Getting laid off from work or becoming unable to work due to illness is a shock to the system and as well as the emotional trauma you can feel when your circumstances change for the worse the financial consequences can be potentially damaging.
If you are a working couple and one of you loses their job or can’t work it can soften the blow to a certain extent but any cut in household income can be difficult to contend with unless you have a strategy to help you stay afloat.
Here is a look at what you might need to do to cope with a cut in household income.
Planning and discipline
Some of the scenarios for dropping down to become a single household income have already been described and you could even make the decision voluntarily if you are starting a family and one of you will be switching to parenting.
Whatever the circumstances that lead you to experience a cut in the amount of money coming into the home you will need to instantly acknowledge the need for some changes to your finances.
Surviving on a single salary having been used to a higher level of household income is certainly plausible but a good starting point would be to accept that the challenge will take a degree of planning and discipline if you are going to avoid falling into an increasing debt situation.
Doing your sums
One of your first priorities, when you find yourself in this situation, is to work out a budget and confirm whether you still currently have enough money coming in to cover your household bills and other unavoidable expenses like food.
If the cut in household income is unexpected and you think you need some extra cash to give you some breathing space you can find a loan here and look at your borrowing options, but it is essential to add up all your fixed expenses as quickly as possible and work out exactly where you stand.
A comprehensive budget that lists all of your monthly expenses will be essential so that you can create a spending plan and identify any areas where savings need to be made in order for your sums to add up each month.
Targeting your discretionary spending
You can’t cut the amount you are spending each month on your mortgage or rental payments and all your other fixed costs like utilities are difficult to adjust substantially for any meaningful savings.
Where you can find some significant cost savings is by looking at your discretionary spending habits each month.
Discretionary expenses are things like gym membership, cable, and eating out at restaurants, all things that are fun to do and have, but not absolutely necessary and spending you can cut out if your financial situation requires it.
When you are trying to cut your monthly expenses you will find that discretionary spending is where the biggest cost savings can be made so take a good look at what you can afford to keep as part of your lifestyle and what will have to be cut back to make sure your numbers add up.
No need to feel hard done by
Even if you have to curtail a trip to the movies or your favorite restaurant in order to make ends meet there are plenty of viable alternatives that can keep you suitably entertained without spending the same amount of money.
Having a movie night at home and catching up on an old film on DVD that you haven’t watched for a while can be just as much fun and if you rustle up some homemade popcorn at much lower prices than you would pay at a movie theater, the savings will soon start to add up.
Having friends round for a dinner party is also a no-brainer alternative to eating out at a local restaurant and there will be no hefty check to pick up at the end of the evening as creating your own menu will be much cheaper.
These are just a few examples of what you can do to combat the impact of finding that your household income is slashed or cut in half and you should find that you can soon adjust in order to help keep your head above water.
Stay focused on finding savings wherever you can by reviewing your insurance costs, cell phone contracts, and any other expenses that have the potential to be lowered and save you money.
Coping with a cut in household income can be a challenge but with planning and discipline, there is every chance you can adjust your expenses to keep your finances afloat.
Ethan Newton shares some of his personal finance advice around the web, enjoying article writing as a way to get his words out into the world.