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May 29, 2012
Making the Cut
The bad news: your boss just hit you with a pay cut. The good news: you’ve still got a job.
In almost all fields, from banking to medicine, workers are being faced with cutbacks. Plus, there have been $6 billion in federal reimbursement reductions since 2007.
The obvious method of preparation is maintaining a “rainy day fund” with about six months worth of expenses. But then what?
“My first step would be to talk to my family and take a close look at our budget,” says Debbie Lucente, a Charles Schwab financial consultant. “From there, we can determine where we can cut back to make up for that lost income.”
Staying on track with retirement savings would be a high priority as well, she adds, “because that time missed is hard to make up.”
Lucente also advises resisting the urge to cash out of your 401(k) or build up high-interest credit card debt to cover expenses.
Experts say key questions to ask your office include: How long will the pay reduction last? When will it take effect? Will it affect other benefits? Is the decrease across the board?
CNN offers steps you can take to soften the blow, like earning overtime, freelancing and not looking at it as a reflection of your work performance.
Others add that small lifestyle changes, like cheaper wine, fewer haircuts and deleting premium TV channels, can add up to a big difference.
Bonus PINK Link: Building wealth may have a bigger payoff than reducing debt. Here’s how.
Have you or a friend experienced a pay cut? Tell us about it.
By Caroline Cox
"Failure is not the falling down, but the staying down." Mary Pickford
*Supporting images from FreeDigitalPhotos.net,David Castillo Dominici, Stuart Miles, Grant Cochrane.
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Comments
4% across the board
My company made a 4% across the board pay cut this spring... I think March. Right before filing chapter 11. They promised to restore the previous pay level by August. But then told us 2 weeks ago, we will get it back starting June 1. :)
It didn't affect my husband and me very badly--partly because the only debt we have is our mortgage and a hospital bill that's on a payment plan. So we just had to be a little more careful in shopping. We even kept up with our savings goals over and above the 401(k), except for one month when we had a car repair. So I'd say that getting out of debt goes a long way toward preparing for such bumps in the road.