A reduced salary can easily unsettle your whole financial situation. While you can plan for some situations several in advance – maternity leave, for instance – others, like an extended illness or a reduction in hours might take you unawares. In either case, a drop in income might leave you feeling less in control of your money or worrying about getting by. That’s why it’s so important to spend some time reflecting on the situation and weighing up your options.
Find your baseline
Your baseline is the absolute minimum that you need to get by: the smallest amount of money that you can spend while still feeding yourself (and your family if applicable), maintaining a roof over your head and keeping the lights on. It also includes council tax, bills for essential services and minimum payments on debts and credit cards.
Living at this baseline is rarely an ideal situation. It means stripping back your diet to budget food, reducing the amount that you can save and getting rid of luxuries like TV subscriptions. And it may well be the case that, even with a reduced income, you can afford to go past this baseline and spend a little more. However, understanding the minimum amount of money that you need to get by is an essential first step.
Make up the shortfall
If your base budget comes in at less than your new, reduced income then job done: you may need to make cutbacks, but you know that you can survive. If it comes in at more, then you’ll need to find a way to make up the shortfall. There are a few options here and finding the right one will depend on your circumstances.
- Borrow from somebody you’re close with. Sometimes, a pay cut only lasts a few weeks or months – if you’re signed off work for a limited period of time, for instance. In these cases you may be able to borrow money responsibly, with a clear idea of when you’ll pay it back. Loans from family or friends can be a good idea, so long as you treat it as you would a business arrangement: be clear about what your repayments will be and when you’ll make them.
- Find a side hustle. This may not work if you’re unwell, but for those with reduced hours and extra time on their hands it can be a lifesaver. Consider how you can turn your skills or hobbies into income. There is plenty of information online to help you get started.
One of the biggest pitfalls of ultra-frugal living is the strain that it can put on your mental health. Constantly denying yourself treats and saying no to expensive plans can be draining, so you need to find ways to be kind to yourself. Make a point of hosting friends at your home so that you can still socialise without having to spend extra cash, or find cheap and free ways to relax – whether that means picking up a charity shop paperback or running yourself a warm bath.
The important thing is to be kind to yourself, and make sure that you’re taking time out from thinking about your financial situation to look after your other needs.