How to Survive a Pay Cut

A pay cut can be enormous, such as when one spouse decides to drop out of the workforce to take care of the children. Others are more modest, such as 5 percent rollback, though both make an impact and have similar survival strategies.


If you have known for a long time that the pay cut was coming, there is no excuse for not saving money. If you have begun to suspect that a cut is coming, now is the time to start saving. Savings should be readily accessible, not tied up an investment or a GIC that incurs a penalty if you need to get at your cash. For the people who can't stand to save, sign up for a different account, specifically for savings, and automatically transfer money from your major account to the savings account. Leave the savings account alone: it's only to be touched after the pay cut has occurred and you have an emergency, like a missed car payment. It is not to be used for family vacations or other perks.


Cut out the wants from the budget. Wants are movies out every week or buying a latte every morning. Don’t deny yourself these pleasures: you can rent the movie for less and drink the coffee in the office or take a thermos from home. Cut back on these expenditures. Don't carry cash with you so you are able to buy fast food when your bag lunch doesn't tempt you. Most financial planners recommend that you carry cash to make purchases, but most people don't track their spending, so they take out $200 to replace the cut up credit card and don't realize they spent it all on lattes. Carry your debit card and one credit card, but use it only in an emergency. Most payphones even take credit cards now.

Credit Cards

Cut back on using credit cards. Most people cannot cut up their credit cards entirely, since they are necessary to make travel arrangements, rent cars or to buy groceries in an emergency. But you can cut back on when you do use them, such as using them to pay for the family night out at the movies. Credit cards should only be used when required or in an emergency.

The next step is to pay off the cards or pay down the balances. Most families carry heavy loads of unsecured debt, usually credit cards, with high interest rates that they need to pay every month. As the higher interest cards are paid off, cut them up. Keep one card for emergencies. Contact the bank that holds this card and see if you can get a lower interest rate. Banks do not offer lower interest rates automatically: you need to ask for them.

Make More Money

Once spending, savings and credit are in hand, your family can either live on the reductions or you need to make more money. Some ways to increase the money you have include selling off an extra car, and having one vehicle in the family, to save on car expenses. Others include paying less on housing, but this option can lead to more expenses when you have to move or sell your home. Instead, look for ways to make more money. There may be an option for overtime, though most employers clamp down on overtime to curb additional salary expenses. One spouse can take a part-time job or perform temporary or freelance work.

Paying down debt, reducing spending and finding creative ways to make a little additional money will help you survive a pay cut.