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How to Adjust Your Expenses When your Income Drops

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Today I want to focus on a quick way to adjust your budget & save money if you’re family experiences an income shortage out of the blue or for a short period of time. Before I can get into all the “how to” details, let me give you a little background…

Let’s face it – January is usually a “tight” financial month. Even though we make a monthly budget, December always manages to throw in some curve balls we weren’t expecting that our “miscellaneous” budget category can’t handle. Unfortunately, this December that happened multiple times for us…

We decided our son NEEDED a big boy bed NOW. (It doesn’t matter how long you’re living on a budget, we all mess up want and need every once in awhile.)

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The new bed we “needed.”

We bought a few presents that weren’t on the list. (It just didn’t feel like “enough” – which is sad in hind sight. We felt like we needed to give a little more to a few of our family members and friends.)

And don’t forget all the food and drinks! (As if my waist line could let me forget…)

So here it is… January, and we’re feeling the pinch that December left behind. To make matters worse, our January income dropped a little from what we had expected it to be – hubs hours at work weren’t quite the same as they had been the previous few weeks and a planned babysitting gig fell through.

Moral of the story is… I needed to shave about $150 off our January budget in order to stay on track – and the bad news was, I needed to shave it off FAST. (We weren’t aware of the change of income until the day our mortgage payment was due – yikes! Obviously paying the mortgage payment was the priority, so that meant everything else had to shift in order to accommodate.)

Ok, now that I’ve given you some background it’s time to jump in.

Here it is – pay day Friday – and we get the “Surprise! Your hours didn’t go quite like you thought” paycheck & babysitting cancellation in the same day. AH!

Are you facing a similar situation? Here are a few steps to help you adjust your budget:

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Step 1: List your priorities. 

We’re talking basic necessities here folks – what Dave Ramsey calls “the 4 walls” – food, housing & utilities, transportation and clothes.

In our situation we needed to pay our mortgage payment, go grocery shopping & get gas for our vehicles. (Utilities and food weren’t part of the equation because they weren’t needed at the moment – utilities had already been paid for the month.)

Normally we spend $200 on groceries every two weeks and $100 on gas – a total of $300. I wanted to see if I could cut that in half – $150 total! Why? Because in addition to the basic “4 walls” of our budget, I also have a student loan payment due this week. Although a student loan payment isn’t a “4 walls” level priority, it is a priority. So in order to make the budget work this week, I needed to do all four: mortgage, food, gas AND the student loan bill, with $150 less than I normally would have to spend.

To recap, my list of priorities was:

  • Mortgage payment
  • Groceries
  • Gas
  • Student Loan Payment

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Step 2: Crunch the Numbers

In our case the math was simple – we needed to make up $150 in expenses that we lost in income this week. But depending on the situation you might really need to take some time to figure this out.

List how much each of your priorities normally costs you. Then total up your income. What is the difference between the numbers? That’s the amount you need to shave off your budget. Things like your mortgage and student loan payments aren’t negotiable, but expenses such as groceries and gas are negotiable and something you have the power to adjust when needed.

My number crunch:

  • Mortgage payment – Not negotiable, full payment due
  • Student Loan payment – Not negotiable, full payment due
  • Groceries – normally $200 (reduce to $100)
  • Gas – normally $100 (reduce to $50)

-It's easy to SAY you'll cut your budget, but it's something else to actually DO it. (1)

Step 3: Create your Plan to Make the Number Crunch Work

This is the most important step – it’s easy to say “we’ll just cut our food budget in half over the next two weeks,” but it’s a whole different thing to actually DO it. Without a plan this might literally be impossible – but thankfully planning is one of my favorite things to do around here, so this is what I came up with:

  • Plan to Reduce Gas Use: 
    • Canceled our plans to take our son to the local children’s museum where we have a membership.
    • Commit to not leaving the car running like I normally do in the winter. This week I’ll just have to deal with not being “toasty warm” through my entire drive.
    • Cancel any unnecessary errands. Just the basics this week – work, daycare, basketball practice & home. Period.
  • Plan to Reduce Grocery Bill:
    • Impromptu “pantry challenge!” We were able to plan out 8 of the upcoming 14 dinners we’ll eat just from items already in our house. That was a HUGE savings! (Curious about what a pantry challenge is or how to do it? Check out this post.)
    • No extras. It’s bare bones this week – no extra snacks or drinks that are nice, but not necessary. For example, my husband loves to have small cans of V8 in his lunch for work – but not this week. 
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Our full cupboards just waiting to be organized & emptied during our pantry challenge this month!

So there you have it… how my family is pinching pennies this week to shave $150 off our normal expenses due to an unexpected income decrease. My goal of this post was to show you that it’s not impossible. You CAN make your budget work. Yes, it may require some painful compromises, but its short term – you’re not committing to doing this forever.

Do you have any experience with shaving money off your expenses & adjusting your budget out of the blue? I’d love to hear from you in the comments below!

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