The first thing that you should do when your income falls is to cut down on your expenses and manage your stress. When you lose your income it is not easy to handle that situation. It has become a common thing in the last two years since the Covid-19 Pandemic onset.
According to research, every household has had a salary cut or had a job loss since the beginning of the pandemic. This created emotional stress and strain as many citizens were unable to meet the expenses towards food, clothing, shelter, monthly expenses and day to day expenses. The reduction in the monthly income is temporary and you can overcome it if you have a budget and emergency funds.
If you are aware of the expenses that are expected to happen in the future and you have to make arrangements for these expenses. There might be unexpected expenses that may come up at any time and you have to be prepared for these expenses. Being rich is not the goal and there is no formula for meeting the expenses. The richer you are the more maintenance expenses you have to incur. All you need to do is manage your expenses and income with what you have.
Accept your situation and tell yourself that it’s okay and you will come out of the situation. Losing your income is difficult to accept and once your income drops you should start to live with the available income in your pocket. You may have to cut down on eating out or the Gym membership, spa and others. Give yourself time and then start focusing on what to do next. Here are some ways you can do that.
- Analyse your expenses
- Eat at home
- Adjusting expectations
- Being Frugal
- Savings
1. Analyse your expenses
When you review all your monthly expenses you will get an idea about what are necessary expenses, what are luxuries and comforts. Analyse your expenses and spend only what you necessarily need for survival. Cut down the other expenses and psychologically tell yourself you will meet luxuries and comforts expenses at a later stage in your life.
Do not compare your life with that of the others. You may have less comforts and luxuries than others. Making a comparison will psychologically hurt you and put you down.
Cut down your expenses by adding substitutes into your life. You may need internet and cut down cable DTH. You can cook at home instead of dining out daily. You can use a phone but can avoid add-on services like caller tunes and data packs. Any expense that you do not need do not spend on it.
2. Eat at home
In the UAE, eating food in hotels and restaurants can be a costly affair. Food is one of the major imports in the country. When you have a drop in income, stop eating outside to avoid the huge expense of food. When there is a change in career and due to that there is income drop or due to recession your salaries have been cut down.
For any reason be ready to do zero in on the food. You can cook and eat for your survival. You need not be a good cook but able to manage cooking for eating. All you need to focus is to reduce food expenses. Compare food items when you are buying and select that you can afford.
Click here to know How can i budget my salary in Dubai?
3. Adjusting expectations
Considering buying a car when your income drops is a difficult financial decision. If you already have a budgeted amount and a financial plan to buy a luxury car, then during your financial crisis it is advisable to purchase an economical car. In the UAE, it is a necessity to have a car for travelling.
You can also adjust your budget and buy a used car which will still save you more money. You can allocate this unspent budgeted amount for other priority expenses.
4. Being Frugal
Practice frugal living for a better tomorrow. Living frugally is a way in which you wantedly calculate your spendings. You can prioritise your spending with the things that are most important for you. You have to cut down spending money in other areas which are not important to you.
Sometimes borrowing things instead of buying can be a good option to cut down expenses, sharing rides instead of you using your car, doing household work by yourselves instead of helpers expenses and by doing other activities on yourself or sharing expenses you can reduce most of your expenses.
Click here for Steps to budget with irregular income
5. Savings
If you don’t have a savings account in UAE then it is highly recommended to have one and actively invest in your account. This is important even during times when your income drops. Having a savings habit will help you systematically allocate your monthly expenses and save a penny each month.
There is an age old saying that, “Penny Penny makes many”. The use of a savings account will help to overcome your financial problems for the next time. Have a goal and keep funding your emergency fund account on a regular basis. During your crisis you can earn through selling your items that you no longer need, freelancing, sharing rides and many other ways.
Take away
There is no universal formula for overcoming the financial crisis challenge. When your income drops all you need to do is reduce your expenses and carefully allocate your earnings towards meeting monthly expenses. Borrowing money for the sake of living will not help in the long run as you may fall into debt trap. It is best advised to adjust your available income until you get any other source of income.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
