Free Debt Analysis     (888) 986-9939


Avoiding Debt With Budget Changes

By: Michael Millington

Debt waits for no man, or job for that matter. When you have a steady job paying off your debts comes as second nature. But when you lose your job you have to adjust your thinking and your debt payment strategy. It’s a little easier to disregard debt when you’re unemployed because you simply don’t have the money to pay what you owe. Your budget doesn’t consist of much if you don’t have a steady income. But there are some cases where you don’t lose your job but you take a pay cut or you’re transferred to another position with a different amount of income. These changes in finance are less drastic than unemployment but still require planning to deal with debt.


Account For Budget Changes

You’ve become used to making certain payments on your bills, debts and other obligations. Some of those will stay the same as they are necessities, but you’ll definitely need to account for the change in funds you’ll see in the upcoming months. Make sure you can still take care of the core finances while reworking your money around smaller, less important costs.

Many budget applications can have you instantly plug in your new income to calculate what your new monthly budget will be. This is an easy way to quickly gain insight to what you need to do with your money going forward. If you prefer you can do your budget yourself and draw up a new monthly spending allocation. Just make sure you have an accurate picture of what you make and what you need to spend.

Accounting for budget changes isn’t just about knowing what numbers to put in. You must have a realistic view on what you can and cannot pay for. A change in income calls for a change in lifestyle and behavior. Not being honest about what you can handle financially can land you in bad debt quickly. The first thing you must get used to is the idea that your life will change along with your budget. Once you do that you can be certain to avoid debt even if your earning potential has decreased.


Cut The Fat

Even though you may not want to admit it, there are things you buy each month that you can do without. It is important to be honest with what you can handle financially in order to keep debt related situations at bay. The main things you must account for are your living expenses (rent, mortgage, food, utilities…), your savings and your emergency funds. Remember, the formula stays the same, it’s just the numbers that change.

This doesn’t mean you have to live bare bones, but in order to avoid adding unnecessary debt to the equation you will have to exhibit strong behavioral qualities. Budgeting isn’t always a strict plan when you have a sizeable amount of throwaway income. As your overall income decreases your throwaway income should be the only income that shrinks exponentially. If you find that your overall income shrinks too much or disappears completely then seek temporary assistance in handling the main priorities you have.

Be honest about your monthly spending habits and scale back whenever you can to avoid gaining debt you can’t handle. Cook more instead of eating out. Cancel monthly subscriptions to services you can do without for a while. Look through your monthly bank statements to see if there are any odd charges and have them cancelled as well. Just remember the goal is to live comfortably, not scarcely. You can still do things outside of your immediate budget, just as long as it doesn’t add to your debt.


Let Your Creditors Know

It’s always a scary thing to talk to your creditors, even when you have a well-paying job. Creditors won’t hesitate to try and retrieve the money they are owed because they don’t want to lose out on what they’ve let you borrow. If you end up losing your job or are otherwise unable to make a payment on a bill it’s in your best interest to contact a creditor and let them know your situation.

Being proactive about your debts is the main way to show creditors that you’re working towards paying them what you owe them. Try to have a working relationship with your creditors so if you happen to hit a rough patch you’re able to have an increased comfort level with your lenders. This can help when you need to negotiate having your debts avoid going to collections.

Also, try not to let the only time you contact your creditors happen because you’re struggling with payments. Make sure you ask a question whenever something comes up. Call to see what you can do if you fall into a bad situation before it happens. Keep your creditors informed if you experience major life changes. Whether you move, lose or gain a new job, get married or have kids, let your creditors know. This will help you negotiate payments, credit line increases and APR reductions.


A change in employment will lead to a change in lifestyle, but it doesn’t have to mean an addition of debt. Make the adjustments to pull yourself ahead of the situation. Contact your creditors and inform them of your new financial situation. Rework your budget so you know what you can spend each month. Eliminate the unnecessary expenses you have each month and become comfortable with your new level of income. Most importantly, try and get yourself a new form of employment. The faster you increase your earnings the less time you spend working on your finances.

  • Take the first step!