How to survive a pay cut and emerge stronger

Be it forced no-pay leave, reduced working hours or redeployment to other positions, an unprecedented number of workers are facing pay cuts as a result of Covid-19.

If you have been affected this way, fret not. Here are five ways to survive the crisis and come out stronger.

Deal with your feelings

A pay cut is by no means a minor event.

Having a reduction on your income forced upon you likely means not only short-term sacrifice, but it could also affect your longer-term goals and force you to rethink your financial plans.

It is normal to feel anything from anger and resentment to panic and disappointment, and you should give yourself time and space to deal with your feelings.

As much as possible, you'll want to work towards acceptance so that you can move on without being held back by unresolved fear, anxiety or shame.

Re-do your budget

Part of the difficulty of dealing with a pay cut comes from the fact that we are creatures of habit. Because we grow accustomed to a certain lifestyle that comes with a certain level of income, suddenly having to adjust to a lower budget can be disorienting.

Redo your budget to fit your lowered income by grouping your expenses into three colours - green, yellow and red.

Green represents expenses that need to continue (utilities, mobile service, meals, groceries, insurance premiums, other essentials).

Yellow are expenses that you reduce or put on hold (credit card debts, loan repayments), while red are expenses that you stop completely (holidays, entertainment, coffee, recreational classes, memberships or subscriptions).

Take stock of your war chest

The next step is to take stock of how much money you actually have and how long it can last you according to your revised budget.

The money for your war chest comes from your savings, bonuses (such as severance pay, if you were retrenched), dividends, endowment cashback, personal loans and other easily accessible forms of cash.

You may include your credit cards in your war chest, but you must use them only for one specific feature - the 0 per cent interest instalment payment.

This converts a big-ticket purchase into a 12 or 24-month instalment plan with 0 per cent interest charges.

Use this at eligible merchants to pay for costly essential items, such as laptop computers or a new air-conditioning system, but be sure to make room in your budget for the instalment payments, lest you get slapped by penalty fees.

Taking stock of your war chest also gives you a timeline that tells you how long you have till things become unsustainable and you absolutely have to get your income back up.

Explore part-time or freelance assignments

Make use of your newfound spare time to explore part-time or freelance assignments that are aligned to your interests. You will supplement your income, but more importantly, you can have the opportunity to try out different jobs and projects in sectors that you are interested in.

Through these, you can showcase your talent, gauge your aptitude among professionals and make important contacts - three crucial factors you will need to build a thriving freelance career.

Even if you don't want to fly solo, you can use this opportunity to create a side gig to generate replacement income while you work out your next career move.

Pivot to a new job function or sector

Recognise that pay cuts are a way for companies to reduce expenses and save jobs - it doesn't mean that your skills and experience have fallen in value.

Someone with your professional profile may attract a higher salary in a different sector, or you may be able to go back to your old salary in a different job function.

Now is the time to be flexible and brave, and open yourself up to multiple career paths. At its core, every job is about solving a problem or fulfilling a need. This means that your skills and experience may be more transferable than you think.