At the height of the Great Recession, I received word at my work that everyone in the company would be getting a 10% pay cut.
It wasn’t fun.
Senior management wasn’t happy that they needed to cut everyone’s salaries. Clearly, everyone who worked with me wasn’t happy either (though they were happy to still have a job).
After you deal with the emotions of learning that your pay is being cut, you need to figure out a plan to deal with your new reality.
Here are three steps to handle a pay cut at work.
1. Cut Your Spending Accordingly
The first thing you should do when your pay is cut is to cut back what you spend.
It’s not always easy to downgrade your lifestyle, especially when you’re used to a certain way of living. Cutting your spending, however, is the quickest thing you can do to make sure you stay headed in the right direction.
Determine what’s necessary spending and what’s a luxury, and find ways to cut back your luxury spending (preferably in line with what your salary is cut). If you can continue to save at your pre-cut levels, do that. If you can’t, you may need to cut back your savings as well.
Hopefully, your spending cut backs aren’t long-term — if things go according to plan, then you can go back to your pre-cut spending and saving levels shortly.
If your spending is already cut back to the minimum, you likely have other issues at play to fix first. If you absolutely need to get a short-term loan, do it until you can make up the difference. If you have bad credit, personal loans (not payday loans) may be your best option.
2. Pick Up Additional Work
If your pay cut at work comes with a time cut as well — going from 40 hours per week to 36 hours, for example — you’ve got additional time to go out and make money.
If you’re still working the same hours (and just making less money), you’ll need to be a bit more creative with your time.
Either way, try and find additional work to make up for the pay cut.
It’s easier than ever to find freelance or part-time work. Drive an Uber. Start a business. Pick up a part-time job. Do what you can to find additional work and make additional money.
You never know — you may actually end up making more than your pay cut, and have a brand new source of income to pull from. That’s a great thing!
3. Look for a New Job
The economy is better than ever. Companies are literally having a hard time finding employees for jobs with salaries above $75,000.
If your salary is cut because your company (or industry) are struggling, you should be looking for a new job immediately.
Finding a new job can often be the most difficult (or at least the most time consuming) part of dealing with a pay cut, so be prepared for it to take some time.
When you have to deal with a pay cut, consider it a three-step process: cut your spending, find additional work, and look for a new job.
Once you’re over the emotional impact of the pay cut, you’re looking at a great opportunity to establish a new path for your career and your finances.
