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Wednesday, January 23, 2019

SIX Tips for Budgeting During An Emergency



 If you've been following my blog for a while, you know that our family just went through a tough year. In March, my husband was diagnosed with advanced heart failure after a virus attacked it, leaving it barely functioning. Talk about a wake up call! We reevaluated every commitment, slashed the budget to the bone, and learned to simplify our life. He needed lots of time, adequate rest, and the best nutrition, so that his heart would have a chance of healing.

Earlier this year, while I was in the process of slashing 25% off our budget, it reminded me of doing the same thing nearly two decades ago.  Eighteen years ago, it had become clear that the company Larry worked for would be downsizing. That's when I wrote my first "Emergency Budget". Basically, I sliced off anything which wasn't pertinent to continuing to live. I wanted to know the exact minimum amount of money we needed to have coming into the home each month in order to "ride out the storm."

Today, I want to share with you six tips to budgeting during an emergency. 

 

1.  Focus on the "Four Walls": 

Dave Ramsey would call these categories your "Four Walls". It's a lot more than just paying your rent or mortgage. These areas must remain funded. But, what, specifically, do the "Four Walls" look like on your budget and what do they encompass? Perhaps, more than you would think.

 Housing, food, clothing, and transportation. 

HOME:


Mortgage
Home insurance
Property Taxes
Gas and Electric
Water
Sewer
Garbage
Home Owner's Association Fees
Any additional taxes or fees (We have a monthly sewer run-off fee)

FOOD:


Groceries
Personal care items
Cleaning and hygiene products

TRANSPORTATION:


Car Gas
Car Upkeep
Car Payment (See this post for my advice on paying cash for automobiles.)


CLOTHING 

Basic Pants, dresses, skirts, shirts
Undergarments 
Socks
Boots
Shoes
Hair accessories 
Coats
Hats
Mittens
Scarves 

2. How long should I prepare for?


If you are preparing an emergency budget, it is generally because Murphy has come to visit in the form of an immediate change in your income or employment.  It could also occur if you are deeply in debt and you now have decided to do everything within your power to release yourself from the shackles of oppression and become debt free. So, these tips go on the assumption that for some reason you need to radically revamp your budget. 

According to some, although there are many factors, which impact your ability to land a new position, you should assume a worst case scenario of six months.



3. Assess your Assets. 

INCOME: Generally when you are laid off you do have some income in the form of unemployment checks. But, that is usually somewhere around one half of your regular salary. This gives you an idea of what to shoot for in your budgeting process. 

If you've followed the Seven Baby Steps, you have a 3-6 month emergency fund in place. By minimizing expenses, you can last a long time on that money. But, as much as you can, you must act as though that money does not exist. In other words, don't run it down just because it is there. 

My husband was laid off for two months. He took every side gig that he could. He did free lance work, tying up loose ends in his department, for the employer who had just downsized him. I cut out every expense that I could. When he found work two month later, we realized that we had not needed to touch our emergency fund.

IF YOU HAVE NO INCOME: If your income has been suddenly cut off completely and you will not be getting unemployment, then you need to make a list of places where you have money. Your bank account? Your sock drawer? CDs? Total this up and compare it to your emergency budget. How long can you make it stretch? If you have an unused spare bedroom, can you take in a temporary border? Note: If you decided to prematurely cash in a CD, you may lose your interest payments, but your principle investment should remain in-tact.

GETTING MONEY: Can you get side income? Can you sell some items? Can you make some items to sell? If you work in IT, but know how to roof houses, then it's time to see if the neighbors need a new roof. Unless it's the middle of winter, of course. Temp agencies are great sources of income for a short time. Can your spouse or significant other take a part-time or temporary job?

FOOD: Don't run to the store. Make a list of items in your freezer and pantry. Then, use this list to compile a menu plan, utilizing what you have on hand. Undoubtedly, you'll need to supplement with a few items from the store. But, you'll be surprised what you can make with what you already have on your shelves. Don't be too proud to take food from local food banks. That's what they are there for!
 

4. Ask yourself if you need it. 

For every line item on your budget, ask yourself if you need it. Cable or satellite? Maybe not. Gym membership? Maybe not? Eating out? Definitely not. 

I wrote a post which you might find helpful, called Four Questions to Ask Yourself Before Making a Purchase

5.  Delay purchases if you can. 

If your winter coat just developed a huge rip in it and it's 10 degrees outside, then, by all means, replace it. Get one used or at a steeply discounted price. But, be realistic. If that purchase can wait until you are, once again, gainfully employed, then put it on "hold". 

6.  Get support.

This is probably the most important thing that you can do! We seriously relied on the understanding and support of extended family and friends while my husband was laid off. Some offered dinner at their house, while others gave us gift cards to local grocery stores. Don't be so proud that you won't accept their help. After all, if the tables were turned, you'd do the same for them. 

What about you? Have you gone through a financially challenging time? What was it that helped you the most? Leave your advice in the comments section.

 

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Do all to the glory of God, 

Hope


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