5 Must-Do's if You're Taking a Pay Cut

The good news: You’ve found your dream job. The bad: You’ve also found out that living the dream every day means that you’re going to have to live on a whole lot less.

Unfortunately, not all great career moves come with a great salary—if you’re taking a position at a startup or nonprofit or starting your own business, for example. And, while taking a pay cut can be totally worth it to pursue your dreams, it’s going to take some reassessing (and, well, overhauling) of your budget.

But unlike when you’re out of work for a couple of months or temporarily short on cash, the financial changes you make to adjust to a lower salary will need to be sustainable over the long haul, and you’re still going to need to plan for your long-term monetary goals. Here’s what you need to know about living on less.

1. Decide Where to Scrimp

You’ve heard it before, but the best place to start is by identifying your unnecessary expenditures. I promise—you’ll be surprised by how much you can live without!

Pull out your monthly checking account statements and credit card bills, and highlight anything “extra.” Depending on your priorities, that could include magazine subscriptions, gym memberships, a Rhapsody account you never use, or a habit of eating out.

You don’t have to cut these out entirely—just consider cheaper substitutions. Can you DIY your bi-weekly pedicure? Or hand wash your clothes rather than having them dry cleaned? Even simply brewing your own coffee can chop the costs of your caffeine fix significantly.

2. Renegotiate Necessities

You can’t exactly eliminate your rent and food expenses, but you can look into less costly options. If you live by yourself, consider taking on a roommate to share the rent, or moving to a smaller place and putting some of your stuff in storage.

When it comes to utilities, you have to keep the lights on and the water running, but your utility companies may offer hardship scholarships or reduced rates for low-income earners. You can scale back your Internet package (or split the bill with your neighbors and share the password). It might be difficult to switch your phone plan in the middle of your contract, but when your term expires, you can ask a relative if she’d let you hop on her plan as an extra line and share the cost.

And when it comes to groceries, rethink your weekly shop, and try buying in bulk to save yourself some dough.

 3. Don’t Miss Your Payments

Whatever you do, don’t fall behind on your credit card bills. It’s okay to pay just the minimum as you adjust to your lower salary, but don’t be late—you’ll take a hit to your credit score. (35% of your credit score is based on your payment history .) And the less income you have, the higher you want your credit score to be so that you can still qualify for great interest rates on loans for your home, car, and lines of credit.

If you have student loans, look into consolidating, which may lower your monthly payments up to 34%. But be careful—it will also stretch out your payment period which adds interest in the long run. If it’s absolutely necessary, you can consider applying for deferment to both stop payments and interest from accruing for a period of time.

Read the full article at: Kristen Cox, Source: themuse.com

September 04 2017 By Kristen Cox, Source: themuse.com Financial Planning