Surviving Prolonged Pay Cuts

The most recent (un)employment report isn’t very positive.  Rather than indicating an improvement in the labor market that we had seen in recent months, September’s employment report seems to indicate that this recession, although perhaps past its worst will be slow in terms of a real recovery.  Anecdotely, the employment news seems to indicate that there are real structural issues, beyond the immediate cyclical downturn that are worrisome.  In particular, I am hearing that in certain areas and sectors, jobs are available, but they are for temporary, contract work, or at substantially lower salary wages than previous positions.  It looks like housing prices and stock market prices might have adjusted rather suddenly, but wages may have some time to stagnate further.

I have previously written about my own experience dealing with a (voluntary) 80% pay reduction to leave the corporate world and pursue spend my professional time in the non-profit world.  Much of the advice then is equally if not even more applicable to a lot of people today, whether they might be fully employed, underemployed or fully unemployed:

–Match your actions with the situation — in today’s environment, it’s normal to expect a longer wait and job search before securing another job, it is also normal to expect that the new job might come at lower salary levels. Emergency funds and budgets should be adjusted accordingly

–Be open minded about making large changes — in particular, moving locations, sharply reducing expenses (say selling the house) or starting your own small business.  If there’s any upside to recessions, it must be the new startup entrepreneurial spirit.

–Weigh the costs and benefits of returning to school — although I am a big backer of higher education, I am becoming increasingly wary of the debt burden most people undertake these days.

–Explore frugal living from an ecologically sustainable standpoint — it can be grueling and mind-numbing to always feel that you are pinching pennies just to for the savings.  When you incorporate frugal habits that are also environmentally friendly, it helps to put things in a more positive light.

shared at this week’s Carnival of Personal Finance