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Living on a Reduced Income

A reduction in income is a tremendous challenge, but not insurmountable.

Everyone experiences changes in life. Sometimes you plan for it and sometimes you have little control. Unexpected changes from a job loss, illness, divorce, or loss of a spouse can impact you personally and financially. Adjusting to account for a reduction in income can be hard, but taking steps to rework your financial plan, identifying new resources and finding the right help, you move forward with peace of mind.

Start a New Plan

The first step in stabilizing your finances after a reduction in income is to develop a new plan and new habits. You might be tempted to revert to your old routine at times, but with the right plan and the right mindset, you can stay on track.

Put together a workable budget

Being clear about what you need to do is an important first step. Follow the tips described in Building a Budget and Sticking to a Budget to build a solid foundation.

Don’t completely cut out anything

It’s usually more effective in the long run to find a way to reduce everything a little than to totally give anything up. This way, you are still enjoying the same things with a bit more control.

Don’t do too much at once

You didn’t get into the situation you’re in overnight, so it’s not likely that you’ll be able to change it overnight. Those who try to do too much at once often fail and become frustrated. Set yourself up for success by taking it one step at a time.

Don’t believe you can’t change your expenses

Any expense can be changed. It really comes down to a asking yourself what you are willing to do to reduce expenses to improve your financial situation.

Figure out your monthly expenses vs. income, but focus on cash flow

Managing cash flow (having the money available at the time you need it to pay your bills)—is often overlooked when planning a budget. Use a calendar to map everything out according to payment date so you can look ahead and have the ability to stay organized.

Follow these steps to create a new plan that works:

  1. Find a manual or electronic calendar that works for you.
  2. Input your pay dates for bills (utilities, rent, etc.) and expenses (groceries, gas, etc.).
  3. Build in payments for periodic expenses (taxes, insurances, emergencies).
  4. Input important dates for periodic expenses (birthdays, anniversaries, etc.).
  5. Schedule specific days to sit down and pay bills.
  6. Organize bill payment addresses in your computer “bookmarks” or in a notebook.
  7. Save all important documents in an accordion-style budget box.

Lowering Bills

Chances are most of us will have to make adjustments to our spending because of some reduction to our income at some time in our lives. In some cases, it might be the little things (like packing a lunch more often) that end up making a big difference. In other instances, it might take a bigger adjustment such as lowering some of our bills.

To lower your bills (TV, phone, Internet, insurance, etc.), focus on doing three things: research, negotiate, and replace.


Knowledge is power. You need to know your options and how they work. Use cost comparison sites such as, google shopping, or

  1. Find out what competitors are offering.
  2. Keep records and stay organized.


Always believe that everything is negotiable! Make sure you’ve done your research and use your knowledge to your advantage.

  1. Be fair. Understand that there has to be something in it for them too.
  2. Decide ahead of time how far you’re willing to bend.
  3. Clearly, confidently, and concisely make the case for what you want.
  4. Be willing to walk away and find a replacement.


Always think creatively to find alternatives for expenses you can’t keep any longer. They might not be the most convenient but will still meet the need at a basic level. For example:

  • Use a digital antenna and an online service instead of paying for cable.
  • Use Internet phone services instead of paying for a cell or home phone.
  • Use the local library for movies, music, and Internet.

Lowering Expenses

Reworking your expenses may happen slowly, but don’t let that discourage you. Changes don’t occur at the same pace for everyone. Naturally we want to keep everything the same as it has always been. Sometimes change can be overwhelming and it’s easier to continue to live as we always have. If you take things one step at a time, you will eventually get there. Here are a few tips to get started on the right foot:

  • Pay with cash, not credit.
  • Buy used.
  • Wait before buying.
  • Make your lunch instead of buying.
  • Consolidate trips to reduce gasoline costs.
  • Research any resources for which you may qualify now that your income is lower.
  • Consider eliminating cable.

Our Best Overall Guidance

Put a freeze on spending for things that you really don't need, establish your goals, build a workable budget, and then make a commitment to stick with it. The most important thing is that you keep a clear sense of purpose and feeling that you can get it done. And we believe you can!