Emergency Budget

Just last week a family friend was notified that his work hours and income was being cut by 20%. It was taking effect immediately.

I learned last night that a good friend of my sister's was laid off this last week. Even at my own place of employment things are changing to accommodate the current economy and state of our nation.

Do you have an emergency budget in place for events such as these? If you don't I would recommend putting one into place.

Last week I shared how we created a budget with our current take home income. Today I want to share how we created our emergency budget.

Start with Your Basic Budget
Take your current budget and begin to cut. Take out every single thing you could possibly do without. What is the absolute minimum you need?

Get serious here. Assume that your income has cut to such a place that you are fighting to put food on your table. Get rid of all the fluff. Categories for clothes, gifts, vacations, internet, extracurricular activities, entertainment, etc. It could all go if it meant survival.

Don't forget to look at some of the more fixed categories. Our emergency budget shows a decreased dollar amount in our food category. If we needed to I could cut back on the amount and type of food we eat. It would also mean absolutely no eating out at any time.

What categories could you completely remove from your budget? What categories could you drastically cut?

Create an Emergency Budget
Once you know exactly what you would need to have to survive, create your new budget. Write it out. Put it on paper in black and white. Add it all together and figure out what the bare minimum is you need to make to maintain this budget before needing to consider selling a house, a car, or other items to survive. File it away for future use if necessary.
Be Prepared
Having an emergency budget has allowed for us to relax a bit more when it comes to the economy and our jobs. We have our emergency budget filed. We know where it is if we need to grab it.

It allows us to be more prepared for an unknown future. It takes away the decision making and cutting in a moment of potential crisis and sense of initial panic. We have made the decision ahead of time as to what exactly will need to happen when and if we ever have to face that situation.

We know exactly the minimum amount of money we will need to make each month before we would have to begin talking about selling our car or our house.

Many of you have already created a basic budget. If not, I hope you have started on one. If you missed my post last week it will walk you through the steps we used to create ours.

What about an emergency budget? Do you have one? Do you know exactly how much your income can potentially get cut before drastic changes would have to be made in your life? If you were needing to look for a new job, do you know the minimum you could hire on for and still survive with your emergency budget? Have you planned ahead so that decisions of what can and can't go don't have to be made in crisis mode?

If you do not have an emergency budget, I highly recommend creating one. It has helped put my mind at ease and not be so anxious as I watch the economy around me. I know what our plan is and that it can be put into place in a moment's notice if needed.