What?! Take a pay cut? Why would anyone in their right mind do that? OK, I know most people don’t willingly take a pay cut, but it is important to have a back-up plan in place in the event a pay cut becomes a reality. And, the reality is, pay cuts do happen, and it is important to prepare for them ahead of time.
When we think of taking a pay cut, we normally envision loss of income at our job. Ultimately, what a pay cut translates to is a loss of spending power and that is something we can all relate to. Even though gas prices are falling now, for almost a decade, the price of gas has been exorbitant and, as a result, the price of goods and services has increased as well. When gas prices increase, the cost of anything that is dependent upon being transported increases along with it.
How do we prepare for a pay cut or, more specifically, a loss of spending power? We create a Crisis Budget. Take your current budget and cut it by 25% or 50% or by the most likely loss of income—for example if the husband or wife loses their job.
Looking at the various categories in our budget, we might see some items that just have to go. As difficult as that may be, remember that this is a small sacrifice for the immediate season; it’s not necessarily permanent. Many people have found that eliminating the cable TV wasn’t quite as awful as they had envisioned and, even after they came to a point where they could afford cable, they continued to live without it.
Go through each of your spending plan categories and determine which are absolutely essential and which can be cut. Unfortunately, during a crisis, the temptation is usually to cut back on the tithing or savings, but I would encourage you to find other areas to scale back on before targeting your saving and giving. For example, in the household area, categories such as electricity and water might be scaled back just enough to allow a little extra to be added back into the food or transportation category. Simply turning off lights when we’re not in the room; not running the water when we’re brushing our teeth; and adjusting the thermostat a degree or two are small sacrifices that can make a big impact.
Look for other ways to slash your spending. When the gas prices were so extreme, many people started car pooling or working from home. As a result of increased gas prices, food prices went up as well, so people took up gardening and went back to making breads and other baked goods from scratch.
When it comes down to it, creating a crisis budget is really not about eliminating categories as much as it is about defining the necessities and building your crisis budget from there. When we define our necessities as food, shelter, and clothing, we can make sure those are provided for first and then worry about whether junior can participate in soccer right now or whether he might need to sit out this season.
Once you have created a crisis budget, try living on it for a month. The worst thing that can happen from doing this is that you will save some money. The best thing that will happen is that the crisis budget will provide a great sense of peace. You will be able to adjust your spending immediately when that imagined crisis becomes a reality.
“And not only this, but we also exult in our tribulations, knowing that tribulation brings about perseverance; and perseverance, proven character; and proven character, hope; and hope does not disappoint, because the love of God has been poured out within our hearts through the Holy Spirit who was given to us.”~Romans 5:3-5