Do you think you can survive a lower income? Maybe you can if you are working from home.
According to a study published by the National Bureau of Economic Research, the average worker is willing to give up around 8% of their wages if that means they get to work from home.
Remote work is nothing new. This is actually a common practice among small businesses. Thanks to the Internet, people can transact and do business even if they are not in the same room. You can meet, talk, chat or hold a conference even if the people you are communicating with are miles away – or even in a different country. This is great for small businesses because it lowers their overhead costs. It allows them to tap into a workforce willing to take a lower paycheck if that means they can stay at home.
Truth be told, this is the perfect working scenario for parents with young children. Instead of just staying at home to take care of the kids, stay-at-home parents have the option to work for a living – even if it means it is only part-time. This is a great way to make ends meet while taking care of other important family matters.
In fact, even multinational corporations have come to accept the value of remote work. Not only will it help lower their overhead costs, it also allows them to tap into the talent of those who are forced to stay at home due to personal circumstances (e.g. disability, family responsibilities, etc). It is a win-win situation even if the company asks you to accept a lower income by working from home.
How to live on a lower income when you work from home
When we realize that we have to survive on a lower income, it can sometimes be quite scary. After all, the cost of living in the United States is rising. According to the data from CareerTrends.com, a married couple would need an average of $3,304 a month to live comfortably. If they have one child, it goes up to $4,681 a month. The more kids a couple has, the higher the amount that they have to spend each month.
When you are offered to work from home but it comes with a lower salary, it might make you hesitant to accept it. But before you turn it down, you may want to consider how beneficial it really is to your finances. Think about what you can save on childcare costs. You do not have to pay for expensive day care services. Since you are staying at home, you can look after your kids yourself. This is easier when they are bigger because they need less supervision from you.
Try to weigh the pros and cons. Do not be too quick to decline because of the lower pay. This shift might end up being more financially rewarding for you.
Of course, this would mean implementing financial management skills. You cannot just go from a high-paying job into a lower one. It is easy to say that you can survive a lower income but it can be tough to follow through. To make the shift less painful, here are some tips that will help you survive a lower income.
Revise your budget plan. With any change in your life, it is important for you to look at your budget plan first. You want to make sure that you can see how the changes that you encounter will affect your financial situation. In this case, you know that there will be a significant effect because you have to live on a lower income. Consider how big the change will be and what expenses will be affected by this change.
Identify the expenses that you will save if you work from home. We already mentioned a couple of savings that you can get by working from home. If you have kids, it will impact your child care costs significantly. But even if you do not have kids, it can also help you save in many ways. For one, your clothing expenses will go down. After all, you do not have to dress up for work – at least, not every day. You can also save on your commute. You do not have to worry about paying for gas or your fare to go to and from work. Even your meal costs will go down. You do not have to be ashamed of eating the leftovers from last night. You also have more time to make home-cooked meals. This is not only cheaper but healthier too. Think about these savings and consider them as you revise your budget.
See what other expenses you can give up. In case there are areas that your new income level cannot cover, there might be other expenses that you can give up. Of course, you cannot compromise your Internet connection. In fact, you may have to boost your subscription to improve your connectivity. But there are other areas that you can give up. For instance, it may be wiser to let go of your cable subscription because you can always watch live streaming online. Since you will give your Internet a boost anyway, this should be quite convenient.
Find other sources of income. Of course, you can always look for other sources of income. There are a couple of online careers that you can tap into for additional income. These can be done part-time. It all depends on your skills and availability. But there is no doubt that there are a lot of options out there. So in case it is proving to be difficult to survive a lower income while you are at home, this is one option that you can always fall back on.
Financial preparations before getting a lower income
While the prospect of working from home may be appealing, you need to make sure you go through the right financial preparations. You do not want to blindly jump into this type of work because it does entail some adjustments.
According to an article published on Boston.com, some people are even willing to take a pay cut of up to $7,600 if it means they can enjoy a higher quality of work life. This amount is not a laughing matter and you are sure to make a lot of lifestyle adjustments to make ends meet. But like we mentioned, working from home involves a couple of give and take for your finances. For you to survive the shift, here are some financial preparations that you need to go through.
Make sure you have enough emergency fund. Your emergency fund represents your security blanket. You want to make sure that you have enough money in this fund to help you live a couple of months without a stable source of income. That way, if the work from home thing does not work out, you have the option to stop it without worrying that you have nothing to spend while looking for a traditional 9-5 job.
Discuss the changes in your expenses. Sit down and talk to your spouse or partner about the possible changes that will happen as you try to survive on a lower income. If you have kids, you may want to include them in the conversation as well. If you have to cut back on some expenses, everyone should chip in. This will help make the transition easier for the family.
Identify areas in your life that you can downsize. As you are discussing with your significant other or family, it may be a great time to talk about downsizing your lifestyle. You do not have to become a minimalist – unless you want to. While it can help you make ends meet, it is not a necessity to help you survive a lower income.
When you are working from home, the challenge is not just focused on your finances. You also have to make sure that you can be productive at home. If you have kids, this is not as easy as it sounds. Of course, to continue earning a living from your house, you have to be productive. After all, increased productivity means you get to earn more. Here are a couple of tips that you can follow to stay efficient as you work from the comforts of your home.
Common questions about living on a lower income
Question: How can I live on a lower income?
Answer: You can always live on a certain amount of money as long as you are willing to live the appropriate lifestyle. It helps to focus on what is essential in your life. As long as these are met, then you should be alright.
Question: Is it possible to save despite a lower income?
Answer: Of course it is. The thing about saving is you do not have to concentrate on saving a huge amount. You can start small. As long as you are consistent about it, you will reach your saving goals.
Question: What are the different ways I can supplement my lower income?
Answer: There are a lot of side gigs out there. The question is, what are you good at? Depending on your skill or talent, it is possible to find a second job that can help increase your monthly cash flow despite a lower income.
Question: What expenses can I sacrifice to live on a lower income?
Answer: Create a list of expenses and separate your wants and your needs. Start by allocating money to your ‘needs’. Make sure these are met. If you have any extra money after your need list is satisfied, that is the only time you can look at the ‘wants’ list.
Question: Is it necessary to be frugal to live on a lower income?
Answer: It is not a necessity but it can certainly help. Being frugal is not just about pinching pennies. It is more of changing your mindset about what is essential to survive despite having a lower income. You can live off a minimum wage if you are frugal enough to understand your priorities.