Although your first inclination might be to panic, there are better ways to cope with a drop in income. Maybe your employer decides to let go of a few full-time workers, or perhaps your hours at work decrease. Whatever the case, a drop in income makes it difficult to pay your rent, your car payment, and other bills. But there are ways to deal with this challenging situation. Here are seven ways to cope with a drop in income.
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1. Adjust Your Outlook
Adjusting your outlook is one of the best ways to cope with a drop in income. Unfortunately, you can't change the situation. But you can change how you respond to this challenge. It might be an uphill battle, but with a positive outlook and positive thinking, you can overcome this hurdle and succeed. To stay positive, get plenty of exercise, eat a healthy diet, and get plenty of sleep. Maintaining your physical health can significantly impact your mental resilience during financial stress.
2. Assess the Damage
Once your income drops, you'll need to assess the damage. You can start by having a discussion with your employer. If the company decreases your hours, how many hours will you work in the future? Or if you’re a freelancer or a self-employed worker, run the numbers to determine how much you'll be bringing in. It's also helpful to look at Department of Labor resources for information on partial unemployment benefits.
3. Where’s Your Money Going?
After determining your new income, you'll need to determine where your money goes. Get a sheet of paper and write down all monthly expenses and their totals. This includes housing, transportation, utilities, insurance, food, miscellaneous costs, and debt payments. Subtract your monthly costs from your new income to determine whether you earn enough to cover all expenses. Many find that smart saving tips can help identify areas where spending can be trimmed.
4. What Can You Eliminate?
After a drop in income, you may discover that you don't earn enough to cover all monthly expenses. This can be scary, but if you eliminate a few expenses, it might be easier to make ends meet. There are several ways to adjust, such as clipping coupons and buying store brands. You might let go of cable until you’re back on your feet or consider moving to a cheaper cell phone plan. Tools like Mint can help you track these small changes over time.
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5. Talk to Your Creditors
If you realize that your new income isn't enough to pay your bills, contact your creditors immediately. Don't wait until you're behind on your payments. Many lenders have programs to help people who are experiencing financial hardship. They might be willing to lower your interest rate, waive late fees, or allow you to make smaller payments for a few months. It's worth visiting the Consumer Financial Protection Bureau for guidance on how to negotiate with lenders.
6. Find Ways to Earn Extra Cash
Finding ways to earn extra cash is another great way to cope with a drop in income. You could have a garage sale, sell items online, or take on a side job. There are many creative side hustles that can help bridge the gap. Even a small amount of extra money can help you cover your expenses and reduce your stress.
7. Don't Give up
Dealing with a drop in income can be incredibly stressful, but it's important not to give up. Keep looking for ways to improve your situation and stay focused on your goals. Remember that this is only temporary and things will eventually get better. Stay positive and keep moving forward.
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2014-09-23T06:57:00.740Z