How to survive a salary reduction

The financial impact of the Corona virus is likely to be considerable - at a micro and macro level, we see the fragility of world trade, the impact of globalisation and the inter-dependence of economies on each other. As the impact of the Corona virus starts to affect the economy, reducing demand and risking jobs, it is inevitable that for some, Corona virus is going to impact their salary (temporarily, or on a longer term basis.) For those facing a potential change in their salaries due to economic uncertainty, here are my four pieces of advice that might help others in similar situations.

(Re)learn to budget: As a student, living off the allowance from my parents, I had to learn to budget. Early in the academic year, I'd blow too much money on Doctor Marten boots, clothes, CDs and partying - so by the end of the term, money was tight. It came down to choosing between either potatoes or bread, coffee or milk. Quite often, getting together with friends to combine the frugal budget meant we got more choice (and a great way to bond.)

Fast forward a couple of decades, and budgeting didn't seem so necessary on a decent London salary - nice clothes and nice holidays could both happen. With a reduction in salary, you need to draw on those rusty budgeting skills. It's not that you can't have most of what you want and need, you just need to consider how and when you buy. There are plenty of impartial websites and communities online sharing tangible and practical advice.

Live like locals: Years of London life with a comfortable salary shielded me from the daily and monthly challenges faced by people in making ends meet. Ironically, I spent a few years working for a company that was trying to help people budget and plan their finances more successfully! One of the greatest adjustments I've faced in my move to Portugal was a salary reduction compared to London. Whilst life in Portugal costs less than UK, any change in income presents a challenge. But iff it was all about money, the rich would always be joyful and the poor would always be miserable - this is far from true! It may sound twee, but focusing on the simple things in life can be very rewarding.

For example, in Portugal, the way people socialise is quite different than in the UK. Rather than "big nights out" with a hefty budget to spend, I observe a lot more impromptu social events, friends meeting up for a couple of hours to chat, laugh, catch up - it's much less about drinking and eating (and spending money) and more about enjoying the interaction. It's something I'm trying to learn from. A great night out doesn't need to be expensive, thanks to learning to live a little more like the locals! Seeing with fresh eyes how other around you approach life and life's challenges is a humbling way to learn, and proof that you can still have much of what you want.

Master the art of compromise: Big brands really get into our heads. There can only be ONE type of tomato sauce, breakfast cereal, vacuum cleaner, mobile phone - and anything else is unacceptable, inferior, sub-standard, not the real thing. It's of course utter nonsense, and deep down, we know that there is little tangible if any difference between our favourite chocolate bar and the competitors. When budgets are tight, this becomes even more relevant. In the UK, budget retail chains such as Aldi and Lidl have managed to convince the average UK shopper to switch away from their normal supermarkets to save on their weekly shop, eroding the profit margins of market leaders and shaking up the sector altogether. Beyond just purchasing stuff, there are so many areas in which we can compromise to have a happier and more successful life.

Prioritisation is one skill that every human being should be proud of - to take into account various factors and make a decision based on that information. Compromise is the next level up - to re-assess all the factors and change the priority based on the revised information. Every financial decision has an impact, so if you remember to consider the impact and where a compromise can be made, it will eventually become second nature. It's a skill parent use all day long to manage their kids - we can go to the park in the morning if you brush your teeth before bed. Good compromises create win-win situations every time.

Consider why you bought something previously: I used to have around 20 pairs of jeans, mostly the same brand, and many different shades but similar styles. I now have only two pairs of jeans. Moving to a warmer climate made me question the need for so many pairs of jeans, and instead I selected the jeans I REALLY like, rather than having too many unworn pairs. We have to ask ourselves why we keep on purchasing things. Is it because the marketeers of this world are so clever, or is it more related to something inherent within ourselves? Does shopping and spending money give us a positive feeling, or is it attempting to address another issue? I get more joy from looking out from my balcony every morning over the Tagus River than any arrival of another Amazon delivery.

Online shopping, TV infomercials and huge roadside advertising hoardings are only playing to our insecurities and needs. Learning to resist the call to action (and trust me, it was tough to close my Amazon account) and just not buying things we don't need seems very obvious but so very hard in practice.

The key to surviving a decrease in income is to quickly adapt to the change and find new ways of achieving your financial needs and goals. It certainly may be tricky at times, but in the greater picture of life, you can and will get through it!