Posted by Dave on November 10, 2009
I have an emergency spending plan. I hope that I will never have to implement it, but if there is ever a time where my spouse or I (or both) lose our jobs, we have discussed what actions could be taken to “get by” until the next job is found.
My current monthly budget is approximately $1,500. If necessary there is an opportunity to reduce this number in both big in small ways, such as:
- Cable (which includes both our phone and internet): Internet could be removed or downgraded to a lower package – if removed this would be a savings of $50. We would probably keep a land-line, but downgrade to the lowest level and use it only for finding a new job, this would save about $5, which would mainly mean cutting long distance minutes.
- Groceries: Currently we budget around $50 per week. This amount could be reduced significantly. Large portions of the world survive on minimal staples of beans and rice – we would probably buy some vegetables and other small things, but if need be, this amount could probably at least be halved savings about $100.
- Gas and Electricity: These expenses are what could be called small wins. Our house is generally fairly efficient in our usage – everything’s off and sometimes unplugged when nobody is using it, but this could probably be reduced significantly by just not using electricity and lowering the thermostat just high enough in the winter to make sure pipes don’t freeze – uncomfortable yes, but if I’m broke these are things that need to be considered. These changes would perhaps result in savings of $25 to $50 per month.
- Automotive: If I was unemployed for an extended period of time, I would probably sell my car, which would remove insurance, fuel and maintenance costs. The city I live in has a reasonable transit system which I would use. This would allow for savings of approximately $200 per month.
- Subscriptions and memberships: I pay for a gym membership, subscribe to zip.ca(for movies) and gameaccess.ca(for video games). My spouse and I also both have cell phones. If these expenses were removed, it would total a savings of $125 per month.
There are some expenses I can’t touch:
- Mortgage: Our mortgage expense is approximately equal to any small apartment we could find in the city we’re living in.
- Life Insurance: This expense is important to me, I would rather eat less then leave my spouse in a terrible spot if she was left alone.
- Condo Fees: If I live where I am at now, I have to pay this.
- Water Heater Rental: $25
In general, I live a pretty stripped down life to start with, I have no debt payments other then the mortgage, but I could cut approximately 40% of my monthly budget if need be. This exercise was useful in calculating how much money I needed to have saved to survive six months or so (hopefully the maximum length of time it would take to find new employment). Additionally, it helped me by looking at what I was spending, or in some cases wasting money on monthly expenses. The calculation brought to light that housing costs (mainly our mortgage payment) is making up over 50% of our monthly “fixed” expenses, and gives incentive of reducing or eliminating this expense quickly. Additionally, I’ll acknowledge there are things that I am spending money on monthly now that I would freely admit are a waste, but accept the expenses as they are essentially my entire entertainment budget.
I’m curious if I’m the only one who thinks like this. Do you have a “Plan B” if your current income were to be reduced/removed, how much could you cut out of your monthly budget, and how quickly could you cut this out if your income were reduced (or removed)?