My Jobless Spending Plan

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)?

13 thoughts on “My Jobless Spending Plan”

  1. Ok, it’s official. Dave is more organized than I am. I have a clue what my spending is, but I’ve never put that much thought in to where I could cut back if one of us lost a job.

    Good post,
    Tim

  2. How much would it cost to buy your water heater outright and eliminate the $25/mo rental fee?
    It might be worth it to find out that cost, and then save up and pay it off and be able to cross it off as a “required” expense if you end up jobless.

  3. I loved this post. I often think of how I could “pare back to the bone” if I needed to. Obviously it would be no fun if a situation necessitated it, but I would be up for the challenge. I look forward to hearing more from Dave and his frugal household! Please do a post sometime on your $50 weekly grocery budget. Well done 🙂

  4. I retired last year at the age of 45. I worked full-time for 16 years then part-time for the same company for 7 more years. The co-op apartment I bought 20 years ago I have owned outright since 1998 when I paid off the mortgage. This greatly reduced my monthly expenses and was a big step towards being able to retire.

    The biggest part of managing my monthly expenses was to find an individual health insurance policy which fit okay into my budget. (I live in the USA so the debate about health insurance reform is very important to me.) I don’t have dental coverage any more but I was careful to get some expensive dental work done in 2007-08 while I still had coverage through my employer.

    When I did retire one year ago, I took a big (300k) company stock payout (before the price tanked) and bought into a high-yield (not junk) bond fund I had been following since 2005 (and whose price was at rock-bottom level). It generates anough income to cover my expenses so my other mutual fund assets (some stock, some bond) are used for reinvestment purposes. I also have an IRA rolled over from my 401(k) which is worth nearly 300k so it is waiting (and growing) until I can tap into it at age 60, 14 years from now.

    But the biggest reason I was able to retire was my decision when I was 20 years old to never want or have children.

    No kids. No debts.

  5. @ Caitlin – I have thought about this, and that’s probably a good idea – it would reduce monthly expenses after the initial payout as well.

    @ Julie – Thanks for the idea!

    @ Scott – This is a ‘couple’ budget. These are our “fixed” or consistent expenses as well. There are other things that we do spend money on like clothes and other entertainment costs that are really variable, but in general, this is what it costs the two of us to live per month.

    @ degree – nice work on the early retirement, I hope I’m in the same situation at 45.

  6. We talk about this a lot. Right now we are each other’s “back up”. So if either of us lose an income, the other can cover.

    Should both of us lose it then we would liquidate one of our properties.

    Cashable asset wise, we have enough to last a few years without having to sell anything.

    Our monthly expenditures are as close to bare minimum as it is. Not enough margin to make a huge difference.

    Great post. Nice to see specifics.

  7. We would be ok if one of us lost our job… with a few sacrifices we could actually still bank a bit of income. I am very fortunate to have parents that, let me just say, have done pretty well for themselves. If financial disaster ever came our way, they would be there… they have said as much. In today’s world, this is very comforting…

    I would have to be in VERY desperate straits to ever approach them about help though.

  8. I’ll come out of lurking to comment on this one. DH and I have kept a very detailed record of expenses for years now. It’s not so much a budget (or a goal) as a description of what actually happens. So we know where we can cut. Over the years, we’ve cut back on the extras little by little, so we already don’t have many. We already pay low rent, don’t heat our apartment and try to be careful with our food costs. Here’s where we would cut right away:

    Wine–we never eat out, but buy ourselves the occasional bottle–hey, we live in France ok.

    Car–we’d stop driving and save on gas an freeways(yep, they’re expensive here). My husband uses the car only for work. But we wouldn’t probably give it up because it’s very low maintenance and completely paid for.

    It would suck to give up internet, but it would save us 30 euros a month, plus we’d probably hardly ever turn on our computers, so we’d save energy.

    Since we know what we spend each month and each year, we know how big our emergency fund should be–and we’ve got about a year’s worth set aside just for that.

  9. Well done. I would also buy a water heater. I am quite certain it would be cheaper than a $25 monthly rental fee. I also took an early retirement and nothing beats the feeling of slowing down to smell the flowers and sip my coffee. Living frugally means that I truly enjoy when I treat myself. It also means making choices for what is truly important for me.

  10. Its funny the waterheater came up. Mine was installed in November of 1986. When I bought the house four years ago, I bought it from the rental company for $40. I recently had a service person out to install a new furnace, and he told me not to even think about changing the waterheater. Just save the 15 dollars a month and one day another five years from now it might let me down. If it happens tomorrow, there are no hard feelings. I can buy a new one already on the rent I have saved. In my opinion no one should be renting. I know I won’t ever go back.

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