Although the 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 maybe 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.
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.
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.
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.
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, and you might cancel other monthly costs, such as gym memberships.
5. Build a Side Hustle
If you need additional income now, there's no time to panic. Many people have generated extra cash with a side hustle. This can be anything. Some people babysit after hours or offer tutoring. Others offer office or house cleaning services, or you might generate extra cash with other odd hustles, such as lawn care, car washing, an errand service, etc.
6. Unload a Few Items
You work hard for your belongings, but if you experience a drop in income, getting rid of some of your belongings can provide the cash you need to keep your finances intact. Besides, you probably don’t use most of the items in your home. Have a yard sale or post items for sale on online marketplaces, such as Craigslist. The money earned can help pay a bill or put food on the table.
7. Revamp Your Finances
A change in income can trigger a lifestyle change. Be realistic about your situation. For example, if you don't foresee recouping in the near future, it might be time to think about downsizing your house or car. If your kids are in private school, making a switch to public education also saves money.
A drop in income can catch you off-guard, and it's definitely a scary situation. But if you're proactive and make the needed adjustments, you can survive this tough time. What are other ways to cope when your income drops?