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How to Handle a Cut in Your Pay (part 2)

Continued from part 1

After talking with your spouse, sit down with your kids if they are old enough to understand, and let them know that your pay has been reduced and that everyone will have to make some sacrifices but we have each other and we will get through this.

Now you need to take a look at your current budget and how your new total take-home pay is going to affect it.  The first thing to do is to take a look at your fixed expenses:

  • Housing costs – mortgage or rent
  • Loan payments – your car loan, student loans, whatever
  • Insurance – your monthly bill for health, auto, homeowners, life and any other forms of insurance you might have
  • Child support or alimony, etc.
  • Child care
  • Tuition payments – school or college

Can your new take home pay cover those costs?  No? Well you’re going to have to make some tough decisions and fast… or you will end up falling into the trap of using your high interest rate credit cards to make up the difference.  And trust me, that is an unsustainable proposition.

We haven’t even listed the other “sort of” fixed expenses like utilities, food, etc.  I say “sort of” fixed because their monthly amounts may not be consistent, they are expenses that you normally cannot do without.   Think about ways you could reduce your fixed expenses… For example, is it possible to:

  • Refinance your mortgage? Do you have the credit and equity to do a refinance?  You new income might be an issue, but if your rate is significantly higher than the current rates, you might be OK.
  • Adjust your withholding? Adjusting your withholding could put a few more dollars in your pocket each paycheck.
  • Refinance your car? Refi or consolidate your student or other loans in order to reduce your monthly payments?
  • Lower rate for rent with your landlord?
  • Negotiate lower child care costs with your childcare provider?
  • Increase your insurance deductibles temporarily in order to lower your premium cost?  Don’t cancel your policies just because you’re tempted to free up the cash! One accident of serious illness and you could be bankrupt.
  • Ask your ex-spouse to lower your child support or alimony payments?
  • Sell or trade in your car for a cheaper one?  Consider paying cash for an older car.  If your car is paid for, you auto insurance can be reduced considerably.  When financed, you are required to have full coverage.

If, you still come up short after making the possible cuts to your expenses, you might have to consider looking for another job that pays more, or an additional job to help supplement your new lower income.

Remember to reel in any additional spending and stay off of the credit cards.

If you find yourself in an overwhelming situation and have no idea what to do, you might be best served to contact a professional to help you get your finances in order.

The professionals at DebtHelper.com can explain the benefits of a debt management program and provide you with a fresh start.

One of the biggest long-term benefits of the debt management plan is the reduction in interest. Reduced interest allows you to pay off your principal balances faster while saving you possibly thousands of dollars in finance charges.

In order to determine if you are eligible for a debt management program, you can fill out an online budget application form now and then you can contact one of their Certified Personal Finance Counselors© at (800) 920-2262.

DebtHelper.com can currently accept clients from the states listed here. DebtHelper.com is licensed, insured and complies with all state licensing requirements to ensure mandated regulations are followed. They are diligently working on becoming licensed in every state and are opening new states monthly.

Please call (800) 920-2262 if you have any questions. DebtHelper.com’s consultations are free, call them any time.


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