A sudden loss of income is a gut punch in your life.
This is probably the last thing you want to hear.
Your job has been cut.
We are temporarily halting operations and can’t keep you on the schedule.
Maybe you are trying to figure out how do you survive a huge pay cut?
It sucks to hear that you are laid off or taking a huge pay cut. Doesn’t matter if it is permanently or just a temporary situation.
Maybe you are sick and unable to work. If you can’t work your hours, then you don’t get paid.
Very possibly you rely heavily on tips and business has dried up.
For some, a sudden loss of income happens when a loved one has a died.
In all honesty, it is hard to sugarcoat your situation. This sudden change can have your grappling with what to do.
You are trying to figure out your next move, but feel trapped in fear and unknown.
In this post, we are going to provide resources on how to survive a sudden loss of income.
How to Survive a Sudden Loss of Income
This was the last place you thought you would be in. Yet, you are faced with a sudden drop in income.
We are here to help you survive this season.
But, better yet, we are going to make sure you are prepared to overcome these money management tips in crisis that naturally occur. So, it is easier and less stressful to weather another storm, if and when it comes.
1. Make Sure You are Prepared for Next Time
Take ownership on what got you into this situation. Don’t hide under a rock and blame something or someone else. Take a deep look at yourself.
While this may the hardest thing you have to do, it will have the greatest impact in your life long-term. You have the power inside you to change, to make things better, and specifically, make sure you won’t be in this situation.
You can manage life while living paycheck to paycheck until that paycheck dries up, and then, you are left scrambling.
More than likely, you wanted to pay more attention to your personal finances and do things better. But, life (and fun) just got in the way.
Now, you are panicking because you don’t have money coming in. You need to pay bills. And you have zero clue how that is going to happen.
Here at Money Bliss, we have tons of resources to help you succeed. Stick around. You are guaranteed to learn plenty of money lessons to make sure next time is different.
There will be a next time. Another crisis. Guaranteed.
If you don’t believe me, think back to 2008, 2001, early 1990’s, early 1980’s, the Great Depression – just to name a few. An economic downturn tends to happen every 5-10 years. And that doesn’t include personal crises everyone experiences from time to time.
Get prepared for the next one because you will survive this one.
As much as panicking has set in, it won’t do any good in the long term.
Take a deep breath. The situation is what it is.
In order to make logical and rationale decisions, you must have a clear head.
Personally, I was struggling with everything affecting our economy. I wasn’t thinking clearly plus strolling through the news updates and social media sure didn’t make it better. So, I went out on a long 2 hour bike ride. That is how I cope.
How do you cope? What helps you to focus?
Find something to separate yourself from your current situation. Take the time to breathe.
You need to refocus.
3. Prioritize Bills to be Paid
After a sudden loss of income, the first step is to figure out what bills are coming due. Use our bill paying calendar to help you.
Next, you must prioritize the order in which your bills are to be paid.
This is where you make the tough decisions to pay some bills right away and postpone paying other bills.
We will discuss shortly how to make this happen.
The priority goes to your basic expenses – shelter, food, transportation, and clothes, if needed. In a time of crisis, the highest priority is on rent, basic utilities, and food.
Everything else goes way down on the priority list. We will discuss why knowing what your expenses are with a bare bones budget is important and comforting in a time of crisis.
Just to Note on Not Paying Bills:
You need to be in constant communication with the company you owe money to. That means calling them directly and telling them your situation. Even better, use the online secure message center. Ask if you can apply for financial aid, lowering of interest rate, or be put on a payment plan.
4. Cut Unnecessary Expenses
Unfortunately with a sudden loss of income, your lifestyle is going to have to make changes to overcome the situation.
You have to cut unnecessary expenses quickly.
There is no way to get around that fact.
You can try and sugarcoat it to make things look and feel better. However, the stress is going to seep through the cracks. The reality is the reality.
Resources to Cut Expenses:
- 10 Ways on How to Drastically Cut Expenses Now
- The Vicious Cycle- Learn How to Stop Spending Money Now
- 101+ Things To Do with No Money
- 12 Things I Quit Buying to Save Money
5. Bare Bones Budget
You must learn how to budget after a pay cut.
If you have never learned to budget, there is no better time than now.
After a sudden loss of income that is when you would move from your “normal” budget to your bare bones budget.
A bare bones budget will focus on the most critical expenses and push everything else to the side until income levels are back to normal.
Every single person needs to know what the dollar amount they need to cover their basic and minimum expenses.
6. Learn to Live on Less
This is exactly what you don’t want to hear right now. Things have come crashing down and you quickly realize that spending more than you make wasn’t the best idea. Plus you don’t have a clue how to dig yourself out, and don’t worry, we have plenty of resources to help you.
You put off saving money because you didn’t feel it was necessary to put saving first. Now, you realize that having money saved would make a monumental difference in your life.
During times of crisis, you tend to naturally learn how to live below your means.
Then, when things go back to normal, your lifestyle inflates and you are back at the spot you were before all of this happened. Unless you decide to learn to live on less and prioritize saving.
Learning to live on less means you are saving money, which opens up opportunities and ultimately less to financial freedom.
Tips to Enjoy Living with Less:
- How to Live Below Your Means and Love Life
- The Ultimate Guide to a Frugal Lifestyle
- 175+ Simple and Easy Frugal Living Tips to Save Money
- Why a Thrifty Lifestyle is Something You Need Today
- Avoid the Trap of Lifestyle Creep and Reach Financial Freedom
7. Find Better Money Habits
During this season, you will be forced to pick up better money management habits. That is just the nature of the beast with a sudden drop of income.
The key is learn those critical money habits; keep them around for when life gets back to normal and income rises.
If not, you will end up right back in the same place during the next crisis.
Take just one of the money habits from one of the posts below. Implement it now. Perfect it. Make it a habit.
Resources on Money Habits:
- 10 Money Rules You Need to Live By
- Powerful Millionaire Habits that will Change Your Life
- 7 Simplistic Habits Needed for Debt Free Living
- 10 Money Management Tips in Crisis Times to Help You Stay Afloat
Sudden Loss of Income = Time to Make Money
This is the time to get creative.
You need to make money fast in order to make up for the sudden drop of income.
Right now, you need to focus on bringing in extra cash. This isn’t about living your dream life doing your dream job. This is reality – making sure you have money to pay your bills.
You need to make money and fast.
Another option is to start selling your stuff. Here is how: What to Do with Old Stuff (& Make Money).
Be willing to do whatever it is to make money during this period of time.
While there are plenty of organizations you can apply for financial aid or hardship, it is best to figure out how to bring in money today. Be proactive to help your situation. Don’t just sit around waiting for other people to help you.
This also may be the best time to start looking at a career change.
How to Avoid a Crisis with a Sudden Loss of Income
There is only one way to avoid a personal finance crisis when your income drops – that is to save money.
Period. There is no better way to avoid a crisis than have money sitting aside just in case.
This could be an emergency fund. That would cover any short term expenses that need to be handled.
Anything above and beyond an emergency fund would be covered by a rainy day fund. If you wish you took the time to save money towards a rainy day fund, you aren’t alone. Most people can barely cover a $400 emergency expense – the chances of paying bills with drastic loss of income is nearly impossible for most of society.
Personally, the best way I have found is to save money each and every month. I prioritize saving money and plan to live off the rest.
And if you know me… I am always way more likely to succeed with a challenge.
Saving Money Challenges:
- Quickstart your Emergency Fund Challenge in Less than 60 Days
- Handpick the 52 Week Money Saving Challenge for You
- Ultimate Guide to a Successful No Spend Challenge
- These Monthly Money Saving Challenges You Need to Try
What to do Next When You have a Sudden Loss of Income?
Throughout this post, we covered money management tips to help you overcome the sudden loss of income.
What is your next step?
What should you do with the resources you have left?
Hopefully, the sudden loss of income is temporary and doesn’t last for a long period of time.
You need to take one action. Followed by another action. Keep following ahead step by step. Therefore, do not worry about tomorrow, for tomorrow will will worry about itself. Stay focused on what you can do today.
You can overcome this season in your life and come out stronger and more financially sound on the other side.
Also, how will you be different once you survive this financial crisis?