There are several ways to deal with a shrinking income. Whether you’ve recently lost your job, or your employer reduced your hours at work, a shrinking income can be the last thing you need in a tough economic world. But unfortunately, this is a reality for many employees. However, solutions are available. Here are seven ways to deal with a shrinking income.
1. Don’t Panic
It's normal to feel panicky if your income drops suddenly. But panicking is one of the worst ways you can deal with a shrinking income. When you panic, there's a chance that you'll be paralyzed by fear. And once you're paralyzed, you're not in a good position to make smart decisions or brainstorm solutions. Stay calm and wrap your mind around the new situation.
2. Get Rid of Cable
It might be hard to let go of your cable. But if you're paying $200 a month for premium stations, the money you save could help pay a utility bill or put food on the table. When your income drops, it's important that you prioritize and eliminate expenses that aren't necessary.
3. Reduce Your Entertainment Budget
In addition, going out every weekend with your friends may come to a stop if your income drops. It's easy to blow $50 or $100 on the weekend. Whether you're going to the movies, out to eat or meeting for drinks, the money you spend on recreation and entertainment can be put to better use. This doesn't mean that you can't have fun, but you should look for entertainment that's free or very cheap. Go to a free concert, visit a free museum or hang out at the beach.
4. Raid Your Friend’s Closet
Going shopping is another thing that may have to stop if your income shrinks. If you need new clothes, either for a special event or any other reason, rather than spend money you don't have, maybe you can swap garments or borrow garments from your friends. You may also find excellent deals at thrift stores, consignment shops or flea markets.
5. Supplement Your Income
Rather than sit around and complain about your situation, get proactive and take steps to boost your income. There are several creative ways to generate extra income, and in many cases, you can get started with no out-of-pocket money. For example, maybe you could look for a part-time job one or two days a week, start a small business or offer consulting services in your field of expertise.
Letting go of your house or your car might be the thing that pushes you over the edge. This is especially true if you worked hard to achieve the things you have. But given the situation, you need to put your pride aside. Downsizing and moving to a cheaper place or getting a cheaper car can be the solution to keeping your budget on track and avoiding unnecessary debt.
7. Don’t Rely on Credit Cards, if Possible
Unfortunately, some people refuse to modify their lifestyle when their income drops. As a result, they may rely on credit cards to fill in financial gaps. Unfortunately, this creates more financial problems because you’ll deal with costly debt that can take years to repay. Reserve credit cards for an emergency — only. And only use a card if you can pay off your balance in full.
Unfortunately, a shrinking income can create a lot of stress and financial anxiety. Just know that you're not alone in this situation, as many people deal with similar circumstances. However, if you make wise decisions, you can get through this transition with ease. How have you coped with shrinking income?