In life, the only constant is change - and that reality applies just as much to our financial situation as it does to every other aspect of our lives.
There are few of us lucky enough to go through our entire working lives earning a steady, regular income. Whether we're transitioning to a part-time role, or dealing with the after-effects of a job loss, a relationship breakdown, an injury or illness, maternity leave or an extra mouth to feed, adjusting to a recalibration of spending habits can be no mean feat.
If you're encountering a change in income, there are a number of key measures you can take to help stay afloat – so here are five ideas to consider to assist you during difficult financial circumstances:
It may seem obvious to say that when your income drops, you'll need to tighten your belt accordingly. But that definitely doesn't mean cutting back on absolutely everything. Just the same as with drastic dieting, adopting a 'pauper mentality' and denying yourself every single thing that's non-essential can set you up for failure. Instead, focus on your two biggest discretionary expenses, whether that's eating out or buying new clothes, and focus on bringing down your spending only in these areas. This is often much more achievable and less overwhelming, and can make a big difference to your monthly outgoings without making you miserable in the process.
There are all kinds of online services that can help you identify your spending patterns, track bills and payments and offer suggestions on how to be more economical, from ASIC's MoneySmart Budget Planner to Mint. And don't forget there's also our own Budget Planner Calculator, designed to give you a clearer picture of your spending habits, so you're more informed and better positioned to make positive, effective changes.
It's often easier than you think to reduce those monthly bills and other recurring outgoings. Could you switch to a cheaper mobile phone plan? Is there a more economical electricity provider than the one you're currently with? Could you manage without that pay TV subscription, or at least replace it with a cheaper alternative? Could you share Wi-Fi with a neighbour and split the cost, rather than having your own subscription? From monthly insurance deductions to online subscriptions, take the time to go through every recurring bill you have and ask yourself if it's absolutely necessary, and if there's a way to reduce the cost, or even eliminate it completely.
Undoubtedly one of your biggest expenses is a mortgage – but if you're going through tough times, you could consider taking a repayment holiday (which you can typically do if you're ahead on your payments), to give you breathing space while you work on improving your financial situation.
One of the most damaging aspects of having a reduced income is the fear and uncertainty it can create. Creating an emergency fund can go a long way to alleviating this. You might be surprised by how much you can generate by selling some of the stuff you have lying around that you no longer use. Whether it's old jewellery, furniture, clothes or appliances, consider getting rid of it online, via sites like Gumtree or eBay, and directing the proceeds to a separate bank account, to be used only if absolutely necessary. The peace of mind you'll create for yourself and your family is more than worth the short-term hassle – and it can also be a positive, cathartic experience to let go of the old!
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