6 Things To Do When Your Income Takes A Hit

With 2020 almost over, the labor market is still struggling to recover, and many Americans are grappling with income disruptions from wage reductions or unemployment. 

Perhaps you may be going through this as well. Maybe you still have a job, but your income isn’t what it was at the beginning of the year. Trying to figure out how to afford your expenses can be nerve-wracking. Fortunately, Money.com offers a few ways to stay afloat until your financial situation improves.

1. Modify Your Budget

“If a person’s income or salary is adjusted, then their budget needs to be adjusted as well,” Thomas Racca, a personal finance manager from Navy Federal Credit Union, told Money. 

If you’re unsure how to make a budget or adjust your existing one, there are many resources available online, such as You Need a Budget and Mint. These connect to your bank account and monitor your spending so you can identify areas of improvement.

Determine which expenses are needs and which are wants. For example, you might cancel your subscription services and only keep the one you use the most. Or, you could try to follow a rigid spending limit.

Also, look at parts of your budget that were consistent before the pandemic but may have changed. For instance, if you switched to full or partial remote work, you are probably driving less, which means you aren’t encountering as many of the risks your auto insurance covers. You may consider contacting your insurer to lower your monthly bill by trimming your coverage.

Although curbing expenses doesn’t fix everything, it can help when you need to get back on your feet.

2. Redirect Your Income Elsewhere

Ideally, you should distribute your earnings across three areas: 


  • Your checking account for daily purchases
  • Retirement account contributions
  • An emergency fund


Even though saving for retirement is crucial, it’s just as important that you redirect your existing income to cover your current expenses. 

In some cases, you might reduce the amount of money for an emergency fund or retirement. But in others, you might need to withdraw funds from your accounts to get by. If you have a savings account, you should use that money before turning to your retirement vehicle. 

“If you can continue contributing to your retirement funds, that should remain a priority,” Racca noted. “Whenever possible, contribute at least to the level your company matches.”

It can be extremely discouraging to change your financial strategy but remind yourself that this situation is temporary, and you can resume your saving once things improve.

3. Negotiate With Your Creditors

When Congress passed the CARES Act, they included provisions to support federal student loan borrowers and homeowners during the pandemic through the end of 2020, such as:


  • Foreclosure bans
  • Forbearance programs for homeowners
  • Suspension for student loan payments and interest. 


If you can’t afford these payments due to an income change, you should reach out to your lenders to see if they can help. For example, federal student loan borrowers can lower their monthly payments by requesting an income-based payment plan. Even if you borrowed a private loan, your lender may defer your payments or possibly refinance your loan altogether.

Additionally, it would be best if you focused on covering your mortgage before your utility bills, as a missed home loan payment can impact your credit more. Don’t be afraid to let your lenders know your situation. Many financial experts recommend taking the initiative and reaching out first before waiting for them to contact you about your bills.

4. Look For Government Assistance

Just because you currently work doesn’t mean you can’t apply for help from the government. Eligibility requirements vary from state to state, but you will probably qualify if you can’t afford essential living expenses like groceries or medical treatment.

Visit the USA.gov Government Benefits, Grants, and Loans page to find programs you can apply to.

5. Lower Your Housing Costs

Ideally, about 20% of your income should go to rent. However, if you are earning less than you were previously, you may need to move somewhere more affordable. Of course, this may not be possible for everybody. It’s much a different story for someone who is younger, single, and doesn’t have a family or a home loan to pay off versus someone with a mortgage and a family.

If you are a renter, you could consider moving home, getting a roommate, or moving to a cheaper apartment. While these options might be unappealing, they can also help you reduce one of your costliest expenses as you continue job hunting.


  • Silcox, Kenadi. “6 Moves to Make Right Now If You’ve Taken a Pay Cut.” Money, 1 Dec. 2020, money.com/lower-salary-budget-help/.
Ian Schindler