Updated: Nov 17, 2020
Bubbles burst, pandemic lockdowns, companies downsize, and personal disasters happen which can result in a reduced paycheck. How do you make the most of a reduced income? Try adopting the right tools and attitude, and you can make the most of a reduced paycheck and not just survive, but THRIVE.
1. Is you situation temporary or permanent?
- You may only have to adjust to lessened cash flow for a limited time. But before you tap into your reserves (and retirement savings, home equity, cash value life insurance, etc.) it would be wise to behave as if the salary reduction is long-term. Cut down on spending now. Securing your old income may take longer than you think.
2. Recognize that your salary is not you
- Many people believe self esteem directly corresponds with how much money they make—the higher the income, the more important they feel. If your mood declines when your income drops, make every effort to dispel the attitude that financial wealth equals worth. It does not, nor does having an abundance of money guarantee happiness.
3. Seize the day
- Consider this your opportunity to discover what you really want out of life. After all, if you are going to dedicate forty or more hours a week to your job, it should be something you love. Or at least like.
4. Analyze your expenses
- Prioritize expenses now, and identify which bills take precedence. Mortgage versus car payment? Credit cards versus utilities? Analyze the consequences of missing or not paying each.
5. Develop a spending plan
- Discern between those expenses you can and cannot live without. If you find there is simply not enough money to support your necessities, much less your desires, at the very least you now know how much you will require from your next job.
6. Remember: credit is not supplementary income
- If you use credit to maintain the lifestyle you’ve grown accustomed to, it won’t be long before you “hit the wall”. Without an income to support repaying the balance in full every month, you’ll be paying in installments with high interest rates based on your debt-to-income ratio. Credit cards are not designed to be emergency savings accounts.
7. Develop a plan
- Be specific: include names of people you need to speak to and proposed accomplishment dates for each task. Develop SMART goals. Update and refer to it regularly.
8. Go forward (seek professional financial counseling visit www.skillz4life2020.com for assistance)
- Adopt a positive attitude and taking pragmatic steps, you can adapt to a reduced income, and achieve a financially stable future.
Disclaimer: All the information in this blog is published in good faith and for general information purpose only. It does not make any guarantees about the completeness, reliability and accuracy of this information. Any action you take upon the information you find in this blog is strictly at your own risk.