Easing Down the Salary Ladder  

How to make the most of a reduced paycheque

Countless Canadians are earning considerably less then they used to and struggling to keep up with expenses. A wide range of circumstances can boomerang personal income back to where it started. Bubbles burst, the economy falters, companies downsize, and personal disasters happen. Perpetual salary growth–or even maintenance–is simply not guaranteed. However, by adopting the right tools and attitude you can thrive on a reduced paycheque.

Determine whether your situation is temporary or permanent

If you fully expect to be back in the work chair soon, you may only have to adjust to lessened cash flow for a limited time. But before you tap into your reserves (and retirement savings, home equity, cash value life insurance, etc.) it would be wise to behave as if the salary depreciation is lasting. Though both your gut and your resume may assure that a six-figure income is just around the corner, you can't know for certain until you are negotiating the fine points of your defined benefit plan. Cut down on spending now. Securing that job may be harder and take longer then you think.

If you anticipate never earning as much money as you once did, you may be experiencing anxiety and depression–normal emotions not easily shrugged off. There are practical matters to contend with as well, (such as how you will pay your bills) that can send you into panic mode. Adopting a systematic approach of simply doing what you can will take you far.

Recognize that your salary is not you

This is a deceptively obvious statement. Of course your salary is not you. But many people's self esteem directly corresponds with how much money they make–the higher the income, the more important they feel. If your mood declines when your income drops, make every effort to dispel the attitude that wealth equals worth. It does not, nor does having an abundance of money guarantee happiness. Think back to when you were making more money then you do now. Were you genuinely happier, or did you just have the ability to buy more?

Seize the day

Hardship can hone skills and challenge entrenched ideas. Perhaps you worked in the high-tech field because the money was good, but that is not where your passion (or even perhaps, talent) truly lies. Consider this your opportunity to discover what you really want out of life. After all, if you are going to dedicate 40 or more hours a week to your job, it should be something you love, or at least like. 

Adopting a systematic approach of simply doing what you can will take you far. 

If you are currently unemployed or are working fewer hours then you had been, use this “extra” time wisely. Your options are as varied and abundant as your desires. Consider taking a class–one that will boost future earning potential (to where it was or even beyond) or for pure pleasure. Write that book, paint the kitchen, start an exercise routine. Or just relax. Chances are, at the end of many a gruelling day at your former higher paid yet high-stress job, you said to yourself through gritted teeth “all I want to do is lay down on the couch, TV on, shoes off and do nothing.” Well now you can. Enjoy this time–it may not last forever.

Analyze your expenses and value system

When cash is copious, it is easy to spend arbitrarily. However, when the salary that sustained such a lifestyle is gone or drastically reduced, it's time to take a good strong look at what you need to spend your money on, not what you can. Prioritize expenses now, and identify which bills take precedence. Mortgage versus car payment? Credit cards versus utilities? Analyze the ramifications of missing or not paying each. If you need help deciding, contact an expert.

Develop a budget. It will help you to discern between those expenses you can and cannot live without. If you find there is simply not enough money to support your necessities, much less your desires, at the very least you now know how much you will require from your next job. If expensive (and expensed) dinners are now a thing of the past, relish in the delights of pizza, or making cold-cuts stretch with lots of lettuce. Enjoy and appreciate the things you may have begun to take for granted.

Article originally published in Volume 10-5 of Your Workplace magazine