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What to Do When Your Income Drops

By Amanda Christensen

A short-term loss of income can be devastating. There are steps you can take to look ahead and plan how to weather the storm. Read through the four steps below then download the FREE printable: What To Do When Your Income Drops: Four Steps to Create a Short-Term Plan and fill in your answers. This process will help you inventory, brainstorm, and create a short-term plan to get back on your feet. Keep reading for Step 1…


Begin by “inventorying” your 1) monetary and human capital, and community resources and your 2) fixed, flexible, and occasional expenses.

1. First, make a list of all resources available to you. Include monetary resources such as assets, income, savings, and cash, as well as human capital resources to include talents, skills, education, time, etc. Anything that could contribute toward household expenses or income should be listed. Next, identify community resources that may be used temporarily to supplement your income or reduce expenses. Once you’ve completed your inventory lists, it will be clear what resources you have and what you need to cover. NOTE: It is important to leave retirement investment assets alone for financial planning purposes. Borrowing from retirement accounts is for a worst case scenario situation. Consult with a financial professional regarding these decisions.

2. Second, inventory your expenses. List all fixed expenses, where the amount does not change, that you must pay every month. List all flexible expenses such as gas, groceries, and utilities. List occasional expenses that do not occur every month yet will be coming soon (within the next three months).


Next, use your inventory list to brainstorm ideas under each of the three sections listed below. Include a spouse/partner and family members who may need to be involved. Brainstorming can be a powerful tool to help you adapt and be innovative. During the brainstorm write down ALL ideas. Step 3 is where you can narrow down and choose your exact plan of action to move forward.

1. List ideas to temporarily simplify your lifestyle and decrease expenses
2. List ideas to increase income
3. Consider how community resources may help you increase income/decrease expenses.


Your next step is to make a short-term plan to adjust to your loss of income that includes the current resources available to you (Step 1), and the ideas you’ve brainstormed (Step 2). Choose options based on your immediate need. Prioritize your expenses by order of importance: food, shelter, transportation, utilities, phone, insurance, essential medications, etc. There are questions in Step 3 that may help you as you make your plan.


Revisit and revise your plan regularly until things stabilize. Repeat the three previous steps as additional information and resources become available. The four-step process will get easier each time you repeat and revise. Lastly, as you move into the maintenance phase, and your financial situation improves, continue to make purposeful decisions and prioritize purchases. Now is also a good time to replenish resources like your emergency fund, food storage and other savings.

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