A pay cut, whether big or small, can catch you off guard—and throw your finances into disarray. While a salary cut is different than a layoff, it can leave you feeling just as uncertain.

How do you deal with a pay cut and deal with this uncertainty?

There are strategies to help you navigate both the emotional and financial challenges of this situation. One key element? A budget. Whether you need to create a budget from scratch or adjust the budget you already have, doing so can help you get back on your feet and set yourself up for success.

Here’s a rundown of budgeting tips to survive a pay cut to keep your finances intact:

Ask your employer for the parameters of the income reduction or salary cut

First, keep in mind that a pay cut typically isn’t personal. According to Scott Bishop, an executive vice president of financial planning at a wealth management firm, businesses often cut salaries to preserve their cash reserves while they stabilize their cash flow or weather some larger economic impact, like the coronavirus pandemic.

A salary cut can leave you feeling just as uncertain as a layoff. Fortunately, you can get through it with the right strategy.

Secondly, make sure you understand the full scope of the salary cut. Bishop suggests you ask your employer questions like:

  • What is the amount of pay being cut?
  • Why is pay being cut?
  • When will the reduction begin, and how long will it last?
  • Will any of the following be affected?
    • 401(k) match
    • Healthcare or insurance costs
    • Employer-sponsored training or continuing education opportunities
    • Hours or job responsibilities
  • What are the long-term plans to improve the company’s financial situation?

Once you’ve painted the full scope of what and why, you can determine how to handle the pay cut.

“For some people who are big savers, it might not be a big deal,” Bishop says. “But for some people who live paycheck to paycheck, it’s going to be significant.”

It's easier to determine how to handle a pay cut if you understand the full scope of the cut.

Settle any anxieties that might come with a salary cut

If you are dealing with financial stress, try settling your mind and emotions so you can make decisions with a clear head.

“The emotional and mental toll can be one of the hardest parts,” says Lindsay Dell Cook, president and founder of Budget Babble LLC, which provides personal finance and small business financial counseling. “It gets even harder if there are others depending on your income who are also financially stressed.”

When sharing the news with family members who may also be impacted, Cook suggests the following:

  • Find the right time. Pick a time of day during which everyone will have the highest mental capacity for the conversation. “For instance, I am a morning person, so if my husband told me at bedtime about a pay cut, I would have a much harder time processing that information,” Cook says.
  • Frame it as a brainstorming session. Bring ideas of what you can do to handle the pay cut, such as a list of expenses you can cut or a plan for how you can make extra income.
  • Empathize with the other person. “Reduced income is not easy for anyone. Everyone responds to financial anxiety differently,” Cook says.