Develop a Crisis Budget
Your crisis budget, which will detail your spending during a financial crisis or economic downturn, will guide you on how to rein in the expenses. It’s wise to develop this bare-bones budget before an emergency occurs so you’re making decisions with a clear head instead of in panic mode and scrapping everything.
Your crisis budget will trim the fat – maybe you were going to the movies every Friday, grabbing coffee to go before work, and buying takeout for the family during the week. Scaling back on (but not entirely eliminating) these spending categories during tough times will help you pull through without going into major debt.
When a financial emergency occurs, your purse strings are bound to tighten, so you’ll need to have a plan for how to buckle down on spending.
Look for Ways to Cut Back and Increase Your Income
While constructing your crisis budget, do a thorough skim of every line of expenses in your budget and ask yourself honestly if there is an opportunity to save. An interactive budgeting spreadsheet that juggles the numbers automatically can make it easier to end up with a budget that balances.
If you’ve lost your steady pay, could you forgo the satellite television package and the premium cell phone data plan? Could you rent out your spare room or downgrade your car to a more cost-efficient means of travel? It’s a hard exercise but it will help you stay afloat later on if circumstances take a turn.
Decreasing expenses is part of a crisis budget, but also look for any way to increase your income.