How a pay cut should impact your debt payoff plans

I find myself in a tough spot and I am not sure what to do in this situation. My husband recently lost his position within the company he works for. They offered him an alternative position that unfortunately has significantly less pay than his previous position. I work full-time as well, but do not make a significant amount either. We have 2 children, one in daycare and the other attends school full time, but we do have to pay for after school care for him. We own a home, have student loan debt, 1 car payment, and 3 credit cards we have stopped using and are trying to pay off the balances for. We have a very small amount in savings and we both have retirement savings through our work. I feel overwhelmed and not sure what our plan should be. Do we continue to try to pay off our debt as a priority or do we need to shift priorities? Should we look for new better paying jobs, part-time jobs? I am honestly concerned about being able to cover all our bills, but I don't know how to free up more money. Appreciate any information you have.

- Deborah

I can definitely appreciate the tough spot that you are in. I would suggest that you do everything that you just said. I would continue to pay off the debt, you may have to apply a smaller amount to it in the short term, but it is always best to get out of debt and once that is done, that money is free to take care of other needs.

Also, start looking for better paying jobs, as your kids grow older, their needs will only increase so if you and your husband can find better paying jobs now, so much the better. I am glad that the company offered your husband another job and that they didn’t just let him go. This is happening to a lot of people and restructuring around this new reality can be hard, but you can do it.

And a part-time job would help tremendously. Since you have two children I think it may be hard for both of you to work two jobs, but possible and prudent for one of you to do so. This will help decrease the shortfall left by your husband’s new salary.

I would also suggest finding ways to cut back on your spending. Join a warehouse club like Costco or BJs (I absolutely love Costco and I stock on up essentials that I know I will need and it lasts for months at a time and then I am only in the grocery store for specific things. Example, instead of buying 2 rolls of paper towels for $5.00, buy 12 rolls for $10.00 and you know that you are going to need paper towels and you save so much money over time.) Carry lunch and snacks to work, curb eating out and even ordering pizza until you get the finances under control. Check cable bills and cell phone bills for places to save money and all of this money can go towards the debt you are trying to pay off or making up lost income.

Right now you may be feeling like you are swimming against the tide and that is reasonable, but take a couple of breaths and map out a plan and stick to it. You can do this.