Explore ways to reduce monthly fixed expenses
Just because something is a fixed expense doesn't mean you can't change it, at least temporarily. Here are some places worth exploring.
Student loans. If your income is reduced significantly, you may be able to temporarily reduce (or pause) your monthly student loan payment. Depending on the type of waiver you get, your principle may or may not continue to accrue interest. Options include student loan deferment,2 income-driven repayment,3 and forbearance.4
Health insurance premiums. These can be a significant burden on a family, especially if you lack employer-sponsored healthcare. If your pay goes down significantly, talk to an accountant or other tax professional about whether you'll ultimately qualify for an ACA subsidy given your reduced wages.
Consolidate credit card debt. Can you transition your outstanding debt to one credit card especially one with a lower interest rate?
Reduce your savings
Retirement savings is one of the last things you'll want to cut, especially if you are getting a tax break for your contributions. For example, if your top marginal tax rate is 20%, contributing $100/month to a tax-deductible retirement account only reduces your ultimate take-home pay by $80/month.
- The status of your current emergency fund. If you don't have at least 3-6 months of living expenses saved, consider prioritizing building your emergency fund over saving for retirement, at least temporarily.
- Credit card debt. If you have outstanding credit card debt, you may want to consider reducing your payments to your retirement rather than just making the minimum monthly payment. This is especially true if you're paying a high interest rate on your credit card debt.
If you have a spouse who is still working and has access to employer-based 401(k) matching funds, try to prioritize making the maximum contribution if you can, because otherwise you're leaving free money on the table.
Remember, this decrease is your monthly income is almost certainly temporary. Getting creative about living within your new means will ensure that you can weather the financial storm and not be saddled with extra debt when your income returns.