The COVID-19 pandemic is battering businesses across the globe. Restrictions to halt its spread have caused commercial activity to shrink. Sales have fallen, revenues plunged, and numerous businesses have closed shop. Some may never reopen.
Some can still make it through these trying times, but only just. A lot of them manage to do this by slashing their operating costs. At times, this involves asking their employees to take a pay cut.
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If you are facing a salary cut, this article is for you. Here, we will share a few tips that can help you manage this situation.
1. Trim Your Spending
Examine your budget, and ask yourself whether there are things you could do without, or replace with cheaper things. If you haven’t been using a budget, now is the time to get deliberate about it. Most people are surprised how much wasteful spending they discover when they begin to record their planned and actual expenses.
It’s likely you still have some room to manoeuver, but you may never realize this until you start using a budget and working to trim it.
2. Save What You Can
This seems counter-intuitive. How can you possibly be saving much when you have to live on a fraction of your previous salary?
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Trimming your budget gives you some leeway to save. You could still have net savings from your cost-cutting measures. Don’t spend that extra on something you didn’t plan for beforehand (unless it’s a real emergency). You may need it soon.
3. Get As Far As Possible Without Debt
How about borrowing to supplement your income?
You should only do this if you absolutely must. It’s easy to get into the debt trap, but very difficult to pull out of it. As you cut costs, remember that you’re doing so to shore up your finances. If you rack up debt at the same time, it will erase some of the gains you have made from trying to reduce your budget.
4. Negotiate With Lenders
Perhaps you already have some unpaid debt on your books, and you’re wondering how to deal with it. What do you do?
First, look at the terms of repayment you agreed on with the creditor. Decide whether you can repay the loan within the period you previously agreed to. If you can’t, you may ask for more time to do so. Most people are in a difficult financial situation, and your creditors will likely be lenient with you based on this fact.
5. Plan to Supplement Your Income
You may also have to find new income sources to prop up your finances. Think about deploying your skills and experience in ways that can bring in extra money from the side. And if you don’t think your present skills can generate enough revenues for you, try acquiring new ones.
When you’re deciding what to learn, take note of the ones for which there’s a lot of demand. Also, consider the future of work—the coronavirus could accelerate our movement into a future that’s dependent on tech and automation. Are there skills you could learn to give you an advantage in this future?
6. Evaluate Your Long Term Goals
If you fear that a reduction in your salary will threaten your long term goals, you should reevaluate them. Consider adjusting your plans (for instance, changing timelines or specific steps going forward).
But you should not give up on your long term goals just yet (unless the salary cuts render them impractical). For all you know, your income could rise again at some point, and you may still be on track to achieving your aims.
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