Dealing with a Reduced Income
At various times in our lives some of us may find ourselves needing to live on less. Examples include reduced income due to retirement and added expenses such as medical costs, home repairs, or putting kids through school. What can a person do? The best step is to take action now to make changes in how you manage your money.
Track your expenses. Keep track of all the money you spend, on little things as well as big bills, so that you can make informed choices about your spending.
Change your spending. Research shows that families with reduced incomes who quickly made changes in their spending habits were happier with how they were managing their finances. Families who didn't make changes felt more out of control and more dissatisfied.
Start by looking at your flexible spending: those items that vary month to month. It’s easier to change expenses such as entertainment, food costs, etc., than fixed expenses such as rent or mortgage payments.
On the University of Illinois Extension's Getting Through Tough Financial Times website, get help with setting spending priorities and download a budget sheet (pdf) that will help you adjust your budget to meet your lower income.
Avoid using credit to pay bills. Borrowing or using credit to pay bills often brings only temporary relief and can be more expensive in the long run. Research studies show that for families who did increase their use of credit, the more they borrowed the unhappier they were with their financial situation.
Talk to family members. Living in uncertain times is stressful. At the Getting Through Tough Financial Times website, you can learn more about identifying sources of support and friendship and communicating under pressure with your children and other family members.
Source: Kathy Sweedler, Consumer and Family Economics Educator, University of Illinois Extension