With layoffs being in the news every day, what is an employee supposed to do if his employer decides to do salary cuts or benefit cuts instead? You may be faced with this situation and wondering how long your job will be secure for. Here is how to prepare yourself financially if your employer decides to do pay or benefit cuts as opposed to layoffs.
Surviving a pay cut: Personal finance
News reports have companies cutting hours and salaries by up to fifteen percent. If you are one of those employees who had his salary or hours cut then you need to make some financial adjustments quickly. The good news is that prices on food and gas have also been on a steady decline.
If you have not prepared financially, then the good news is you can start immediately. First gather all your bills and see how much money you are paying every month. You will need to create a budget if you do not have one. This article will give you the basics for creating a budget.
The easiest expenditures to cut are entertainment, food, and the extras. We all have extras such as clothing or books that we spend miscellaneous money on every month. Make a conscious decision to not buy anything extra until things stabilize.
Shop for grocery sales and only buy what you need. Pick an amount of money to spend on food and stick with it. Take that amount out in cash if you have to. Once the cash is gone then you are done with the food shopping. This may help you be more aware of how you are spending your food budget.
Limit your dining out. This can be going out to restaurants, fast food drive-thrus, and pizza delivery. You may have to give up the convenience of these things in order to make your money stretch.
Evaluate your bills. Do you have the premium cable package? How many cell phones with all the options do you have? You can cut a little bit on these bills without really missing anything. Call the companies and change your services. Drop your cable down to a lower package. You do not need unlimited texting on your cell phone. You may find that you can drop your house phone and just use your cell phone.
You can also save money on childcare. Childcare costs can take a huge chunk out of your monthly budget. If you can, consider tag-team parenting. Tag-team parenting can save you up to $8,000 per year. There are some sacrifices to this type of childcare. I have listed related articles to this at the end of this article.
If, after your pay cut, you still have a little extra money then put that money into a savings account. Do not touch this money because this is your emergency fund in case you get laid off. If you prepare for the worst then you can hope for the best.
Surviving a pay cut: 401k
General Motors may have started the trend that cutting the employer match to the 401k accounts was a good way for the company to save money. This does not mean that you should stop contributing. This may seem like an easy way to make up for your salary cut but it can really hurt you in the long run.
Compounding interest in your retirement fund is what will allow you to retire. Without this, you will have to work longer. Plus, companies that have done this in the past have reinstated the company match once the economy stabilized. You do not want to lose the additional retirement funds.
Surviving a pay cut: Health Insurance
Premiums are going up and coverage is going down. Employers are expecting the employees to pay more for their share of the health care benefits. You can plan for this possibility also by using a flexible spending account. You can put money into an account before taxes to be used on health care deductibles, medicine, and co-pays. Just remember, you have to use all the money in this account within the year or you will lose it.
All these little savings add up and will hopefully hold you over financially until the economy stabilizes. Control the expenses that you can control, do not give up on your retirement account, and keep planning for a brighter future.
What is Tag-Team Parenting?
Save Money with Tag-Team Parenting
Organization is Key to Tag-Team Parenting
Marital Stress in Tag-Team Parenting
Parental Agreements in Tag-Team Parenting