How to Handle a Reduction in Income

Almost 25% of Americans have filed for unemployment. This is a staggering statistic. Employment conversations are often framed around people who have completely lost a full-time job, but even more people have been affected if we widen the scope to include reductions in income. Employees are experiencing reduced hours or furloughs, and business owners are seeing reduced revenues. Even retirees may have reduced income if they work part-time or depend on rental income from tenants who have been unable to pay.

If you or someone you know has been affected by reduced income, looking at your discretionary expenses should be your first move. Look at items you can immediately cut from your budget. Consider getting take out fewer times each month, and reducing spending on wants like home décor and clothes. Next, take a look at your fixed expenses. There are on-going programs that offer relief for student loan payments and, in some cases, mortgage payments during the pandemic. If you had been paying above the minimum on any of your debt or credit card balances, shift to paying only the minimum payments to make sure your income can cover your basic needs. Maybe even look at expenses that you hadn’t previously thought of as flexible. My 82-year old grandmother called me the other day to update me that she’s “cutting the cord” and getting rid of cable. She has switched to YouTube TV, which is drastically cheaper than her previous monthly cable bill.

If you have to take on debt during a period of reduced income, make it count. If your washer stops working and can’t be repaired, it has to be replaced. If you want new clothes to make yourself feel better and would need to pay for them on credit, reframe your thoughts to find a solution for feeling better without spending money. Make a list of free ways to boost your mood and keep it on hand for when you feel down. Ideas include going for a walk, sitting outside in the sunshine, or calling a good friend. Delay large purchases, vacations, or any items that are not absolutely necessary until the world is a bit more settled.

Making changes to your spending is rarely easy, so allow yourself grace as you make changes. Learning to live on a leaner budget will create good habits that can carry over even when your income returns to its previous level.

~ Kathryn Beach

Any opinions are those of Kathryn Beach and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.