Published in: Banks | Oct. 1, 2019
By: Maurie Backman
A lower paycheck means you'll have to make adjustments elsewhere.
Most of us aim to snag raises on the job. But what if the opposite happens to you? What if you're forced to take a pay cut, either because you move to a new position or because your company insists on cutting your hours?
Losing out on income you once relied on can hurt you financially and put you at risk of landing in serious debt. If you've been hit with a pay cut at work, here are three critical moves you must make immediately.
When your income dips, you can't continue spending the way you used to. The solution? Redo your budget. See where there's room to cut back on spending, and immediately start doing so while you figure things out. For example, if you need a car to get to work and are locked into a $290-a-month payment, there's not much you can do there. But you can start spending less on restaurants, rideshares, and clothing.
If your pay cut is only likely to be temporary, then cutting some smaller expenses in your budget may be enough to tide you over during that period and spare you from debt. This especially holds true if you have savings you can dip into for a month or so. But if your pay cut is likely to be long-term, then you may need to see about lowering one major bill, like housing, to make up the difference.
For example, moving to a smaller apartment could shave $200 a month off of your rent, and so make it easier to keep up with your bills. Similarly, if you have a car you can get by without, offloading it could save you hundreds of dollars a month in maintenance and insurance alone.
Just because you're forced to take a hit on income at your main job doesn't mean you can't supplement your earnings with outside work. These days, millions of Americans earn extra money via a side hustle -- work they do outside of their regular job.
Your side gig can be anything from waiting tables at a local eatery on evenings and weekends to designing websites in your free time to signing up to housesit. If you have a hobby you're able to turn into an income stream, such as cooking, crafting, or photography, even better -- that way, you can make some cash without having to spend your time doing something you resent.
Taking a pay cut can be a harsh blow, especially if it comes out of the blue. If that happens to you, talk to your manager about why it's happening and attempt to assess the situation at hand. Will your pay cut be temporary while the company sorts out some financial issues? Or should you expect lower pay for a year or longer? If you're looking at the latter, it might be a good idea to dust off your resume and find a job that pays better. Otherwise, you may have no choice but to minimize expenses and maintain a side gig for months on end.
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