I don’t want to be a big, stormy raincloud. But, the economy has been pretty rainy lately, and it’s probably best to prepare with some version of an umbrella.
I’ve been thinking about what we would do if we had a big financial emergency, such as a massive medical expense or if Shane lost his job. We have a six-month emergency fund, but we’d want that to last as long as possible.
Immediately, we’d cut:
– Cable $23/month
– Internet $20/month (we can sort of pick up a wi-fi signal, or we could head down the street to McDonald’s, Panera, or the library for more wi-fi access points)
– Stop contributing to our insurance savings account ($110/month) and make monthly payments to the insurance companies instead to free up that savings for immediate expenses
– Eliminate all unnecessary driving to conserve on fuel and lengthen the time between oil changes (we do this already, I think)
– Cut back on our groceries to the bare minimum, spending $35-40/week on meals that will get the job done
– Eliminate all purchases beyond paying bills, gas, and groceries. No restaurants, no entertainment budget, no exceptions.
We could do all of these things on a moment’s notice, if it came down to it. I’d expect that would free up at least $350, if not more, out of our monthly spending.
If we needed to take it a step further, we could do something drastic and sell our car.
Right now, the car is a liability. We owe about $8,300. Kelly Blue Book thinks it’s worth around $9,500. If things were absolutely dire, we’d try to sell the car and pick up something for around $1,000 and pay for it in cash. That would free up our $277 monthly car payment. The drawback to this strategy is $1k cars might be more likely to break down than newer vehicles. We could be sinking more money into keeping the car running. No good.
The alternative would be having no car, and walking or using public transportation. A hassle, but doable in the short-term. And, no car means no car insurance, so that would be even cheaper.
Hopefully, we won’t have to implement this emergency plan. But, I do feel a bit more comfortable knowing that in theory, we could live on $1,200 per month if we absolutely had to. It would be tough, but it would be temporary.
What about you? What’s the bare minimum you’d need? Are there things you could cut from your budget, or are you already to that point? Would you sell your car? Move to a cheaper apartment?