13 Ways to Prepare for Lower Income

Photo (cc) by Images_of_Money

A reader suggested an article on preparing for income reduction. Not layoff or job loss, but rather a partial loss of expected funds – salary reduction, child support, and the like.

“Where you still have a job, but really need to evaluate the ‘new budget,’” she says.

I’ve written on this subject before, calling it the “financial fire drill.” You figure out how little you can get away with spending – and you do it with an attitude of calm preparation, not fear of deprivation.

This baker’s dozen of tips will get you started.

1. Figure a baseline budget

This is the absolute minimum needed for basic shelter, food, utilities, and mandated payments like child support or student loans. Best-case scenario: simply trimming budgetary fat makes up for the loss of income.

2. Track current spending

If you haven’t got a budget, build one – with pen and paper or with a free online tool like Mint.com or Adaptu.com. Again: Knowing where money’s going can show you places to cut.

3. Pay down consumer debt

Trimming some budgetary fat, as noted above, can give you extra bucks to throw at debt. Two other potential tactics: Try to negotiate a lower interest rate or see if you can get a balance transfer to a lower-rate or zero-interest credit card.

4. Ease off on prepayments

Have you been paying extra on your mortgage or your student loans? Redirect that money into savings; as my MSN Money colleague Liz Weston points out, even a $500 emergency fund can make a huge difference.

Cut some costs

5. Re-think your car

Can yours be a single-car or even a car-free household? If so, sell or garage one vehicle. Don’t cancel your insurance outright, since it can be hard and/or expensive to get back in. If you truly need wheels, then talk to your agent about raising your deductible. While you’re at it, look for a better insurance rate.

6. Inventory your stuff

Is any of it saleable? Somebody paid $1,200 for my little plastic statue of Bob Feller.

7. Cruise frugality sites

May I suggest the following: Money Talks News (of course!), MSN Money’s Frugal Nation and Smart Spending blogs, The Dollar Stretcher, Wise Bread, Daily Worth, and I Pick Up Pennies. I’d also suggest you incorporate frugal hacks gradually, so that you don’t get overwhelmed and burn out.

8. Seek utility discounts

Some have reduced rates for people in reduced circumstances.

And just in case…

9. Got kids in school?

Talk to the financial aid office; a change in circumstances might mean your scholar is eligible for additional help. (Avoid more loans, though.)

10. Still paying your own student loans?

Learn about forbearance now, before you need it.

11. Know what’s out there

Go to GovBenefits.gov to learn about the Supplemental Nutrition Assistance Program and any other programs you might be eligible for; check local resources like food banks and public health clinics too. As with forbearance, find out these programs before you need them.

12. Seek a side hustle

Even a few extra dollars could be a huge help. See “Microjobs: Quick extra cash” for specifics.

13. Think about boarders

Maybe a friend or relative (or a grad student) needs a room. Or check out home-stay programs like Airbnb.com and Roomorama; one couple I interviewed pays most of the mortgage this way.

Does all this sound drastic? Remember, you don’t have to do all of it – and you might find more suitable ways to cut costs.

Attitude is as important as any frugal hack. This is not about deprivation, but rather about smart use of available funds. If your income is reduced your outgo had better shrink too.

Continuing to live the way you always had would be financial suicide. Those credit card bills will keep coming in whether or not your ship eventually does.

More stories on DonnaFreedman.com:

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

How to Buy a Refrigerator, Step by Step
How to Buy a Refrigerator, Step by Step

Here’s how I got the perfect appliance at the perfect price.

7 Free Tools for Saving More Money at Amazon
7 Free Tools for Saving More Money at Amazon

Use these websites and other tools to save money — or earn extra cash — when shopping at Amazon.

Have You Heard of This Best Place to Retire in 2020?
Have You Heard of This Best Place to Retire in 2020?

The best place to retire in America is one you likely are not familiar with.

70% of Older Adults Botch This Basic Retirement Question
70% of Older Adults Botch This Basic Retirement Question

Can you answer this fundamental retirement income question?

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.