Making Do When You’re Earning Less Income
COVID has ruined a lot of stuff for a lot of people: Graduations and proms have been cancelled, weddings have been postponed, in-person school sessions have been moved online.
And as you or a close loved one may be painfully aware, in many cases incomes have been substantially lowered—if not by way of a pandemic-related layoff, then because of a prolonged furlough period, pay cut, slashed schedule, or suddenly absent annual bonus.
While it can certainly be destabilizing to be suddenly faced with less income than you’re accustomed to, there are ways to mitigate the less-than-awesome effects.
Here are some tips for folks faced with a hit to their household income, (no) thanks to the pandemic.
Reviewing the Budget
If you don’t have a budget by now, the pandemic may have made it clear how imperative it is to make one—in most cases, if you don’t make an intentional plan for where your money should go, it tends to make going-away plans of its own.
And if you do already have a budget, now’s a great time to get in there and see where cuts might be made to help you keep from hemorrhaging money you’re no longer receiving. The good news is, there are many ways in which you’re likely to already be saving some money in quarantine.
For instance, people who are working fewer hours, or whose work has been transferred from an office environment to remote work at home, might find they’re automatically spending less on gas than they were pre-pandemic. Because people’s driving habits have changed, on average, over these last few months some insurance companies are also offering discounts and policy credits.)
Given the riskiness of gym environments, you might consider ditching your membership until things are more settled—thereby saving another few bucks each month.
Of course, these savings still might not mean you break even at your new, lower income level—and other cuts will take dedicated effort. Restaurant meals are a common sink for discretionary income. Dusting off those cooking skills might be a good way to avoid reliance on takeout during quarantine.
Groceries might be another prime place to make serious budgetary changes. According to the most recent USDA data, a family of four with young children might spend as little as $588.50 or more than $1,000 on grocery expenses, just depending on how thrifty or liberal their food plan is. Looking for cheap, scalable recipes that rely on inexpensive staples like rice and beans, can mean eating delicious meals even on just a few dollars. At this moment in history, it’s probably a more comfortable option than cancelling Netflix.
Looking for Ways to Restructure Your Debt
Chipping away at discretionary spending is one thing, but some bills are unavoidable—and many of those are loans. From mortgage and car payments to credit card statements and student loans, most Americans are in the process of paying off something or another. Oftentimes, it’s several somethings.
Those with federal student loans probably already know that payments have been automatically suspended and interest has been waived until September 30, 2021, so it’s probably not the best time to consider refinancing those.
But those with private student loans may want to reach out to their providers directly to see what options are available, especially in light of income loss. SoFi’s low-rate student loan refinancing options could be one way to lower your monthly payments to a more attainable figure.
Credit card payments can also be a serious burden for American families trying to make ends meet, particularly if they carry a balance on multiple cards. Consolidating those payments using a personal loan might help them save interest in the long run while also making payments more manageable on a month-to-month basis.
Considering a Side-Hustle
Making do with less money than you’re used to is always going to involve at least a little bit of sacrifice. One way to level the playing field: Trying to churn up some extra dough on the side.
If a furlough period or slashed weekly schedule means you suddenly have some extra time on your hands, you might be able to use those hours to your advantage. You could consider monetizing your hobby by selling your crafts on
Etsy , for example, or signing up to deliver those takeout meals everyone’s living on these days with Postmates .
If you were considering a career shift anyway, it might not be a bad idea to keep your ear to the ground for new opportunities. Some industries, such as digital communications platforms, have actually seen increases in hiring as a result of the pandemic. The unemployment rate is still more than 6%, so if you’ve still got a job, you might consider keeping it until you’ve got something else locked in.
Planning for the Future
Although it might not change much about your current circumstances, planning and preparing for the future can be a great way to increase your peace of mind today. After all, as 2020 has shown us time and again, you really never know what’s going to happen.
If you have any amount of income at all right now, it may be worth setting aside an emergency fund to make it easier to weather this kind of storm in the future. Having three to six months’ worth of living expenses, including all of your fixed costs, like rent, taxes, and car payments, as well as discretionary but still necessary expenses such as food and gas is recommended.
SoFi Checking and Savings® is a cash management system that can help you get a handle on exactly where your money is going now. There are no account fees and everything can be managed from the comfort of your cell phone.
One feature of SoFi Checking and Savings is the vaults feature, which allows you to earmark savings for a variety of different goals, whether you’re still working on your emergency fund or aiming to take that vacation so desperately needed after all this mess. You’ll also continue to earn interest on the funds while you’re saving, and there’s no limit to how often you can transfer between your spending balance and your vaults.
SoFi has also partnered with a range of trusted insurance products to offer life, auto, homeowners, and renters coverage through SoFi Protect. You may be able to save money on your existing policies by switching, or simply provide a new level of security for the future during these uncertain times.
Turning Troubles into Opportunities
Although income cuts are no one’s idea of a good time, the chaos surrounding the coronavirus does offer many Americans the opportunity to take a closer look at their finances and their careers. Although many of the changes we’ve undergone over the last few months weren’t expected, that doesn’t mean they have to be completely negative!
Along with the products mentioned above, SoFi also offers its members free one-on-one consultations with career coaches who can help you unlock your potential, even in the post-pandemic world.
SoFi Checking and Savings
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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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