We all hope the day doesn’t come, but having an income decrease is a sad reality for many.
Regardless of the reason, this can lead to a budget deficit which means you have more money going out than coming in. There are a few key things you can do to manage your expenses, even after your income has decreased.
Here’s how to budget with a decreased income.
See Which Expenses Can be Cut
The first step is to take a look at your current budget and monthly transactions. After viewing your account you can start to see what can be cut.
Unfortunately since you are making less money, you’ll have to pick and choose what you can still afford to pay. Separate your expenses so that needs are prioritized over wants.
Focus on covering core expenses like housing, food, transportation, and household bills.
Sell Things You No Longer Use
To help offset the lack of income that will be coming in, consider selling things around the house you don’t use anymore. Most people don’t realize that they have thousands of dollars worth of items just laying around their home.
They key is to go through your home and get items listed quickly. Be honest about what you’re really using and sell items that you haven’t used in months.
You can sell clothes, old electronics, furniture, toys, tools, household items and more for extra cash. Use sites like Craigslist, Facebook Marketplace, and Offer Up to make a quick sale.
Look Into Relief Options
If you’ve been laid off, you can always contact your state’s unemployment office or apply online. Do this as soon as possible to get the process started.
Another thing to look into are government relief programs and other bill relief options. For example, you can often defer your Federal student loans if you’ve been facing an economic hardship.
There are programs in place like LIHEAP that can help with energy assistance.
Not paying your bills and accruing late fees without letting your bill companies know your situation is not the best way to handle the situation.
Some companies may have relief options in place even if they don’t mention it openly. If you don’t ask and investigate, you’ll never know about these options.
Lower Your Food Costs
One thing my grandmother always said is that “people will help feed you but they won’t always help you pay your bills”. This is true in the sense that it’s much easier to find resources that help families with meals vs. options that will pay a family’s bills and living expenses.
While bill assistance programs are a great option to start with, you still have to put something toward your bills each month to keep up. If you defer payments on an expense, this will provide temporary relief but you’ll need to catch up eventually.
One thing you to focus on when dealing with an income increase is lowering your food costs. You can still eat well but on a lower budget. This means no restaurants and dining out.
Also, remember there are local food banks and food pantries that are giving out fresh food all the time. If. you really need it, you can feed your family healthy and full meals without spending much money at all.
Take ‘Free’ to the Next Level
Most people love to hear the word ‘free’ but when your income decreases this word holds so much more value. Things that you once paid for in the past may not be an option currently and that’s okay.
Purpose to reduce your expenses and find financial relief by using all the free options that are available to you. This may mean:
- Applying to receive free products to test so you can use the samples in your household
- Accepting free clothing that friends or family may be giving away
- Making your own cleaning products and laundry detergent at home so you can lower some monthly household expenses
- Applying for free or reduced WiFi through companies like Comcast
- Downloading or borrowing free books and movies from your library
The list goes on and on.
Be Open To New Income Streams
You can also help your family recover from this decrease in income by finding alternative ways to earn money. Making money with a new income stream paired with some of the other ideas can really help you stay on track with your budget and bills.
Maybe your company needs help in a different department or has extra hours for people who ask. My husband got laid off a few years ago but luckily the company hired him back a week later for a different position.
You can also develop a completely new income stream. Some of my favorite flexible income streams include:
How to Budget with a Decreased Income
Experiencing an income decrease can put you into a tough spot and you will definitely have to change your budget. Hopefully, the change is temporary but in the meantime, you can take these steps you can take to help you continue to pay your bills and meet basic needs.
Having a plan in place will be a key factor in helping you get through this life change and get back on your feet when your income is restored.