There was a time when employees were virtually guaranteed a raise each and every year. Even poor employees typically got a raise that kept pace with the rate of inflation. This is no longer the case. As the budget cutbacks in Wisconsin have proven, any employee may be asked to take a pay cut. Since you never know exactly when you are going to be forced to take a salary reduction, you need to prepare your finances just in case. Here are a few tips that will help you prepare for a potential cutback.
Overstock your emergency fund
Most people will tell you to keep approximately 3 months of living expenses in your emergency savings. That may work during normal economic circumstances, but not today. You should stock your emergency savings account with at least a full year’s worth of salary. You never know what financial emergencies will arise and you want to make sure that you have enough money to survive a life changing situation.
Update your resume
Now is as good a time as any to start updating your resume. Don’t wait until you are in a negative situation to start updating your resume. The best time to start looking for a new job is while you still have your old job. Start updating your resume with newer job titles, job descriptions, educational, and contact information. Most employees can tell when they are about to either lose their job or be forced to take a cutback. You should prepare yourself in advance.
Shop your services
Just because your current employer is asking you to take a pay reduction does not mean that all employers would ask for the same thing. Start visiting sites like Monster and Careerbuilder to see what opportunities exist in your career field. You may be surprised to learn that other companies are willing to offer you a salary increase at a time your employer is asking you to take a cut.
Start reducing your expenses
One of the best ways to deal with a salary cutback is to eliminate some of the luxuries in your life. Try to shave the exact amount of expenses out of your budget equal to your salary reduction. Small adjustments to your entertainment and shopping budget might just allow you to adjust to a temporary salary setback without ever really feeling it.
Know your rights
It is perfectly acceptable for an employer to ask an employee to take a salary reduction. It is also just as acceptable for an employee to turn down this request. If you have a contract with the employer then they may not be able to legally lower your salary without your permission. You can often negotiate for extra perks in order to accept a reduction in income. You may be able to get more paid leave time, additional vacation days, or an increased bonus. You could ask for the option to telecommute as well.
Dealing with a salary reduction is difficult enough. Make sure that you follow these tips so that you are prepared.
So, have you ever been in this kind of situation? What have you found helpful?