A job loss or unexpected pay cut can make it challenging to manage our finances. Today I’m sharing budgeting tips to help you survive a pay cut. Whether you want to learn how to save money after a pay cut or save for an unexpected job loss, these tips can help you during a difficult time.
Learning how to budget and manage your finances can come in handy if you’ve experienced an unexpected pay cut or job loss. These budgeting tips can help during this difficult time.
The key is to remember that this is not your fault. Sometimes we can’t control how the economy impacts our income. We’ve recently heard in the news that companies are laying off employees, cutting hours or reporting loss in income due the recent events happening around the world.
Today I want to share how to survive financially after a job loss so you can pay your bills, adjust your budget and continue working towards your financial goals. Use these tips as a starter guide on how to budget when you lose your job.
- 5 things to do before creating a budget
- 10 ways to stop spending money you don’t have
- 5 ways to stop overspending on impulse shopping
1. Just breathe
Breathe in, breathe out. This is not an easy time. I’m sorry this is happening. But you will get through this.
Focus on the things you can control right now. Don’t let the things you can’t control prevent you from taking action.
2. Determine your essential living costs
Now let’s figure out the absolute minimum amount of money you need to cover your essential living costs. This includes:
If you are currently working towards paying off debt, then you’ll want to include debt payments in your essential living costs too.
I know it’s not easy when you experience a sudden drop in your income or a job loss. But try to make at least the minimum payments on your debt. Continuing to pay down debt can help reduce your monthly debt payments.
Once you’ve determined your essential living costs, compare this with your household’s income. If you’re currently living without a source of income, see how much cash you have set aside in your savings account or emergency fund.
Read Next: How to quickly build your emergency fund
3. Reduce (or eliminate) unnecessary expenses
It’s never easy to cut back on spending, especially when it already feels like you may be living paycheck to paycheck. Remember that this reduction in spending may only be temporary until you get back on your feet.
It can be stressful to deal with income loss and having to cut back on your favorite luxuries. However, reducing your expenses is the best way to get your finances under control.
If you don’t already have a monthly budget, I recommend making a list of all your discretionary spending. This is non-essential spending that people purchase when they have enough income leftover after paying their necessary expenses and contributing to their savings and retirement accounts.
Examples of discretionary spending includes dining out, cell phone, cable TV, clothing, steaming services (Spotify, Netflix), gym membership, beauty products, subscriptions, hobbies and sports, vacations, gifts, and so on.
Negotiate your bills
For some expenses, such as a monthly cell phone or cable TV, you may want to consider calling up your provider to negotiate a better price. When I quit my job to go back to school, I found a better cell phone plan to suit my budget.
Cancel subscriptions or memberships you’re not using
I recently canceled my subscription to Crave TV because we weren’t using it anymore. There’s no sense in paying for something that you’re not using.
No matter how closely you pay attention to your monthly bills, I’m sure if you take another look, you’d find at least one subscription that you’re not using. You may even discover a late fee you’ve forgotten about. Oops!
To help you get organized and pay less on your monthly bills, consider using this free tool by Trim.
Trim is a digital personal assistant that makes it easy to save money on your monthly bills. All you have to do is sign up here and Trim will do the heavy lifting for you.
Trim will also negotiate your monthly bills, such as your cable, cell phone, and internet bill. Trim works behind the scenes and automates ways to save you money.
Now you can have more money in your pocket to help grow your savings and pay off debt faster.
Read Next: 12 ways to pay off debt quickly
4. Look for ways to save money on your necessary expenses
As we already covered, your necessary expenses are food, utilities, shelter, and transportation. Finding ways to reduce these expenses can help during a time of income loss.
Saving money on food
First you want to make sure that you and your family have food on the table. Here are some ways to help reduce food costs:
Meal plan – This is the easiest way to save money on groceries and dining out. Spend one night per week planning the meals you want to make for the next seven days. If you need some guidance, many Mint Notion readers love using the $5 Dollar Meal Plan to help plan their meals.
Buy generic – Generic or store-brand products are usually cheaper than brand name. To make sure that you’re not compromising on your family’s health, I recommend reading the labels to check ingredients.
Stop buying processed food – I can appreciate how easy is it to pop a frozen pizza into the oven and call it dinner, but it’s not healthy. Plus, processed food tends to be more expensive than cooking from scratch. Try to stick to eating whole foods and shop around the perimeter of the grocery store.
Shop by the flyers – When planning my meals for the week, I like to see what’s on sale at my local grocery store. I only buy what’s on sale to help keep my grocery bill low. If something’s not on sale that week, I won’t buy it.
Eat less meat – I recently read the book How Not to Die and learned how meat is not the healthiest option. Plus, meat can be expensive. There are lots of cheaper ways to get enough protein into your diet, such as beans, lentils, tofu, and tempeh.
Save money on utilities
When you experience a sudden drop in income, every bit counts when you’re trying to keep your living costs down. Here are a few ways you can reduce your utility bill:
- Adjust your thermostat.
- Use dryer balls to help cut down dryer time.
- Unplug items not being used. This can help reduce your electric bill.
- Invest in blackout curtains. This can help keep warm or cool air from escaping.
- Change filters to keep your vents clean.
- Use energy-saving light bulbs.
Read Next: 20 ways to make your clothes last longer
Save money on shelter
Our home is usually the biggest monthly expense. When setting your monthly budget, it’s recommended that your housing expenses should be no more than 35% of your take-home income. However, in expensive cities, such as Toronto, this is easier said than done.
Here are a few ways though you can reduce your shelter expenses:
- Move to a cheaper home. If possible, you may want to consider moving to a more affordable neighborhood or home.
- Rent out your extra space. If you have an extra room in your home, consider renting it out. Having roommates can help lower your cost of rent or help pay the mortgage. You can even rent it out temporarily on websites such as Airbnb to make extra money.
- Downside. You may find that downsizing your home can save you money. Or living in an apartment building without amenities. Condo fees can really add up!
- Take care of your home. This can help prevent extra repairs and prolong the life of your home.
Save money on transportation
Most of us commute to work, either on public transit, riding a bike or driving. If you’ve experienced a job loss, then your transportation costs may be low right now. However, if you’re still working and had a pay cut, here are some ways to help reduce transportation costs:
- Use a bicycle.
- Take public transportation.
- Use GasBuddy to find the cheapest gas station near you.
5. Create a new monthly budget
Now that you’ve determined your essential living costs and figured out ways to reduce your non-essential spending, it’s time to create a new monthly budget. This budget will be based on your new paycheck.
If you currently don’t have an income, you’ll need to see how much cash you have set aside to make sure it’s enough to cover your essential living costs.
For those new to budgeting, you can follow my step-by-step guide on how to create a budget.
If you need a binder to help keep all your finances organized, many Mint Notion readers love using my printable Budget Planner.
- How to budget when you live paycheck to paycheck
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- How to use the cash envelope system without cash
6. Create a budget calendar
When creating your budget, I also like to use a finance calendar. This is a financial tool designed to help to help you remember when money is coming IN and when money is going OUT.
I’m not just talking about your bills. You also need to know when you need money for specific events. Such as buying a birthday present for an upcoming party, or expenses for your child’s school field trip, or meeting your parent’s for lunch, or when you need to buy a dress for your friend’s wedding. It’s important to keep track of all these dates on your financial calendar.
I recommend keeping this calendar separate from your daily work or personal calendar. You can create your own or use the finance calendar included in my Budget Planner.
Here are a few more benefits of using a finance calendar:
- Fewer missed bills. When everything is laid out nicely on your calendar, you’ll be less likely to miss a bill payment. This can help you avoid those pesky late fees.
- Better understanding of your finances. You’ll be able to easily track your bills and fixed expenses. This can help you prepare for when big expenses are due.
- Increased savings. You can set a reminder for yourself to contribute towards your savings goals.
7. Find ways to make extra money
When I quit my job to go back to school, I didn’t have an income. I knew money would be tight if I just relied on my savings alone to get me through college, so I started looking for ways to make extra money.
That’s what led me to start this blog. It was just a hobby in the beginning, but then I learned how to turn it into a full-time job.
Interested in learning how to start your own blog? You can follow my easy step-by-step guide here to start your blog in minutes. It also includes a special discount for Mint Notion readers and a free domain name.
Finding ways to earn extra money changed my life and I encourage everyone to try it, no matter what your income level is.
The easiest way to make extra money is to start where you are right now. Look around your home and see what you have. Is there anything you can declutter and sell?
Maybe you have new or gently used clothing you can sell. Or shoes? My friends Rob and Melissa from the site, FleamarketFipping.com, make a full-time income from flipping stuff for profit. In their first year full-time, they made $133,000 in sales!
I recommend checking out Rob’s FREE 75-minute workshop. You’ll learn how to find hidden treasures at flea markets, thrift stores, yard sales, and your home, and how to turn them into maximum profit. His workshop is completely free to join. You can sign up here.
Another easy way to make extra money is to participate in market research. Companies are willing to pay you to get your opinion. I started doing online surveys when I was in college to help me make extra money. It’s been a good way to help my bank account grow each month.
PRO TIP: Earn the most money when you sign up for several survey websites. Then you’ll get to choose the surveys which pay the most money. Save time and earn more cash!
Start out with Survey Junkie. This is one of the best paid survey websites available in the United States and Canada. They currently have a TrustScore rating of 8.7/10 on Trust Pilot, which makes them one of the highest rated survey sites.
How to get started with Survey Junkie:
- Take Surveys: Sign up here to create your free account. This process takes only a few minutes to complete. Then you’ll be matched with surveys.
- Earn Rewards: Complete surveys and you’ll earn virtual points.
- Get Paid: You can redeem virtual points for PayPal cash payments or e-gift cards.
Side hustles can be a great way to boost your income so you can save more money and stay afloat. Here’s a few of my favorite side jobs you may want to consider:
- Pinterest virtual assistant
- Freelance writer
- Virtual assistant
- Stella & Dot stylist
- Affiliate marketing
- Selling on Amazon
- Flea market flipping
If you still need some ideas on how to make extra money, I recommend checking out these posts:
- 34 legitimate ways to make extra money
- 20 free ways to make extra money
- 10 side jobs for stay-at-home moms
- 10 side hustle ideas for dads
- 12 real ways to make an extra $500 this month from home
8. Remember to keep saving
When we make cuts to our spending, it’s tempting to stop contributing to your savings or retirement. However, this decision can potentially hurt your finances in the long run.
Of course, since your income is lower right now, the amount you put towards your savings may be less than it was before. However, you’ll want to use this as an opportunity to think about your savings goals. You should keep your savings goals that same and continue to work towards them, even if it’s at a slower pace for the time being.
The key to saving money is to start small. Start where you are right now. To make it fun and help keep you motivated, I recommend doing a money challenge.
Whether you want to get out of debt, build an emergency fund, or save for your dream vacation, a money challenge can help kick-start your savings so you can achieve your financial goals faster!
Here are a few money challenges you may want to check out:
- Save $465 in 30 days
- Save $500 in 31 days
- Save $1,000 in 12 weeks
- No new clothing challenge.
Stop buying any new clothing for a certain period of time.
- Shopping ban challenge.
Stop spending money for a certain period of time.
- No eating out challenge.
Stop dining out for a certain period of time.
- No weekend spending challenge.
Don’t spend money on the weekend.
- Pantry challenge.
Cook meals using items you already have instead of going to the grocery store.
- Free entertainment challenge.
Find free activities to do instead of spending money.
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