What is the best strategy for budgeting a pay-cut?

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Answered by: Roy, An Expert in the Basics of Frugal Living Category
Budgeting a pay-cut can be a difficult and daunting task.Especially if you do not have a great monetary surplus based on the budget you have for your current income. However, there are some simple strategies one can engage; the tough part is simply to begin somewhere. Like many tasks, once it is undertaken the intimidation factor is greatly reduced.

The easiest first step is to make a list of all your consistent monthly bills and get an average monthly cost for them. After adding them together, estimate also to the best of your ability, your arbitrary spending. Join these two together and compare the numbers to your new salary. Is there a deficit? Do you just "break even"? Or is your surplus simply not large enough to cover what you might need for emergency funds? If you answered no to all of these questions then great! Advancement from here is simply a bonus. Unfortunately there are many people in today's economy who would answer yes to one or all of those questions.

If the latter describes you, then the next step may be to observe your past and current life-style. Many people as they enter the corporate world, fall into the sub-conscious pattern of having their life-style pursue their income. How is it,that after an over-all trend of pay-increases throughout many peoples' career, their disposable capital has not significantly increased? It is obvious that the blame will most often rest on the sub-conscious increase in the lavishness of one's life-style. A new car loan here and there without any great need, a mortgage increase or construction loans, or even taking advantage of numerous lay-away and financing options add up very fast. Also, careless daily spending on small wants tends to increase subtly and add up greatly as time goes on.

This being said, the practical thing to do while budgeting a pay-cut is to examine that list you have created with a critical eye; looking for any excessive expenditure that might not meet the criterion of a need. This means another list. There will be a list of things that are wants and a list of things that are needs. Having made these lists you now need to start eliminating wants, but there will most likely also be some items that fall partially into either category.

For example, your cost of buying gasoline in a month's time can probably not be eliminated all together but may be greatly reduced with a little thought and prioritization. Maybe that weekly morning breakfast with the guys, fifteen miles away could be eliminated or that monthly fishing trip that you drive 80 miles for and put gas in your boat for. But on the other hand you obviously have to drive to work or you would have no money.

The same concept may be applied to grocery shopping. There are items to be bought at a more cost effective rate, some snacks, desserts and drinks could be eliminated and of-course there are limitless options these days in utilizing coupons.

You can probably see the trend by now. It all tends to revolve around priority, life-style and perspective. Sure,some sacrifices need to be made, but many times a little trimming here and there will at least keep you out of the red.

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