Nobody wants to deal with a pay cut, but here are some tips for how to do so, just case
The very thought of receiving a pay cut sends shivers down the average worker’s spine, which is perfectly understandable. Most of us have worked very hard to get where we are today — so getting your salary slashed hurts more than just your personal bottom line. It hurts your pride and self-esteem, too.
But if it happens, you can’t just give up. You’ve got to step up and make whatever adjustments you must in order to survive. In Part I, I covered a few basic ways to do that; this time, let’s look at a couple that are less obvious.
Though it hopefully it won’t happen, you may be hit with the indignity of a benefits cut along with your pay cut. If that happens, you have fewer options on the savings front; but if it doesn’t, you may be able to trim a few bucks from your budget by adjusting your benefits.
Though I ordinarily wouldn’t suggest it, consider cutting back on your 401(k) contributions. Retirement is important, but survival in the now is more important. Your retirement fund will still be there when the belt-tightening eases, and you can start contributing more money again then.
Next, take a look at your health insurance. You may be able to shift to another option with a higher deductible and a correspondingly lower cost, assuming your company makes you pay part of the premiums (as they increasingly do these days). You can always shift back later.
Your company may offer a “cafeteria” fund to which you can contribute pre-tax dollars in small amounts. If so, take advantage of this flexible spending account and contribute as much money to it as you can, so you can use it to help cover deductibles later on.
Speaking of Insurance…
You can also try the above strategy with your other insurance premiums, especially your car and homeowner’s policies. Often, you can either pick and choose what to cover — which means you can toss out stuff that’s unlikely to occur — or, again, you can opt for a higher deductible to lower your premiums.
If your car’s of a certain age, you can even decide to decrease your coverage to basic liability levels. Be forewarned, however, that if you get in an accident and the insurance companies decide it’s your fault, none of the damage to your auto will be covered.
The items I’ve outlined in both parts of this article represent only a few of the ways that you can survive if your company slashes your salary. Put these into play, think hard about what else you can try, and I’m sure you’ll survive that pay cut with flying colors!