15% of Workers Experienced a Salary Reduction in the Past Year. Here Are 4 Ways to Cope With One

Many people inevitably end up living paycheck to paycheck without money in a savings account to fall back on. If you’re one of them, then a pay cut of any sort could constitute a huge financial blow.

A March survey from Monster revealed that 15% of workers experienced a reduction in salary in the past year. If you wind up in that unfortunate situation, here’s what to do.

1. Trim some non-essential spending

A 10% pay cut might seem catastrophic when you’re used to spending your earnings in full. But if you take a look at your budget, you might discover some ways to cut back on spending so that you’re able to cover your expenses without resorting to debt.

For example, cutting back on takeout meals and canceling a monthly subscription might help you compensate for half of your pay cut. You might manage to make back the other half if you spend more mindfully at the supermarket and limit apparel purchases to items needed for work only.

2. Take more of a DIY approach

You may be used to hiring a lawn service to cut your grass and a cleaning service to come to your home once a week. Following a pay cut, you may have to be willing to do these things yourself for a period of time to avoid spending beyond your means.

That said, once you get into the habit of doing more chores yourself, you may find that you can uphold those habits even once your pay increases. So from there, you may have an opportunity to build savings.

3. Make up the difference with a side hustle

Losing a portion of your pay doesn’t mean your employer will expect you to work less. But if you can find the time for a side hustle, it could make it possible to boost your income and get it back to where it was prior to when your employer reduced it.

Now do keep in mind that side hustlers tend to fall into a trap. Those who are paid on a freelance basis sometimes use all of their earnings and forget to set aside a portion for tax purposes. So if you’re going to work a second gig to drum up, say, $300 a month, and you don’t have taxes withheld from your wages, you may want to set anywhere from $50 to $100 of that aside in case you end up owing it to the IRS. (Your best bet, of course, is to work with a tax professional who can give you a more accurate estimate of how much to set aside.)

4. Try to negotiate a better setup with your employer

Your employer may have had a reason for cutting your pay. And if you work 40 hours a week, you might still have to do so at a lower rate. But one thing you can do following a salary reduction is negotiate other perks that soften the financial blow.

Let’s say you normally commute to an office five days a week but have a job that can also be done remotely. What you might do is ask your manager if you can start working remotely twice a week. Doing so might save you some money on gas and tolls. And if you have kids, it might also mean needing fewer paid child care hours those days — and spending less in the process.

It’s never an easy thing to take a pay cut. But if that happens to you, use these tips to cope until your paycheck is restored to its former state or you’re able to go out and get a new job that pays you the full wage you deserve.

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