Surviving a Drop in Income Without Using Debt
Surviving a drop in income without using credit is not an easy task. But if a drop income does occur there are ways to help offset the financial decrease rather than using credit.
The First Steps when Decreased Income OccursCreditors should be contacted immediately if difficulties are imminent with credit and loan repayments. Contacting creditors as early as possible will make them aware of the situation and some help should be offered. This help may take the form of frozen credit accounts or paying ‘interest only’ until the income problem has been rectified. Credit customers should ensure that they do claim Payment Protection Insurance (PPI) if this applicable. Early contact with creditors should bring about a solution and should stop interest fees and charges accruing.
Rethinking a Financial BudgetIf a drop in income does occur it is important to rethink financial budgets. Research all benefits that are applicable from the government as soon as possible. Government benefits will usually not be back-dated so this should be another priority. A clearer picture of income and expenditure figures will emerge once these issues are addressed. Remember, government benefits are not charitable handouts; benefits are there for exactly this purpose but millions do go unclaimed.
Cutting Back on Household ExpensesLooking at ways to cut back on expenditure should be a priority. There are plenty of ways to cut back on household expenses. Look at ways of paying utility bills in instalments rather than in one lump sum. Cut down, or eliminate services such as costly cable television packages. Buy supermarket brand foods instead of well known brands when shopping. There is no need to cut out all luxuries but cutting down on monthly household expenses will help to slightly offset the drop in income.
Easy Ways to Cut Back on ExpensesA drop in income will mean looking at ways to economise and cut out overspending. Some easy ways to economise and create some income can include:
- Eating at home more often and avoiding restaurants
- Cutting down on car expenses by taking public transport
- Cutting back on nights out; socialising in the home will be less expensive
- Eliminating expenses such as gym memberships
- Look at ways to bring in income such as renting out a room in the home
- Use the internet to bring in income including selling unwanted items and offering work skills to companies
- Any items that are required should be bought online; these items will be less expensive than in stores
Look For Ways to Maximise IncomeIf income does drop, look for ways to rebalance the situation. People on income benefits may have limits on the amount of income they can actually bring in but those still in employment have many options. Undertaking part-time jobs at the weekends or in the evenings is a good option to bringing in extra income. Look at ways to use work related skills that can be undertaken from home via the internet. There are still plenty of legitimate home working jobs available if researched carefully.
Be Wary of Eating Into SavingsSpending savings should be the last resort when a drop of income occurs. Although many people do have savings for exactly this sort of ‘rainy day’ period these should not be used unless it is avoidable. Savings are an investment that have taken time to build up. But they can quickly disappear once they are dipped into every now and again. Savings are a safety net, and if the drop in income is only temporary they should not be touched if possible.
Avoid Taking Quick Fix CreditAnyone living on a low income knows how tempting offers of quick fix loans and credit can be. But taking out loans and credit during a period of reduced income will only add to problems not solve them. This type of high interest debt can still be around long after the drop in income issue has been resolved. Anyone who takes quick fix credit could be looking at long term harassment from debt collectors if repayments are not maintained. Plus, the extra interest from these debts will simply add to the household expenditure every week or month.
Surviving a drop in income is not uncommon throughout life. It is important not to panic or look for easy ways such as additional credit to rebalance the drop in income. Surviving on a lower income without using credit means looking at ways to economise and increase income on a long term basis. Hopefully the drop in income will be temporary, and living on a low income for a short period can make people more financially capable.