How To Deal With a Sudden Drop In Income
Living paycheque to paycheque is all fun and games until one of those paycheques is taken away! I know how it feels to deal with a big drop in income, and know how incredibly stressful it can be. It can be quite alarming especially if you didn't have a firm hold over your finances.
My drop in income came after I had my daughter - for a very organised person, I didn't really think about work after having her, I think I assumed I would go back to work and pay for nursery, but as a lot of parents know, it can be hard to suddenly leave your new gorgeous little side kick. I decided to leave my full time job and stay at home with my daughter.
Whilst I was on maternity leave, I had to deal with the drop in income from my full time wage to statutory maternity pay, and then when that was finished I had my evening job wage that I started which was not a lot of money!
The first thing that I would recommend you have a drop in income (whether that be from job loss, maternity pay, illness etc) would be to look at your budget. If you have read my posts before, you will know that I am a littttttle bit obsessed with budgeting - but for good reason! You won't get anywhere with your money if you have no clue how much is going in and out of your account.
Budgeting For The Win
There are a few different ways of budgeting, but my favourite (the one that I personally use) is referred to as the Zero Sum Budget. I discuss it in great detail in my post dedicated to it, but it's basically where you allocate all of your money to different areas. What we tend to do if we don't budget, is pay the bills, and then spend whatever is left over on things that we don't really need.
With the Zero Sum Budget you will see how much is actually left over after paying your bills, and you can then put the extra money into different pots. This doesn't mean that you can't spend of your money after bills, but just that you can use the money sensibly, rather than thinking you have all of this extra cash to spend at Topshop, and then realise that you don't have enough to buy your Dad a birthday present (bit of a random example, but you get what I mean!).
After a drop in income happens, you need to know for sure how much money you have coming in and how much you have going out, to see if you have enough to cover your bills.
Work out how much you have coming in (e.g. salary, benefits etc), and how much you have going out. It is helpful to look at previous bank statements or your direct debits listed on your internet banking.
Which Expenses Can You Reduce?
Now you've put a budget together, it can be much easier to look at your bills and general spending, to see where you can cut back. Depending on how much money reduction you have, you may find yourself making some difficult choices. Don't worry though - this may only be temporary once you get yourself back on track.
Put aside an afternoon to go through it all - it will be worth the effort once you have managed to find areas to save money, because even if it is a little bit of money saved, it will help you right now - and add up to more saved in the future.
Look on comparison sites for your main bills, and with things like your food shopping, start meal planning and you will save a ton of money. There are various other hacks you can use as well - feel free to join my Frugal Food Shopping Facebook group to help you out.
I would definitely suggest to see if you can cut each one of your expenses down, as a mistake that some people make is to try to only reduce their smallest expenses (e.g. coffee at Starbucks), but continue paying thousands too much on bigger expenses like mortgages.
Check You're Getting All The Help That You Can
Don't put this one off - if you find yourself in a bad situation, you need to try and get the help necessary, and again - it only needs to be temporary to get you back on your feet. If you have children, you need to make sure that you can afford the bills.
If you are in the U.K, go on the gov.uk website and use the benefits calculator – where you will input all of your information and it will work out what you should be entitled to.
If you are worried about not having enough food to feed your family, please use a food bank. There are a lot of people who are too proud to go to one, but there are millions of people that use them each year (according to The Trussell Trust’s they gave in 2016/17 1,182,954 three day emergency food supplies to people in crisis.
Check out their site to find the nearest food bank to you - The Trussell Trust.
Also let family and people close to you know as well - this is another thing that we are uncomfortable doing (I know I was!) but they will want to help you - they love you, and want to make sure that you are ok.
Look For Ways To Earn Extra Income
I'm a big advocate of earning extra income, because it made a massive difference to my life personally (helped me pay off debt, take my daughter on holiday, just have a better quality of life) and I encourage everyone to do it, regardless of how much money you earn in your main job. As this post is kind of all about, you can lose an income stream at any point, so if you have more than one, you won't be so stuck if you lose one.
Don't despair - there are things that you can do even if you are short on time and money, and I can share some of these things with you to get your bank balance looking healthier.
First things first, you need to try and find some things to sell. I'm personally pretty ruthless with what I sell - but I always seem to find more and more stuff to sell! Depending on what it is, you can decide on where you sell it. Some places to sell your items could be car boot sales, eBay, Gumtree, Facebook marketplace, there are various selling apps as well such as Depop.
Some people find it hard to part with certain things in their home, but I would just encourage you to look around and imagine everything with a price tag. I can tell you from my own experience that having the extra space and the extra money from selling things is amazing!
If you or your partner are still working, ask if you can get any overtime in as an easy way of earning some extra.
There are various other ways in which you can earn some extra money such as:
- Look for evening/weekend work. There are loads of places hiring all the time - I work in my part time job as admin in a cleaning section of a large company - and we are looking to hire new cleaners every week. There is extra work out there! Print out some CV's and go round the local shops asking if they need anyone. Check out the job sites and places such as Gumtree. Every little bit of extra cash will help you!
- Dog boarding. I do this, and the site I use also has cat sitting, dog walking, dog sitting and small animal care on there too. You don't need any money to do this as the pet owners will provide all of the stuff for you, so this can be a great way of getting some extra cash, especially if they live really close to you. I do most of my work on the weekends and in the evenings, so it can be done around other jobs/commitments.
- Matched betting. This is one of my most recommended ways of earning extra money, because you don't need a lot of money to start off with (about £60) but it is not done like real betting. Read the post to find out more, but I have done it lots in the past and I know many people who make thousands and thousands from it.
- Mystery shopping. This isn't a huge earner but it's a good way of earning a little bit extra and you can also get some free food out of it as well.
- Entering surveys. This can be a bit of a slow burner, but every little bit of extra money helps!
I put together a list of 100 money making ideas that you could do, so hopefully there will be at least one thing here that you can try!
What are your best tips for dealing with a drop in income?