What to Do When Your Income Decreases

What to Do When Your Income Decreases

Have you ever experienced a sudden decrease in income? Perhaps your company went out of business without warning. Or, maybe you had an accident and had to take a temporary leave of absence with no short term disability pay. Of course, you may have planned to leave your job for a better opportunity to make even more in the long run.

The facts are there can be a lot of reasons people experience a change in their income. But whether or not it is planned, a decrease in your income can wreak havoc on your budget and your finances. But what should you do when your income decreases? Here are some steps to take to make sure you income decrease doesn’t harm your finances too much.

1. Take Stock

Even if the decrease in your income is planned, you will need to evaluate your finances to get a starting point.

How do you know what steps to take or where you are headed if you don’t know where you are starting from? Determine what your outstanding debt is. Make a list or spreadsheet of all of your necessary bills including rent or mortgage, auto loan payments, food, utilities and any other bills. Next, put your monthly bills into categories such as “must have to live”, ”need but could live without”, and “wants”.

As hard as it may be, the first bills you must eliminate are the wants. Carefully scrutinize the “need but could live without” category to make sure you cut down these expenses as much as possible. If you think there is a possibility your drop in income could continue for a while you need to be realistic.

For example, if you had cable on your “must have to live” list, move it to the wants list and shut it off. Every bit of money you can save right now is crucial.

2. Don’t Spend

Clearly you may need to change your spending habits. You can’t afford restaurant meals and don’t even think about a trip to the gym or your favorite salon. Cancel any memberships you have, especially if they are unused. Turn your thermostat down (or up depending on the season), and limit energy consumption as much as possible.

This is the time to tighten your belt and be a bill slashing, money saving Nazi. Buy groceries that go with what you already have on hand and make meals from that to save money. Use coupons and double your savings by buying primarily what food is on sale at the grocery store.

3. Increase Your Income

When your income has dropped you need to look for ways to bolster it. Clean out closets and other areas of your home. Sell whatever you have excess of or don’t need so the income can be used for necessities like water, food, and rent. If you lost your job, update your resume’ and get back out there. Look for a temporary job or side hustle to help make ends meet.

4. Negotiate Bills

Did you know some of your regular monthly bills can be negotiated? Call your creditors to see if you can temporarily pay a lower amount.

It’s a far better option to humble yourself and make the phone call rather than ignore your bills. You don’t want to run the risk of having unpaid bills go to a collection agency because they are much more aggressive in their collection tactics than your creditors will be.

5. File for Unemployment

Filing for unemployment may not be an option if you left your job voluntarily. However, the qualifications for receiving unemployment differ from one state to another, so it certainly wouldn’t hurt to explore your options in this area.

6. Health Insurance

Don’t forget about your health insurance. If you can, keep your health insurance from your previous job or change to a different plan. Try not to drop your health insurance completely if it can be avoided.

If you don’t know what to do when your income decreases, the steps above can help you get started. No matter what the reason for your income reduction, it is possible to survive and even thrive with less to live on.

What else would you do if your income decreased?

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Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of Snipon.com.


  1. Our income temporarily decreased this month because I changed jobs. We trimmed the fat on our budget and made it work, but it was tight. We contributed only the minimums to our student loan debt since we didn’t have the extra income to overpay on them. If this were more of a longterm decrease in income, we’d naturally find new ways to supplement our income, too.

    1. I’m glad you were able to make it work and it was only a short-term decrease. I agree, there are different ways to handle it if you know it’s only going to be for a one-month period. For example, my income will sometimes be a little lower if I take time off for vacation since I don’t have paid leave (self-employed). But, I can usually handle it because I planned for it and I know it’s only temporary. 🙂

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