5 Life Saving Tips for Budgeting in a Crisis

Life doesn’t always go smoothly and when something unexpected happens it can turn up the pressure financially. Knowing how to approach budgeting in a crisis can help you get through the situation you are facing.

There are lots of situations that could lead to a financial crisis. You can experience a job loss

When a crisis hits, your finances may be the last thing on your mind. But at some point you will have to think about what is happening with your money. These tips are designed to help you stay afloat until your situation stabilizes.

1. Create an emergency budget

An emergency budget is a temporary spending plan that includes your most essential expenses. You can think of it as a scaled down version of your regular one monthly budget.

• Keep a roof over your head
• Make sure the lights and water stay on
• Feed your family
• Get insurance to protect your property and health

Now look at everything else you spend money on every month that isn’t a basic need. Go through your expenses one by one to see what can be cut or eliminated.

• Prepaid services you don’t use
• Catering (or food delivery)
• Entertainment
• Travel
• New clothes
• Cable TV
• Expensive cell phone plans
• Hobbies and recreation
• Electronics and gadgets
• Toys for children
• Books and magazines

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Get the budget right

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2. Find out how much money you have to budget

For example, if you lose your job or your working hours are reduced, you will receive less money. So you have to budget for it.

Here’s a good rule of thumb for determining a basic amount you can afford to budget for each month if your income drops. Reduce your expenses by the same percentage.

So if you’re earning 30% less right now because of a financial emergency or crisis, you’ll need to cut spending by at least 30% to keep pace.

I know it sounds like no fun and it’s not. But if you don’t want to go into debt with credit cards or loans, you’ll need to adjust your spending to match what you earn.

Ideally you have a decent one emergency fund waiting in the wings for you to draw on; more than half of Americans have something set aside for rainy days. But if you’re not one of them, you might have some stuff lying around the house You could sell for cash that you could hide your savings.

3. Pause automatic payments and savings

As you review your budget it’s important to prioritize and look at what you can cut. The goal is to keep your emergency budget as lean as possible.

Canceling automatic payments can help you avoid overdrawing your bank account if you don’t have the cash on hand to pay the invoice when it’s due. You can also temporarily stop any savings deposits, including automatic transfers and pension plan contributions.

Doing these things isn’t ideal, but it can be necessary if you need to keep a close eye on where your money is going.

If you think you won’t be able to pay your invoice on time after you cancel automatic payment, call your biller and let them know. They may be willing to work with you to move up your due date or waive late fees if you let them know.

Remember to resume your automatic payments and deposits later when your financial situation is stable. If your budget allows, you can consider temporarily boosting your savings if you took money from an emergency fund to pay bills during the crisis.

4. Talk to your creditors

Budgeting in a crisis when you have debt means you need to be proactive in managing it. Otherwise, you could be setting yourself up for financial headaches if you fall behind on your payments.

A simple phone call to your creditors will help you stay in control. For example, if you have credit card debt, you may qualify for a hardship program. Your credit card company may temporarily suspend payments, lower your interest rate, or waive certain fees.

If you have federal student loans, you may be eligible for a deferment or forbearance to take a break from making payments. Private student loans may offer similar debt relief options.

Both can help lower your monthly payments, making budgeting your money easier. And you can also check with your lenders to see what other options there are if your budget is so tight that you can’t make the payments.

Other ways you can negotiate include:

• Ask for a better offer on car insurance or home insurance
• Reduction of the mobile phone or internet tariff
• Ask your landlord for a better rent if you don’t already own a home
• Switch banks to avoid high fees
• Developing payment plans for medical bills

Again, every penny you can get back or concession you can get from your creditors and billers makes a difference.

5. Get help if you need it

Careful budget planning is sometimes not enough in times of crisis. You may need to ask for help to do this.

If your financial situation is tight and the light at the end of the tunnel seems far away, consider your options. There are resources and systems in place to help families and individuals going through financial struggles.

This includes things like unemployment if you lose your job, SNAP (food stamp) benefits, housing assistance, and other government programs. Food banks, churches, and even friends and family can also be a source of help when you are struggling financially.

And remember, even though budgeting your money means making some painful decisions right now, it doesn’t necessarily mean your finances are ruined forever.

Credit scores can be rebuilt, emergency savings can be topped up, and you can play catch up to retirement if needed. The most important thing is to make sure your family’s basic needs are met right now.

Final Thoughts: Don’t let the crisis derail you financially

When there’s a sudden shift in your finances, it pays to know what to do. And having a solid emergency budget can make a huge difference in how well you’re able to weather financial storms. These tips can help you get through a crisis, if one does happen, without succumbing to financial panic.