Somewhere down the line, we find ourselves with no source of income. You might get a pay cut, or you are entirely out of a job. It is a sad situation to get yourself in, but the first step is not to pity and beat yourself up about it. The next step is learning how to budget after a pay cut or job loss.
How to Budget After a Pay Cut or Job Loss
Create a New Budget
Your old budget will not work under the new circumstances. If you had no budget, then get to drawing one that will work with the current situation. You can base this on your new paycheck or the savings you set aside to weather such a rainy day.
Read more on how to start budgeting.
Cater to the 4 Essential Needs
You will basically need the below 4 items to survive while you figure out what to do next. These are:
If you have any debts, like personal loans, credit card loans, and student loans, you can talk to the creditors to work out a repayment plan that suits your new situation. Alternatively, you can keep paying the minimum repayment amounts to avoid accumulating penalties, which can increase your total debt.
Here in Kenya, some banks have Loan Protection Insurance for personal loans to cover for repayments if one becomes disabled, dies accidentally, or is retrenched. You will, of course, have to provide proof like your redundancy letter.
Cut back on unnecessary spending
The easiest way to save money is by cutting back on discretionary spending. It is also the best way to survive with the little you have after a pay cut or job loss.
Reduce the amount of money you spend on anything that is not essential by at least 10% – from your entertainment budget to clothing, cable, and telephone bills.
Save money from your necessities
While at it, try to cut down on the money you spend on your necessities. Your food budget, for example, might go lower if you use a meal plan.
Another option is to move to a more affordable house. Also, get an affordable car and health insurance.
Explore other money-making avenues
With the current pandemic, the situation is worse all over the world. Economies are crashing, companies are slowing down, and others are shutting down. However, there might be opportunities for odd jobs, part-time opportunities, and online gigs.
You can also explore your hobbies, professional skills as well as learning new skills online. Use all these as revenue streams while you look for a better job. Who knows, these might even grow into a business.
The bottom line is, job loss and pay cuts happen, through no fault of our own. I have been here, and it is a scary path to walk, honestly. However, pitying yourself will not get you another job, and neither will it give you the courage to face another day. You just need to get up, embrace the situation, and work towards changing it. Draw a new budget, reduce your expenses, and explore new easy to make money.