Down the Salary Ladder: How To
Make the Most of a Reduced Paycheck
Americans are earning considerably less then they used to - and
struggling to keep up with expenses. A wide range of circumstances
can boomerang personal income back to where it started. Bubbles
burst, the economy falters, companies downsize, and personal disasters
happen. Perpetual salary growth - or even maintenance - is simply
not guaranteed. However, by adopting the right tools and attitude,
you can make the most of a reduced paycheck - and not just survive,
whether your situation is temporary or permanent
If you fully expect to be back in the CEO's chair soon, you may
only have to adjust to lessened cash flow for a limited time.
But before you tap into your reserves (and retirement savings,
home equity, cash value life insurance, et cetera) it would be
wise to behave as if the salary depreciation is lasting. Though
both your gut and your resume may assure that a six figure income
is just around the corner, you can't know for certain until you
are negotiating the fine points of your defined benefit plan.
Cut down on spending now. Securing that job may be harder and
take longer then you think.
you never expect to make as much money as you once did, you may
be experiencing anxiety and depression - normal emotions not easily
shrugged off. There are practical matters to contend with as well,
(such as how you will pay your bills) which can send you into
panic mode. Adopting a systematic approach of simply doing what
you can will take you far.
that your salary is not you
This is a deceptively obvious statement. Of course your salary
is not you. But many people's self esteem directly corresponds
with how much money they make - the higher the income, the more
important they feel. If your mood declines when your income drops,
make every effort to dispel the attitude that wealth equals worth.
It does not, nor does having an abundance of money guarantee happiness.
Think back to when you were making more money then you do now.
Were you genuinely happier, or did you just have the ability to
Hardship can hone skills and challenge entrenched ideas. Perhaps
you worked in the high tech field because the money was good,
but that is not where your passion (or even perhaps, talent) truly
is. Consider this your opportunity to discover what you really
want out of life. After all, if you are going to dedicate forty
or more hours a week to your job, it should be something you love.
Or at least like.
you are currently unemployed or are working fewer hours then you
had been, use this "extra" time wisely. Your options
are as varied and abundant as your desires. Consider taking a
class - one that will boost future earning potential (to where
it was or even beyond) or for pure pleasure. Write that book,
paint the kitchen, start an exercise routine. Or just relax. Chances
are, at the end of many a grueling day at your former highly paid
yet high-stress job, you said to yourself through gritted teeth
"all I want to do is lay down on the couch, TV on, shoes
off and do nothing." Well now you can. Enjoy this time -
it may not last forever.
your expenses and value system
When cash is copious, it is easy to spend arbitrarily. However,
when the salary that sustained such a lifestyle is gone or drastically
reduced, its time to take a good strong look at what you need
to spend your money on, not what you can. Prioritize expenses
now, and identify which bills take precedence. Mortgage versus
car payment? Credit cards versus utilities? Analyze the ramifications
of missing or not paying each. If you need help deciding, contact
an expert. CCCS-SF/Balance provides free financial counseling
and appointments can be conducted over the telephone at a time
and date that works for you.
a budget. It will help you to discern between those expenses you
can and cannot live without. If you find there is simply not enough
money to support your necessities, much less your desires, at
the very least you now know how much you will require from your
next job. If expensive (and expensed) dinners are now a thing
of the past, relish in the delights of a cheap pizza, or making
cold cuts stretch with lots of lettuce. Enjoy and appreciate the
things you may have begun to take for granted.
credit is not supplementary income
When money is tight, credit cards can take on an unusually seductive
glow. However, a $40,000 line of credit is not a bonus in disguise,
no matter how you much you wish it was. If you use credit to maintain
the lifestyle you've grown accustomed to, it won't be long before
you "hit the wall." Without an income to support repaying
the balance in full every month, you'll be paying in installments.
Interest rates are commonly in the high teens, and if you fall
behind, they will likely skyrocket. Late and over limit fees will
add to an increasingly daunting balance. And soon you'll be wishing
you could return all the merchandise you bought and the meals
you ate just so you don't have to open another statement and look
at those big, scary numbers. Credit cards are not designed to
be emergency savings accounts.
To thwart procrastination, write down what you want to achieve
during this time. Be specific: include names of people you need
to speak to and proposed accomplishment dates for each task. Update
and refer to it regularly. Apathy's enemy is a detailed and well
thought out plan.
Get professional assistance, talk to friends, and find others
who are in like circumstances. It is too easy to think you are
alone in this - support is key. Vent to those who can empathize;
ask for help from those who can assist. Shock, shame, and anger
are normal and feeling these emotions is expected. But by adopting
a positive attitude and taking pragmatic steps, you can adapt
to a reduced income - and achieve a financially stable future.