cell phone providers so you don’t have a high monthly cell phone bill. You might want to move to a lower cost provider like Ting or Tello Mobile.

In short, cut or reduce everything you can. Then, you’re on to the next step.

Prioritize Payments

More Bills than Income — Photo by Scott Graham on Unsplash

If there’s not enough money even after slashing your expenses, there’s not enough. Once you write down your financials, list your bills in order of importance. Think survival here.

Survival Expenses Should Always Be Paid First

Bills and expenses that you likely want to be sure you pay every month can include:

Food,

Clothing,

Utilities,

Housing,

Transportation

The most important goals right now are to feed and clothe yourself as well as keep the lights on (along with the heat or air conditioning) and maintain your house and car. Without the latter two, keeping and getting yourself to work is very difficult.

Keep in mind, you’ll still want to be conservative in these categories. You won’t be eating fancy meals and you won’t be buying designer clothes. You’ll spend the minimum you need to get yourself fed and clothed.

Expenses to Pay with the Remaining Money

After you’ve done looking at your spending priorities, look at how much money you have left. You may find that you have many more bills to go and only a little money left. That’s okay. You knew you were in this position, and now you’re writing it all out and making a plan. This is empowering even if it feels terrifying.

Let’s say you have four debts remaining and you only have $250 leftover. Spread that $250 between each of your remaining debts. For instance, let’s say your four debts have these balances:

CC #1: $10,000

CC #2: $3,500

CC #3: $5,000

CC #4: $1,500

At this point, don’t pay attention to the minimum payment. Instead, add up all the debt, in this case, $20,000, and figure out which percentage of debt each is. For example, CC #1 represents 50% of the remaining debt, so you’ll give it 50% of your remaining money each month, $125. CC #2 is 17.5% of your remaining debt, so it will get 17.5% of your remaining money–$43.75, and so on.

Negotiate Credit Card Rates

If you think your current financial situation is temporary, call your credit card company and ask them to reduce the amount of interest you’re paying. By doing this, more of your monthly payment will go to principal, lowering the overall amount that you owe. You’ll likely be successful with agents lowering your rate about 50% of the time.

Negotiate Monthly Payments

If you feel your financial situation may last longer than a few months, call your lenders and explain your situation.

Credit card companies have the power to reduce your monthly payment. When you negotiate with them, they will ask you how much you can pay monthly. Using the math that you did above, let them know exactly how much you can pay a month. (You’ll tell credit card company #2 you can only pay $43.75 even if your monthly payment is $70.) The credit card companies will likely lower your payment to what you can pay because you’re making a good faith effort to meet your obligations.

Remember to call your other lenders. Your mortgage company may be able to work with you to reduce or temporarily suspend payments. You can also apply for deferrals on your student loans.

The important advice is to call these companies early, before you fall significantly behind. Call them while you still have good credit.

Find a Side Hustle

Reducing expenses is important when you have more bills than income, but the flip side is just as important. Can you start a side hustle as a way to make extra money and boost your income? I started freelance writing 10 years ago when our youngest was a baby. Now, my freelance work contributes 25% of our monthly income. Imagine adding an extra 10 or 20 percent to your current income? How would that money help you improve your financial situation?

Final Thoughts

If you’re in the unfortunate position of having more bills than income, know that you’re not alone. There are steps you can take to improve your financial situation and help you survive this current financial difficulty. Most importantly, remember that this situation is temporary. Things will get better.

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

How to Feed Your Family on a Low Budget

How to Create a Zero-Based Budget in Excel

MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

4 Side Hustles for Teachers

April 15, 2019 By MelissaB Leave a Comment

If you’re currently a teacher, you likely know that while this occupation can be rewarding, it doesn’t pay very well. You may be looking to supplement your income in the evenings or the weekend.

If you’re a former teacher who is now staying home with your kids, you may be looking for a way to bring in money utilizing your teaching skills. However, you’ll need flexibility so that you can do your work when your children are sleeping at night or napping.

Luckily, there are plenty of ways to earn a side gig with your skills as a teacher.

Private Tutor

Teacher Hustles — Make Money as a Teacher

One of my friends worked at Nielsen, became a high school math teacher, and then stayed home when she had children. For the last 10 years, she has been a private math tutor. She gets her clients from referrals from her former colleagues and through word of mouth thanks to satisfied customers. She makes several hundred dollars a month and enjoys being able to still teach even though she is no longer working full-time.

VIPKID Tutor

If you have a bachelor’s degree, you can get apply for a job at VIPKID teaching children in China how to speak English. Most of the available tutoring hours are very early in the morning or late in the evening when your kids are likely already in bed. You can set your own schedule and decide how many hours you want to work each week.

Depending on your experience, VIPKID may pay up to $22 per hour.

Curriculum Developer

Many former teachers make a nice income developing curriculum and selling it on Teachers Pay Teachers. Other teachers are always looking for quality curriculum material and homeschoolers also take advantage of the site.

Online Teacher for Gifted Students

A number of prestigious colleges such as Johns Hopkins, Duke, and Northwestern offer online classes for gifted children. You can teach here, and the schedule offers flexibility as you can decide what semesters to teach and what classes to teach. You’ll be able to challenge gifted students, and you’ll have students who will likely challenge you, too.

If you don’t want to work with gifted students, you can also look at the many online schools available for K-12 students. You can teach from home, and you may have to have a live course or tutoring once a week. My kids were enrolled in an online school this year, and every time they had a tutoring session or interacted with their teachers, the teachers always worked from home, which provides a great deal of flexibility.

If you’re a teacher looking for extra income, you can see that there are a variety of ways to do that, and this list isn’t exhaustive. Here’s another list of ways to make extra money that’s not focused on teachers, but could certainly apply to teachers. If you’re a teacher who opted to stay home with kids, there are many ways you can work from home using your skills and keeping current so you’ll be able to reenter the teaching workforce should you decide to in the future.

If you’re a teacher or were a teacher, have you found ways to turn your skills into a side gig or part-time income stream? If so, what do you do?

MelissaB