A pay cut is not an unusual thing you have come up during the pandemic phase. A large number of people have lost their jobs because their companies failed to ride out. The rest are managing to withstand after making a lot of deductions from the salaries of their employees.
Despite savings, a job loss or pay cut can take the worst toll on your finances. The economy is doom, and it does not seem to look up very soon. You may plan to look for new jobs, but unfortunately, companies are not willing to pay much even to experienced candidates. It is why it seems better to continue to work in the same workplace.
While the living cost is entrenched to let up, it becomes harder to keep up with regular expenses when you are on a pay cut and the worst scenario is when you are in the red. Here are some of the ways that can help you withstand the bad impact on your finances after a pay cut.
Cutting back on monthly spending is key
You have spent a couple of months at your home during the lockdown. You would have analysed the living cost is continually rising. Since you are now on a pay cut, it will be more challenging to meet all of your regular expenses. You would likely have managed during the lockdown because of savings. Now, your emergency cushion has been dipped into, and cash is not flowing in as much as was before the virus outbreak. Therefore, you have left only one way – cut back on your monthly spending.
Make a list of all monthly expenses, including subscriptions, travel cost, and the like. Analyse how much you are spending on each category and where you can whittle down. Leave out some discretionary expenses like dining out, subscriptions for magazines, etc. Food is an essential expense, yet you can save a lot of money by buying it in bulk from a wholesale market.
Avoid taking out new loans
Being in a tight spot, you can be tempted to borrow money to fund any of your expenses, but now may not be an ideal time to do so. You should analyse if it is your need or want, and can you put it off even if it is your need?
For instance, if your laptop is not up and running, is it essential to get it repaired at once? If you can manage with your cellphone, there should be no need to get it done immediately. This time your focus should be on making strategies for paying off your current debts.
After a pay cut, it becomes harder to keep up with repayments. Talk to your lender, tell them a real picture of your financial condition and ask them for an affordable alternative. They will undoubtedly help you. However, life does not go the way you want. If you come up with an emergency and you do not have enough cash in hand, you should consider looking for easy loans in Ireland like bad credit loans and quick loans.
Avoid making a big purchase
You may be among those people who had been planning to buy a car or a house before the pandemic outbreak. Do not be tempted to fund it just because you have arranged a significant amount of deposit size.
Monthly repayments will put an additional burden on your income. It can make it complicated for you to meet your regular expenses and you will likely lose your car or house if you fail to keep up with repayments. A rule of thumb says that you should avoid making such big purchases unless you have a steady source of income.
It can be hard to manage your regular expenses with a pay cut, but ways mentioned above can help mitigate its bad impact. Of course, you will have to whittle down your costs, but do not let it be an excuse for not building an emergency cushion. No matter how much you are earning, you should not shirk from putting aside money for a rainy day. So, when are you going to implement these strategies to manage your finances in a better way?