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Do you have an emergency budget?
What would happen if all of a sudden you were plagued with the reality that your job was no longer secure or essential during a pandemic?
What if your emergency fund was depleted already?

In this article, we will talk about having a plan for the worst. In creating an emergency budget, you will know exactly what to cut from your budget and what that looks like.
COVID-19 has had widespread health and financial implications affecting the entire world.
In the midst of this crisis, people are losing their jobs left and right. Some are furloughed, some are laid off, and some are forced to work reduced hours.
Fortunately, some are able to work from home and continue to get a paycheck but others have not been so lucky.
While there are opportunities to make some money, some are not always the safest. Uber Eats, Grub hub, and Instacart seem to be blowing up in sales as people order food and groceries online for delivery to try to adhere to social distancing.
Grocery stores are hiring. Truck drivers are hiring. Amazon is hiring. But if you are immunosuppressed, elderly, or in the at-risk group, it’s not the best idea.
So then what?
You are going to need a plan and if you prepare now, you won’t be making panicked decisions later. Making a panicked decision almost never makes sense (i.e. the toilet paper hoarding).
That plan is going to be your emergency budget plan. You are going to create a mock budget of what you will let go, which payments can be missed, and how to prioritize your budget during a crisis.

The Step by Step Plan to Create Your Emergency Budget
Step 1: Analyze all of your spending
This is the first step when creating any budget for the first time. There is no difference when creating your emergency budget.
Where do you normally spend your money? Take a good and honest look at past spending. Get all of your receipts, bank statements, credit card statements and start categorizing.
This step is crucial.
If this is the first time you are doing this, you’re going to be in for a shock. You might even be angry at yourself.
Do your self a favor and put emotions aside and do the work. You need to know what you are spending money on to be able to understand and cut it from the budget.
Read more: How to Track Your Spending to Create Better Spending Habits
Step 2: Draw up a normal budget
Given the information you have in the previous step, you know what you can expect to pay for certain things that you need and want in your life.
Don’t worry about strictly cutting anything yet, we will get to that.
I want you to focus on creating a normal everyday budget.
If you need help, please see my How to Budget by Paycheck or How to Create A Zero-Based Budget articles. Both are very good resources for you to create your own budget.
Here is the linkto purchase the budget by paycheck template. And just for being an SMM reader, I am offering 50% off until the end of March. Enter code: COURAGE
Step 3: Make a copy of that budget
Once you have your copy, it’s time to make some serious choices. This is where you will cut ALL unnecessary expenses. Remember, this is a survival budget.
Make a decision as to what expense will go first, second, third, etc.
No gym memberships, no magazine subscriptions, no cable, no extras are usually the first to go. If you’ve got
You can exercise at home, there are FREE magazines you can get from libraries (even online libraries), and you don’t need cable TV (don’t make excuses). Tell your hubby that sports are canceled anyway.
Subscription boxes? Gotta go.
On another note: if you are fortunate enough to have the funds to support your local gym, restaurants, or small businesses, then feel free to continue to fund these purchases. But chances are, you didn’t find this article because you are well off. Most people are struggling and this is an emergency budget so please put on your own mask first.
Read more: How a Budget Buffer Can Save Your Budget

Step 4: From what you have left, you need to figure out how to lower the costs
Mortgage payments:
Mortgage rates are dropping right now. Many have taken the opportunity to refinance to take advantage of lower monthly payments. Keep in mind there are costs to consider. Closing and appraisal costs to name a few. Make sure you understand these costs before you make the decision to do so.
I like using NerdWallet’s refinance calculator. It’s really easy to use.
This is the same as buying a house at this time. Make sure you can really afford it before you buy it. Don’t just buy because the interest rate is low.
Make sure you can afford all of the other costs that come with being a homeowner too. I’m no economist nor am I a real estate expert but I have a feeling that housing prices will fall as a result of this C19 crisis.
Personally, I wouldn’t buy right now with such volatile circumstances.
I’m not versed in foreclosure or short sales but if you’re living in a mansion on a minimum wage paycheck, you need to make a difficult decision. Keep egos and emotions out of it. Again, survival.
Student loans:
Federal student loans are waiving the interest during this time. This can help many people if the interest is keeping them from making any progress on their loans. If you have the funds to keep paying your student loans, the fund will go directly to the principle.
If you need the money for food and shelter, however, consider putting your student loans in forbearance so that you don’t have to make payments for a period of time.
Usually, you will still accrue interest in forbearance but due to the bill that has passed, no interest will accrue during this time of crisis.
Unfortunately, this has not happened for private loans. If you have private loans, call your company and ask what they can do for you during this time.

Auto loans:
If you can refinance to a lower rate, do it. Again, make sure it makes sense for you. Watch the fees. If the fees are more than you would save, it’s not worth it.
If you can do without a car, get rid of it. Seriously. Again, survival.
No need to keep paying on a car that is sitting in your driveway. Food and shelter are your priority. Keep one car if it makes sense.
Another option is to ask your loan provider if there are any opportunities for hardship. Some auto companies are offering delayed payments during the crisis.
Utilities:
At this time many companies are offering to skip a payment for utilities such as water, electricity, and gas during this time of crisis.
In addition, many utilities are suspending disconnections for failure to pay. This includes water companies, gas companies, electric companies, and even internet companies.
If not, see if your utility company offers hardship payment plans. Ask if they can waive late payments.
If you have to skip a bill to eat, then do it. Take advantage of the opportunity and please don’t look at it as a cop-out. There are people willing to help you, please accept the help.
Credit cards:
Credit card companies are also starting to offer assistance to their customers.
Here is a list of credit card companies and banks that are offering assistance such as deferring payments, waiving late fees, suspending overdraft fees, and reimbursing ATM fees.
All of this adds up, especially for your emergency budget. $10 here, $12 there, $87 dollars here may not seem like much but trust me, it counts.
If your credit card company is not on this list, please call and ask how they can help you.
Something else you may consider transfer to a 0% interest card. If your credit card company will not halt interest on existing debt, a balance transfer to a 0% card can save you some immediate cash.
Typically, you want to be sure you will able to afford to pay off the debt in the 0% timeframe in order for it to be worth it but if you are losing hundreds of dollars in interest now, then it could be a temporary fix.
Groceries:
The standard ways to save for groceries is hard to apply when there really are none on the shelves.
If your grocery store is like mine, bare, then it’s difficult to apply coupons, bulk buy, buy the store brand, buy generic, etc. You’ll have to think outside of the box when it comes to food.

Here are some things to consider-
- Local farmers offer cows or pigs, take advantage of that. They will butcher, chop, and cut the meat to your liking. Of course, you will need enough storage to make this work so if you have the funds for a small deep freezer, it could be worth the investment.
- Restaurants offer ground beef, chicken, flavored chicken, rice, and beans in bulk for purchase. Many others are following suit.
- Take advantage of free meals for children while they are out of school. All of the schools in my area are offering free meals for children 18 and younger. They get lunch and breakfast for the next day. Some school districts are even utilizing bus routes to deliver meals to the children.
- Utilize local food banks or meals on wheels
- If you have to order takeout or fast food, companies such as Burger King are offering 2 free kid’s meals with an adult purchase. Others are waiving delivery fees to help out.
- Search for meatless recipes. This is a big one even if it wasn’t just for survival. My husband complained there was no meat in the spaghetti dinner last night. He’ll be difficult to get on board the no-meat meals. But again, survival. Tonight, we’ll be having bean tostadas.
- Skip the juices, soda, and extra drinks. Water will be your friend for a while. Invest in a water filter. We love our ZeroWater tub. No need to hoard bottled water if you have tap water.
There are many other ways you can go to the extreme when lowering your food budget but these should help significantly.
Step 5: Stick to your budget and communicate with the entire family what the plan is.
It won’t help if you have an emergency budget plan but your husband comes home with a 12-pack of overpriced Gatorade. Make sure you communicate to the family the emergency budget so that everyone knows what to expect.
Read more: How to Actually Stick to your Budget

If you’ve cut and lowered everything you can, what then?
What if you’ve cut every possible “want” from your budget and you’ve lowered your bills as much as you could?
It’s going to be different for everyone but this is how I will apply my plan b, c, d, e, f, ect..
–Increase my income, get another stable job, or switch jobs to a stable one will be the first action step. Use unemployment if you cannot find a job. For me, as an RN, I am very flexible. I do not foresee not being able to work, especially in the hospital setting but you never know. The first option for me is to start bringing in another paycheck.
–Use my sinkings funds. This will be the first place I draw money from. Even before my emergency funds. Again, survival. The Christmas savings will have to wait.
–Use my emergency fund. Hopefully, you have an emergency fund too. Many of you are paying down debt so you may not have a large emergency fund right now. If you have extra funds, throw it into an emergency fund right now. Build it up as much as you can. I would personally forgo paying off debt right now to build that emergency fund up to at least 3 months. If you have a hard to staff job, then you may need more, perhaps 9-12 months.
–Borrow from friends/family. I tend to not like this choice but, borrowing money interest-free can make the world of a difference when you need to survive. Just be aware of relationship changes that can occur when this happens. Be honest with each other when you can pay it off and stick to it. If you are experiencing more hardship, let them know.
–credit cards. If you can find introductory rates of 0% for short term purchases than use those before large HELOCs, especially if you only need a few thousand dollars. Just make sure you pay it off on time or you’ll be hit with exaggerated interest rates that will play against you and your emergency budget. Otherwise, look for the lowest rate you can.
–low-interest personal loans. I would not take out a personal loan higher than my credit card interest rate. Mine was 10% last time I checked.
–Use a HELOC. This is a home equity line of credit. Usually, the rates of paying back these loans are lower than credit cards and private loans. But please understand the risks with this. Since you are taking out a loan against your home, you risk losing your home. Also, this will only work if you have positive equity in your home.
–investments from non-retirement accounts. If you do some investing on the side and find yourself in survival mode, then it’s time to draw from those accounts if you have exhausted other aspects.
–Roth IRA. Remember that you can take out the money you put in without penalty. Anything you earned on top of what you put in will be penalized for early withdrawal. You already paid taxes on this money before you put it in so you won’t be taxed here.
–401k, last resort. The market will recover. Your investments will recover as long as you have the time. Try not to touch it if you can.
This plan might change for me as the times change but at least there is a plan. You may have some other variation of this and that’s okay.
Again, this is your emergency budget and emergency plan. This is if you have lost all income or drastically need to adjust due to job loss.
It is extreme circumstances and unfortunately, this is the reality for most people right now in the U.S. as most people cannot afford a $1000 emergency. Many families are just one paycheck away from a financial catastrophe.
Next time this happens, hopefully, you’ll be in a position to thrive in an economic downturn. For now, let’s focus on being prepared.
I wish you all the best and I really hope this helps you!

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