How to manage money when your income changes

Changes in income are a natural part of life - whether you’re starting a new job, taking parental leave, or venturing into self-employment. But even positive changes can take a little time to adjust to financially.

The good news? With a few smart strategies, you can stay in control of your money and feel confident about your next chapter, whatever it looks like.

Step 1: Understand what’s changing

Before you can adapt your finances, it helps to take a clear look at what’s different.

Ask yourself:

• How much will your income change by - and is it temporary or long-term?
• Will your expenses increase or decrease (for example, commuting costs, childcare, or business expenses)?
• Do you have savings or a buffer to help during the transition?

Having a clear picture of your new financial situation gives you the foundation to plan ahead - rather than reacting later.

Step 2: Refresh your budget

A change in income often means your budget needs a refresh.

Start by reviewing your essential expenses - things like rent or mortgage payments, utilities, insurance, food and travel. Then look at your non-essentials, such as subscriptions, dining out or online shopping.

If your income is temporarily lower (for example, during maternity leave or while starting a business), try adjusting your spending to focus on what truly matters right now.

Tip: Treat your budget as flexible, not fixed. You can always adjust again once your income stabilises.

Step 3: Build (or top up) your emergency fund

An emergency fund is your safety net - a small pot of savings that can cover essentials if your income drops unexpectedly.

If you’re earning less, even small contributions can help. Aim to set aside something each month, even if it’s £20 to £50. Over time, it builds up and gives you some breathing room.

For freelancers or self-employed people: Try to keep around three months’ worth of essential expenses aside to smooth out uneven income months.

Step 4: Make the most of what you have

When income changes, it’s often the little adjustments that make the biggest difference.

Here are a few ideas:

• Review your direct debits - cancel or pause anything you no longer use.
• Check your tax code or benefits - especially after a job change or when taking maternity leave.
• Use comparison sites to see if you can reduce bills on broadband, energy or insurance.
• Look for employer benefits you might be missing (such as childcare vouchers or flexible savings schemes).

Tip: If your income has increased, consider keeping your spending at its previous level for a few months and save the difference. It’s an easy way to build a financial cushion.

Step 5: Review your borrowing

If you have existing loans or credit, a change in income is a good time to review them.

Check:

• Are your monthly repayments still comfortable?
• Would consolidating debt make things easier to manage?
• Are you paying more interest than you need to?

Responsible borrowing can help smooth income changes, but only if it fits your new budget.

You can use a personal loan to consolidate debts, fund a career transition, or support home changes that help with your new routine - always with a clear plan to repay.

Step 6: Plan for the future

Once your finances have settled, think about how to make your money work harder for you in the long run.

• Rebuild your savings if you’ve dipped into them.
• Set up automatic transfers to save a small amount regularly.
• Review pensions or investments if your job or earnings have changed.

Tip: Even small, steady savings habits make a big difference over time - it’s about consistency, not perfection.

Life changes - and your finances can adapt too

A change in income doesn’t have to mean financial worry. With a clear overview, realistic goals and a flexible plan, you can feel confident managing your money through any transition.

Whether your next step is a new job, a growing family, or self-employment, the key is to plan ahead and stay proactive.

Looking for ways to stay financially flexible? Explore Novuna Personal Loans to see how a fixed-rate loan could help you manage life’s next big change with clarity and control.

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