We should all plan for a pay cut

By Mary J. Anderson, University of Minnesota Extension

ST. PAUL, Minn. (4/14/2008) —I still have my job. I still get the same salary or hourly rate. I may even receive a cost-of-living increase in my paycheck. But cost-of-living increases in pay will not come close to the increases we will see in the price of food, fuel and housing. 

These prices could double when we compare last year’s prices to what they might be by mid-summer. Many families will experience a significant decrease in their ability to purchase many of their basic needs. 

Most employers are experiencing these same increases in their transportation and raw product input costs. When employers absorb these expenses to stay competitive, it is unrealistic to expect to see increases in our paycheck from these employers. Job bonuses and pay increases are unrealistic in developing a family budget.

How can we adjust to this decrease in disposable income? 

Become aware of where your money is really going and write it down for your family to see. Is any of that money being spent on things that are not really needed?

With a decreased income, make a list of the most important things that need to be paid. Make a list of things you can do without until this situation improves.

Once the family has agreed on a financial recovery plan, act quickly to implement it. It is important to stop the bleeding before the financial health of the family is at risk. Remember preventive medicine is a lot less painful than shock treatment near the end.

Any use of this article must include the byline or following credit line:
Mary J. Anderson is a family resource management educator with University of Minnesota Extension.

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