What to do when your hours get cut back
When Your Employer Cuts Hours
by Gary Foreman
10 Ways to Prevent Non-Essential Spending
My Story: The R's of Reducing Expenses
14 Ways We Save Money
My boss just announced that we'll have to cut back our hours by one day every two weeks. He said that we either have to do this or lay off some people. I'm glad they're not doing a layoff, but how am I supposed to pay my bills when I'm taking a 10% pay cut? My boss hopes that it's temporary, but he doesn't know when it'll end. How do I adjust my budget to a temporary cut in income?
Ouch! Taking a 10% cut in pay is hard, but the fact that the company chose to cut hours instead of layoffs is a positive sign that they think business will revive. Let's see what we can do to help you get through the cut in hours.
The obvious easy answer is to cut your spending by 10%. That's more easily said than done, especially if you've been dealing with higher prices without a raise for the last few years as most of us have.
Expect some of the budget reductions to hurt. You'll be forced to cut some things you don't want to cut, but if you can accept that fact at the beginning, the whole process will be easier.
Accept, too, that you'll be tempted to use credit cards to make up the difference. Don't do it. You'll only be postponing the inevitable and making the situation worse.
Hopefully, you already have a budget or spending plan that will tell you where your money is being spent today. If you don't, you'll need to go back through your checkbook and statements to know what's currently happening.
You can target a percentage of your spending or a specific dollar amount. I'd suggest you aim for a dollar amount that you want to cut each month or each pay period. There's less math involved without the percentages.
Cutting every budget category by 10% is the most straight forward approach but could be difficult. Some categories, like food, are easier to adjust because you make lots of purchasing decisions and have plenty of opportunities to save.
Others, like housing, are more difficult. Once you've investigated refinancing and your insurance, it gets harder to find places to cut. Sure, you can work on your utility bills, but even if you cut your utility bill to zero, you probably wouldn't save 10 percent of your total housing bill.
A better approach would be to see where you can make some big savings with a single action. Think refinancing the house and checking your insurance. If you're fortunate, you could make a big step towards your goal here.
Once you've covered the big items, we'll go to the biggest categories. For most families, our biggest expenses are home, auto, and food. Between them, they generally consume between 65% to 75% of our take-home pay. We don't have the space to get into details on saving in those categories, but you'll find plenty of resources online to help you reduce those expenses.
Next, look at some of the smaller categories. Consider things like entertainment and clothing. Perhaps you can cut way back or even eliminate them until the furlough is over. Remember that you're taking necessary steps. You're not just taking the easy ones.
After cutting your spending to the bone, look for ways to increase your income.
Are there ways that you can earn money on your forced days off? Use the opportunity to turn a hobby into a small home business, or you might be able to find part-time work on that day. Some work-at-home opportunities might fill the time productively.
Even if you can't find a way to make money, don't waste the furlough days. Use the time to look for a new job, increase your job skills, or volunteer at a non-profit. Those activities don't provide an immediate benefit, but they could help build your network and open opportunities later.
It's unfortunate that there aren't any easy ways to adjust when your hours have been cut. Most of us have already cut the fat from our budgets. Now anything we cut is going to be difficult, but if you were looking for a silver lining, the fact that your employer chose to cut hours rather than laying people off is a good sign that they think the cut is temporary. Let's hope that's the case.
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and CreditCards.com. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.
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