No more income — now what?
Extraordinary times call for extraordinary measures to deal with financial loss and negative emotion
For all of us, “normal’’ life has disappeared during lockdown. But for some, this comes with an additional challenge — suddenly losing your income. Business owners or consultants have had their clients suddenly cancel work scheduled, while shop and restaurant owners have been ordered to close.
Many salary earners have been asked to take a 20% to 50% cut in salary, and already some are facing retrenchments.
For any of us, that has a huge effect. But when we have had no time to prepare mentally or financially (slowly reducing expenses), it feels like we just got hit by a bus. Debit orders keep coming and we know that we’re about to hit a serious problem.
The situation is exacerbated by the feeling that you are unable to control the outcome. So, here are a few strategies to help you get on top of this.
Step 1 — Get the family on board to cut your expenses
You and your family need to tackle your spending together. If you’re in lockdown, it’s easier not to spend. But when the restrictions lift, you will need to resist the temptation to open up on your spending, as this is only the beginning of the pandemic and its effects.
The quicker you cut expenses, the longer you will be able to last with less income. Cut deep quickly — if it’s not essential, don’t spend on it.
We did this as a family when I decided to stop corporate work to start my own business. One of the biggest lessons I learnt was the positive effect that the family approach had on my children. They are now much more mindful of the cost of things, much more sensitive to what they ask for, and much more appreciative of what they have, and of waste.
Step 2 — Renegotiate your expenses
Phone anyone with whom you have a monthly debit order and tell them that you are looking at cancelling it as your income has dried up — and ask them if there is a better deal.
I have a subscription to the Financial Times. Three weeks ago in anticipation of this lockdown effect on my business income, I got onto the online chat function with a rep, and asked to cancel. They immediately gave me a 20% discount. I was pausing in responding because I really wanted to cancel, and they immediately gave me another 10% discount. It amazed me how easy it was to get a better deal for the exact same thing.
Short-term insurance — such as car and home insurance is another one that I renegotiate at least every two to three years. The great thing about that is that you can send your existing schedule of insurance and get a like-for-like quote.
One warning though, make sure that it’s a like-for-like quote with a reputable insurer because you need them to pay if you claim.
Cellphone and data packages are another hidden money guzzler that you can relook as there are new offers all the time. Also, don’t fall into the trap that when your contract has ended, you must get a new phone. If your phone is still fine, convert to a pay-as-you-go, or low monthly fee contract. Reduce your monthly repayment by at least as much as you were paying for the loan for the phone (and the interest on it).
Step 3 — Get onto Plan B as soon as possible
You have to get other sources of income now. I have watched friends and clients over the last three weeks be completely paralysed by the financial effect of losing their income. While I understand the emotional effect, every minute not spent coming up and trying new things, is time with no revenue ... and expenses continuing to come through.
Again, don’t underestimate the powerful lesson your children will learn by seeing you do whatever it takes to earn an income. When I was in seventh grade, my father's business was bought by another company. There were two CEOs, so that CEO stayed on and my father lost his job.
I watched as he made an interim plan to get some money in before his next CEO job came through. As an adult, I can now appreciate how unbelievably tough it must have been to go from CEO to side hustler. But he did what he needed to do to keep food on the table and limit the hole that no income puts in your savings. And in the process, he taught me what it means to take responsibility, to make the best out of whatever situation you find yourself in.
There are many ways to make money online. For example, companies are always doing market research and they will pay you to fill in online questionnaires. Many people launching a new website will also pay for you to do the “usability testing”.
Step 4 — Journal
An additional challenge of losing your income is that it's loaded with emotion — disappointment, anger, disbelief and much more; expectations that you’ve put on yourself (or your partner) that you are now no longer able to fulfil.
One of the problems if you do kick straight into survival mode is that you often don’t take the time to work through this — you just bury the emotions.
The danger of this is that the emotions resurface — either the next time it happens, or when you retire (because retirement mimics this situation of no more income, but expenses to pay).
There is significant power in journaling. There’s a lot of proven brain science behind why it helps to resolve issues, reduce stress and improve health — even in people who only journal once a month. So get a pen and a book and write.
It’s not going to feel great when you have to fill out repetitive online surveys for small amounts of money or when you have to cut out the things you normally enjoy. You are worth so much more, that’s not under discussion.
Extraordinary times call for extraordinary measures. And, like all times in life, this too shall pass.
• Linfield is an independent financial adviser at Southern Pride Wealth who holds the Certified Financial Planner accreditation and is the founder of Working Women's Wealth, an initiative to empower woman to make, protect and invest money.