How To Bounce Back When Your Income Goes Down News, Sports, Jobs
Losing an income is never easy, but it has become increasingly common over the past year and a half: According to the Pew Research Center, 44% of American adults report that their household has experienced a job loss (including temporarily) or a reduction in salary from the start. of the pandemic, with Hispanic and Asian adults most likely to say so.
It creates incredible tension as people scramble to cover basic expenses like food and shelter as well as monthly bills and daily expenses, even though the reduction in income is temporary. Getting a feel for your budget and avoiding procrastination is key to doing the right pay cut, says certified financial planner Manisha Thakor, founder of MoneyZen, a financial education consultancy in Portland, Oregon.
She says your chances of surviving and maybe thriving are increasing exponentially “If you know your expenses in advance, immediately recognize that something bad has happened and you need to adjust them – and open your mind to the idea that it is very likely that by downsizing, you could actually have a richer life. “
“It’s good to admit it’s a shitty situation and you’re going through it.” I think that many people do not give themselves this grace â, says Athena Valentine Lent, founder of the Money Smart Latina website.
Losing income can lead to heartache when you mourn your previous lifestyle, says Daisy Luther, founder of The Frugalite website. “I grew up in a well-to-do family and never heard people say, ‘We can’t afford it’, then I divorced and had to accept that my life had changed.” she says. She could no longer go out to a pizzeria with her children every Friday evening, for example. Gym memberships and nail salon tours were also out. She suggests giving yourself some time to feel sad, and then starting to focus on how you’re going to move on.
CHECK YOUR EXPENSES
If you review all of your expenses, says Thakor, then you can determine which items to cut: “Anything you spend money on that doesn’t bring you joy, like cable bills, activities for the kids, things that have crept into your life on ‘who looks better? “- just get out of this competition”, Thakor advises.
Lent adds that you can compromise: âI might need the internet, but not the cable. I need a phone, but not these extra items on the phone plan. I need to shop for groceries, but I don’t need to eat out. I don’t need Netflix, I can go to the library. Everything you don’t need to spend, don’t spend it â, she says.
ZERO ON FOOD
Food is a major expense category for many people, and it’s a prime target for cuts, says Valerie Rind, author of “Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin” who experienced a significant drop in her earnings when she changed careers about 16 years ago. “I reduced my outings to restaurants, even though I like it and I’m not really a cook” she says. She also changed the way she does her shopping, bypassing the $ 4 orange juice and using a slow cooker for more meals, which also created leftovers for the freezer.
Recently, she took inspiration for meals from TikTok chefs, who break down the recipes into short video segments. “It makes things easy and simple” she said, adding that her favorite chef is @thatdudecancook.
ADJUST YOUR EXPECTATIONS
Thakor suggests considering whether you could get by with less, for example if you can trade in for more economical vehicles or consider having just one car. âPeople drive cars that are more expensive than they can comfortably afford. Look at certified used cars â, She suggests. It’s easier to deal with a loss of income, even temporary, without a big monthly payment for a car.
RELISH THE CHALLENGE OF BEING FRUGAL
Luther suggests treating frugality as a game. When it comes to food, home decor, or accessories, she suggests considering whether you can do it for less than the cost of the purchase.
“It can really be a lot of fun” she says. She enjoys growing tomatoes and lettuce to make her own salads, which she says saves her at least $ 10 a week.
SAVE FOR THE NEXT TIME
If you’ve had to run out of your emergency fund or don’t have one, consider deepening your cuts for savings that will protect you in the next financial crisis. Thakor suggests an emergency fund goal of $ 2,000 and then keep building – but even $ 500 can protect you from financial shocks.
âIf you know you’ll be running out of cash in a few months, start accumulating money. “ Lent said. Look for ways to make some extra money, for example – maybe carpooling, freelancing, or selling items you no longer need, she adds.
This column was provided to The Associated Press by the NerdWallet personal finance website. Kimberly Palmer is Personal Finance Expert at NerdWallet and author of “Smart mom, rich mom.” Email: [email protected] Twitter: @KimberlyPalmer.