Last season's British & Irish Cup runners-up sold its assets for £1.5m in November to see out the campaign.
They came fifth in the second tier last term, but captain James Freeman and Gary Graham have now left.
"The biggest expense we have is the playing squad, so we have taken money out of that," Morgan told BBC Jersey.
"We've taken a very significant chunk out - we've had to, If the overspend was some £300,000 per year, where are you going to find that from?
"Just remember what happened to London Welsh, and have a look back over the past few seasons at the problems other clubs have had."
Flanker Graham has joined Premiership side Newcastle while skipper Freeman has gone to Exeter.
Reds sold their St Peter ground to "third-party owners" as part of the restructure last year, but Morgan remains confident that they can buy it back by 2020, a target set in January.
"You just have to be realistic. I think as long as you're up front and people know what you've got to spend, in Harvey's [Biljon, head coach] case his budget, he works to that.
"He's done a great job in finding good lads at good prices."
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Jersey Reds chairman Mark Morgan says the Championship side has had to lose a "significant chunk" of its playing budget to cut costs.