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Everyone experiences changes in life—sometimes you plan for them and sometimes you have little control. Unexpected changes from a job loss or illness can affect you personally and financially.
A reduction in income is a tremendous, but not insurmountable, challenge.
Adjusting to a reduction in income can be hard, but taking steps to rework your financial plan, identifying new resources, and finding the right help can move you forward with peace of mind.
Start a new plan.
The first steps in stabilizing your finances after a reduction in income are to develop a new plan and new habits. You might be tempted to revert to your old routine at times, but with the right plan and right mindset, you can stay on track.
Put together a workable budget.
Being clear about what you want to do is important. Use the Alabama Extension Money Management Calendar (FCS-2305) to build a solid foundation. Contact your county Extension office for more information.
Don’t completely cut out anything.
It’s usually more effective in the long run to find a way to reduce everything a little rather than give up anything. This way, you are enjoying the same things with a bit more control.
Don’t do too much at once.
It is not likely that your situation will change overnight. Those who try to do too much at once often fail and become frustrated. Set yourself up for success by taking it one step at a time.
Don’t believe you can’t change your expenses.
Any expense can be changed. It comes down to asking yourself what you are willing to do to reduce expenses to improve your financial situation.
Figure out your monthly expenses versus income but focus on cash flow.
Maintaining cash flow (having the money available at the time you need it to pay your bills) is often overlooked when planning a budget. Use a calendar to map out everything according to payment dates, so you can look ahead, stay organized, and on point.
Follow these steps to create a new plan that works.
- Find a manual or electronic calendar that works for you.
- Input your pay dates for bills (utilities, rent, etc.) and expenses (groceries, gas, etc.).
- Build in payments for periodic expenses (taxes, insurance, emergencies, etc.).
- Include important dates for periodic expenses (birthdays, anniversaries, etc.).
- Schedule specific days to pay bills.
- Save all important documents in an accordion-style budget box.
Put a freeze on spending for things you don’t need, establish your goals, and make a commitment to stick with them. The most important thing is to keep a clear sense of purpose and feeling that you can get it done.