There are few financial obstacles harder to manage than a sudden and unexpected loss or reduction of income. Things won’t be easy, but the key to surviving such a significant setback is to create a plan and take proactive steps to protect yourself and adjust your financial behavior appropriately.
Stop and assess
Losing a job or having your salary slashed is scary and stressful. You may start to feel panicked, but it’s important that you keep a clear head and make a thorough assessment of the situation.
- How much income do you still have?
- How much do you have in savings?
- What are all of your fixed and variable expenses?
- Is this a temporary or permanent situation?
Take the time to account for all of your assets and liabilities. You need to know what you have and what you owe in order to create a plan.
You won’t be able to do all the things you were doing before your income was reduced. There will likely to a lot of change by subtraction, so it’s crucial to understand your personal and household priorities from the outset. Money will be limited, so what gets paid first? There isn’t necessarily a right or wrong answer, but understanding your priorities will help take some of the pressure off those difficult decisions you’ll soon be making.
Related: The path to financial stability
If you’re eligible for unemployment benefits, begin that process immediately. Visit your local food bank to help defray grocery costs. Contact your creditors and utility providers and ask about available hardship programs. See what help is available and don’t be afraid to take it. With a reduced income you’re going to have to find ways to reduce your spending, which isn’t easy. So use every available resource.
Replace lost income
Finding a new job takes time, which is why your initial focus will be on reducing your spending to match your reduced income. But as you cut spending and look for supplemental aid, you should also be working on finding additional income, either in the form of a new job, a second job, or through alternative means, such as selling unnecessary possessions. In a worst case scenario you may also be able to borrow against certain retirement funds, but this isn’t advisable if it can be avoided.
Evolve with the situation
Taking all of the available information – your present income, your savings, your bills, your debts, any available aid or assistance, and your priorities – you should create a spending plan and stick to it. But, as the situation evolves, so should you. If you find additional income, update your plan accordingly. If a creditor offers you a hardship plan, review your plan once more and update where necessary.
With any significant financial disruption it can be very difficult to get back to “normal.” But you can find level ground much sooner if you simply act fast and face the situation head on.