MU Extension MU Extension       University of Missouri    ●    Columbia    ●    Kansas City       Missouri S&T     ●    St. Louis


When Your Income Drops, Take Control

Joyce Cavanagh, Ph.D., Former Consumer & Family Economics State Specialist,
College of Human Environmental Sciences, University of Missouri-Columbia

No amount of money or planning can guarantee that your family will not go through a disaster at some point. Disaster comes in many forms and can vary in the severity of its impact on your family. Disaster can strike at any time. Unfortunately, disaster has not only traumatic emotional consequences but often negative financial consequences as well.


Natural disasters, sudden military deployments, layoffs, family changes, medical emergencies and divorce can all lead to a drop in income. You may begin feeling a large amount of stress because of your situation. However, with some planning you can take control of your finances. The following steps will help.


1. Try not to panic!
Though your natural tendency when your income drops may be to worry and wonder how you'll make it, try to remain calm. There are resources that can help you through this difficult time. If you feel a great amount of stress, you will not be able to think as clearly and you may make decisions that you will later regret. Try to keep a routine schedule in your life for consistency. Attempt to eat well and get enough sleep.


2. Take stock of what you have and what you owe.
Begin by taking an inventory of all the resources you have. Get out bank statements, investment papers, retirement funds, and insurance information. Consider all of your resources such as cars, your house, various equipment you might own, etc. Examine how much debt you have as well. Look at any loans you might have along with credit cards. Determine what regular monthly bills you have and if you will have any irregular amounts due within the next few months.


3. Make a plan and stick to it.
After you have inventoried your situation, it is now time to make a plan for how you will adjust your spending and pay your bills. Prioritize bills by which is the most important. At the top of the list, should be bills that:

  • Maintain shelter (rent or mortgage);
  • Maintain vital services (utility, phone, transportation insurance);
  • Cost the most to postpone (bills with late penalties, repossession or disconnect/reconnect charges); and
  • May be vigorously collected.

Take a look at how much income you will have and make a plan to apply that income to your bills. If you find you cannot cover all of your bills, call creditors and discuss your situation. You should call them as soon as you realize you won't be able to pay all of your bills. Do not wait until you have already been turned over to a collection agency; it is generally too late at that point in time to work out a payment plan. Most companies are willing to set up a plan with smaller monthly payments for those people who find themselves in need. It is difficult to admit to someone that you cannot make ends meet and that you need help; however, it may spare you from ruining your credit record and from having your belongings repossessed.


The most important aspect to remember after you have set up a plan with a company is to stick to it! If you find that you still cannot make the payments, call the company again and see if the payments can be reduced even further. Companies want to see that you are putting forth an effort to pay your bill; therefore, communication with them is so important. If you simply don't pay your bill or don't stick to the payment plan, they will most likely not be willing to help you.

(If you find that you are having difficulty putting together a payment plan and working with creditors, you may consider contacting a Consumer Credit Counseling Services near you. They are a not-for-profit organization that helps people organize their resources, set up payment plans, and better manage their money.)


4. Decide where you cut back.
Put on your creative thinking cap and find ways to cut your expenses. It may be as simple as taking your lunch to work everyday instead of eating out or clipping coupons. Assess car insurance premiums to see if there are coverages on older cars that could be dropped or if deductibles could be raised (which will lower monthly payments). Call to get quotes from various insurance companies to see who offers the lowest rate. Look for sales on clothing and food. Avoid waste by turning off lights, reusing items (such as using coffee mugs instead of disposable cups). Walk through your house/apartment with family members to find creative ways to cut costs. Carpool with friends and neighbors and share services, such as babysitting. (For more ideas on how to cut costs, see the Extension guidesheet, "Money Management: Living on Less")


5. Find ways to make extra money in times of need.
You may find that just a little extra income would help you squeeze through the hard times. Clean out your house and have a garage sale to make a few extra dollars. Put your skills to use. Can you sew? Paint? Clean? Babysit? Make home repairs? Ask friends and neighbors if they need any work done that you could help with. Children may be able to help by getting after school jobs or doing work around the house that an outside person would normally do.


If your income has recently dropped significantly, your first instinct may be to give up hope. However, if you take some time to organize your assets and find creative ways to effectively use your skills and your resources, you will find that you can take control of your situation and keep yourself afloat.



References:  Janice Holm Lloyd, Sharpen Survival Skills When Your Income Drops, North Carolina State University Cooperative Extension, FCS-323-8.




Last update: Monday, July 06, 2009




University of Missouri logo links to

Site Administrator:
Copyright  ADA  Equal Opportunity

MissouriFamilies is produced by the College of Human Environmental Sciences,
Extension Division, University of Missouri