How to deal with a pay cut

We recently had some bad news at work and lost a large amount of revenue. As a result I have to take a 10% pay cut. It could have been a lot worse! I am now re-evaluating my expenses and budget to make sure I can still cover everything. Debt has me on the edge financially!

I calculated my new take home paycheck and adjusted my budget in excel accordingly. Luckily I have paid down my debts with my tax refund and another windfall incomes which has lowered my minimum payments. I should still be OK financially without too many drastic changes.

Here is what you should do if you take a pay cut at work:

  • Examine variable expenses: Cut back on the "extras" such as starbucks, magazines, eating out, etc.
  • Recalculate your budget: Run your current expenses against your new lower income and make adjustments. Look for ways to cut back and lessen the pain
  • Look for side work: If you can find some work to do on the side to help make up for the lost income. You can also sell stuff on ebay, craigslist, etc.
  • Adjust your tax withholding. If your pay cut is large enough you may be able to adjust so that less taxes are taken out. Check and see if you now fall into a lower tax bracket.
  • Get a second job: If the cut is really bad you can look for a part time second job to help make up for it. This is a last resort for those who really get cut back financially. It may also be good to look for another job too
Some of these options can be done immediately while others take time. If you have an adequate emergency fund you should be able to make it for a long time without feeling the sting too much. Always cut any expenses you can before tapping into savings. Once you get adjusted be sure to refill that emergency fund!