Most experts say you should have between 3-6 months worth of living expenses in an emergency fund.
Some emergencies are small.
A $500 car repair, for example, shouldonly be a small dip in your fund.
But then there are bigger emergencies, like losing your job.
Thats where anemergency budgetcomes in.
Itll keep your safety net in place as long as possible.
Were assuming you knowBudgeting 101 and have already set up a basic budget.
Your emergency budget will be based on that budget.
Were also assuming you have an emergency fund (because you need one!).
In that case, an emergency budget might not be that useful to them, either.
First, review your current budget and all of its categories.
Your budget might be on a spreadsheet or in anonline tool like Mint.
Either way, pull it up and check out your main spending categories.
see to it theyre up to date.
you’re able to create your emergency budget in a spreadsheet, on paperwhatever medium you prefer.
When I built my emergency budget, I simply tweaked my categories in Mint.
Take a look at anything in your budget that isnt an absolute necessity, then axe it.
For me, these categories included personal care, restaurants, and shopping.
That meant no haircuts, happy hours, or new toys when I was in emergency mode.
Okay, yesbudgets needsomeroom for fun.
But an emergency budget isnt meant to be long-term.
Its simply meant to keep you afloat in a time of financial crisis.
So dont be afraid to cut stuff outits temporary.
That being said, there are a couple of caveats to cutting every non-essential.
First, consider the cost of ditching your luxuries.
For example, lets say you have cable.
But it might just depend on the severity of your emergency.
Also, you know your spending habits and the details of your emergency.
Maybe you feel comfortable keeping a few non-essentials.
You may have room to add a few of these back in, depending on your situation.
But first, you should see just how much youre working with once your budget is stripped down.
Cutting all non-essentials is the first part of that process.
Reevaluate Your Financial Goals
You dont want to neglect saving long-term.
But during an emergency, those goals need to be reevaluated.
Because if you dont have money coming in, youre using your emergency fund to pay for those goals.
Do you want to keep paying off debt or saving for retirement?
Or do you want to use as little of your emergency fund as possible?
Your answer will affect your emergency budget.
If you choose Option 1, youll simply stick to your goals and add them to your emergency budget.
If you choose Option 2, simply adjust your emergency budget accordingly.
But debt goals are a little trickier, since youre accumulating interest.
Some say its better to forget about an adequate emergency fund and tackle the high-interest debt first.
It also prevents you from going deeper into debt while dealing with an emergency.
Plan to pause or reduce any transfers or automatic payments while youre in emergency mode.
These expenses are the same every month.
Your cellphone bill, maybe.
These expenses are fixed, but that doesnt mean they cant be lowered.
Maybe youre thinking of ditching your comprehensive coverage, forgoing your renters insurance, etc.
But keep in mind: when youre in emergency mode, thats when you need safety and security most.
To me, this is when it makes theleastsense to cut back on something like insurance coverage.
Cut your fixed necessities, but dont risk going without something that could make your emergency even worse.
Then, find ways to be frugal in each of these categories.
I Heart Budgetsrecommends starting with food, which can vary quite a bit:
Reduce your food budget.
I know, I know, this is not easy at all.
No sense in actually going hungry because you needed your organic pine nuts.
For other categories, you might find ourbill-by-bill guide to be helpful.
Unplug stuff when not in use.
They wont be possible for everyone in every situation.
Obviously, frugality is good whether youre in emergency mode or not.
When youre in emergency mode, convenience has to go out the window.
Cut back on your variable necessities as much as you could.
If frugality is new to you,here are some basics.
After cutting luxuries, exercising frugality and reducing the cost of necessities, whats your monthly spending?
Thats the number youll have to pull from your fund each month youre in emergency-mode.
You know your own habits and situation.
Or, wait until your situation improves a bit, then add them back in gradually.
After my emergency, I found a small stream of income in a side gig.
But you also want that money to last.
Image by nick criscuolo.
