We’ve talked here before about the importance of having an emergency fund. While this type of fund can be used for any emergency that may arise, the true use of this money is if you lose your job. It can help get you through until you can find a new one. But what if your new job doesn’t pay as much as your old one did?

 

If you’re facing a permanent loss of income due to a lower paying job, what should you be doing? You obviously can’t keep living on your $60,000 salary when you’re now making $45,000. And while your emergency fund can be used to help you while you’re making changes, you shouldn’t wait too long before adjusting your lifestyle to fit your new income.

 

Here are some things to consider if you find yourself in this position.

 

  • Be realistic – It’s won’t be easy accepting the idea that you suddenly will be making less. You’ll likely feel underpaid and maybe even undervalued. But honestly, if the options are a lower income or no income, sometimes you just have to make the decision to work for less, especially when you have a family to support. While the lower paying job may not be forever, it’s your reality right now, and you need to make decisions on how you’re going to live.
  • Cut the easy stuff – Everyone has things they wouldn’t be heartbroken over cutting out of their budget: gym memberships, cable, dining out, hobby allowance, etc. It’s the stuff you enjoy having, but don’t need (your “Wants”). While you don’t necessarily have to cut them out completely, you will definitely have to readjust how much you can afford to spend.
  • Cut the hard stuff – Can you still afford your car payment? Your mortgage payment? Can you afford to fund your kid’s activities? If your income has dropped significantly, you will likely need to make some difficult decisions, and the sooner the better. You don’t want to find yourself in a position where you’ve exhausted your savings and run up your credit card to keep a house you no longer can afford, and then end up losing that house a year down the road because you can’t make the mortgage payments with your lower income. It will not be an easy choice, but it will be easier than dealing with the financial consequences if you don’t let go.

 

Obviously, how much you will have to readjust will depend on how much income you lose. It will also depend on your current lifestyle. If you already live well below your means, you shouldn’t have a problem living on a lesser income.

 

Please check out our All Your Worth series. It may be helpful when you are working through your budget.

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