Budgeting tips will really come in handy if you suddenly find yourself trying to survive an unexpected pay cut. We get a lot of advice about what to do when you get an income increase. But we need to know more about what we should do when we are facing a lower income. If you are not careful, you might end up turning to debt in order to meet all your expenses. While using debt is beneficial sometimes, it is usually not a good idea to use it to make ends meet. If you have no idea how you will pay it back because of your lower income, then you need to do your best to avoid debt.
According to reports, the overall values of both salary and compensation went down slightly. This has two implications. One is that there is a lower number of salary appraisals. If you think about it, that is not too bad. But the other implication is. When the median salary values are down, that means there are people who had to face a lower income than before.
These are the people who are in dire need of budgeting tips to survive this financial change.
How to change your budget after a lower income
You may be feeling a certain level of panic because of your recent pay cut. While the feeling is justified, you should try to keep yourself from stressing out too much. It is very important for you to have a clear head right now. You have a lot of things to do so you can survive having less to live on. It may be true that the lower income puts you in a bad situation, you should still be thankful that you still have money coming in. All is not lost.
But that does not mean you should relax. The real work begins after you calm yourself down. What you need to do is to concentrate on a couple of budgeting tips. Go through it one step at a time so you can focus on every task. It all seems simple but it will require a lot of self-control, discipline, and sacrifice on your part.
So what are the budgeting tips that you need to implement once you learn that you will be getting a lower income from now on?
Look at your current budget
If you happened to survive without a budget plan in the past, that is no longer possible now. It will be really irresponsible to live without a budget. First of all, you need it to help you organize your finances. Since you will be living on a smaller income, you need to get to know every expense so you can make sure it can be funded. Obviously, your income can no longer meet all of your usual expenses. You need to analyze what you were spending in the past and your overall lifestyle. You will be making a lot of changes so you will not end up borrowing too much money. The end goal here is to create a new budget that can give you the lifestyle that you need based on how much you are earning now. Most likely, you will be forced to create a frugal budget plan until you find the means to increase your income.
Lower your discretionary spending
Your discretionary expenses refer to those that you can live without. So if you have to live on a smaller income, this is the first thing that you will cut back on when you are creating a new budget plan. According to reports, the average American spends around 10% of their net income on discretionary expenses. This includes entertainment, reading, vices, and cash contributions. Obviously, these will be the first to go if you have to cut back on your expenses to make your budget fit your new income. While you need to cut back as much as you can, you should also consider your personal preferences. You do not want to make yourself too miserable.
If it is really necessary to cut back on something that you love to do, find a more cost-efficient alternative. If you love clothes, opt to buy in thrift shops instead of designer labels. For those who like to go out on weekends, look for places to visit for free. You might be surprised at what you can discover if you put a little effort into it.
Find ways to save on necessities
Obviously, you need to budget for your necessities – but there are still budgeting tips that will help you save money on these expenses. Food is a necessity but you will save money on it if you cook your meals from scratch. Not only that, you will save more if you buy your ingredients in bulk and cook huge meals ahead of time so you can reheat it anytime during the week. Rent a smaller home to save on the lease. If you think your pay will be permanent, sell your house and live in a smaller one. For your groceries, see if there are things that you can save on as well. Add water to your dishwashing liquid or soap. These will make them last longer. You will find a lot of ways to save on your necessities – but it will take a lot of creativity and ingenuity.
Stick to your saving goals
Despite your reservations, it is possible to save money even with a lower income. You just have to be disciplined about it. Focus on the priority savings – like your retirement. In case you do not have an emergency fund, you might want to save up for this. The fact that your income is lower means you need it so much more. Your tight budget does not leave a lot of room for extra money. That means one emergency can quickly turn your life upside down. You need to be prepared for that. Just because you have a lower income, that does not mean you cannot be financially secure. You just have to know the right budgeting tips that will make it possible for you to reach your saving goals. Make sure you have both long-term and short-term goals.
Tips to survive after a pay cut
Surviving a pay cut is difficult but with the right budgeting tips, you should be able to live comfortably. The adjustment will be hard at first, but over time, you will get used to the new lifestyle that you are forced to live. One thing is for sure, it is not an impossible feat. Valerie Rind, a contributor for Next Avenue published an article in the Forbes website detailing how she survived a 75% pay cut. She had to do a lot of changes – mostly are on the things that she does on a daily or weekly basis. Her efforts did not require her to sell her home or get rid of her car. All it took were changes in her budget plan and a lot of new financial habits.
Just like her, you can also survive a low income and be a financial success. Here are some tips that might be useful.
Talk to an accountant to figure out if there are deductions or benefits you can get after the pay cut. For instance, you might have to declare something to lower your taxes.
Involve the whole family. The pay cut will be hard for the whole family and that is the reason why you need to get everyone involved. You will all need to make sacrifices and a conscious effort to be responsible with spending money.
Look for another source of income. You need to increase your income somehow. Finding another source will diversify your income and make your finances more secure.
Be careful with the use of credit. If your finances are really tight, stick to using cash for now. That will lower the risk of overspending.
Do not forget these budgeting tips so you can live a great life despite your lower income.