Most people react to an unplanned pay cut in the same way they would to an unplanned haircut: utter shock, followed by breath-taking panic. Thankfully, money is more important than hair. No, seriously, it is. The good news is that with a little planning you can prepare for an unplanned pay cut. You may still be shocked, but you won’t need to panic.
Think about a pay cut like any other life interruption, except that in this one you may need help with bills. All deviations from plans can affect our mental health, but how we deal with them defines how well balanced we really are. Gaining control of an imposed situation requires three steps: define it, measure the impact, and implement a measured response:
1. Define it
Ask yourself: How much has the pay been reduced, and for how long? What costs will be reduced as a result? In other words, what precisely are the parameters of this change?
Suppose my pay is cut because the company wants to reduce my job to four days a week in the off season. At first I’m shocked, having not seen this coming and panic creeps in. How I will pay my bills? Then I look to define the situation; 20% of my pay for 12 weeks of the off-season with a reduction in variable work expenses. Okay, so how bad is this?
2. Measure the impact
Consider in specific terms: How much is this going to cost me? If I was earning $800 a week, I’ll lose $160 a week times 12 weeks is $1,920, and if I was spending $120 a week on variable work expenses (transportation, coffee, lunches, etc.) the net cost will be $136 per day or $1,632 in total. Knowing the damage, what can I do about the impact?
3. Implement a measured response
A measured response is the action(s) I’m prepared to take to meet the challenge imposed by the pay cut: changing my cellphone plan to save $25 a month won’t cut it; while selling my house to cover $1,632 is probably overkill. Here are some examples of a measured response:
Every pay cut will come with different parameters and their own challenges, but any pay cut situation can be eased by following these three simple steps. So relax, if it ever happens to you, you’ll be ready, and if you’re still checking the length of your hair, you’re probably reading the wrong blog!