Why I Have Two Budgets and You Should Too

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Some of you may have logged on to your share trading accounts in the last week and had a slight panic. I know I did.

We lost over $800 in one day from our fund, more than we’d deposited for the month.

Now I know we shouldn’t panic about movements in the stock market.

It goes up and down and so long as we don’t need the money anytime soon (ours is a 10+ year plan) there is no need to worry.

My immediate concern turned to ‘ohmygawditsGFC2point0’ and are we ready for a meltdown???

Which may be premature, but I can clearly remember the entire sequence of events between 2007 and 2009/10 which were pretty dire. This time, I have a plan.

My Two Budgets

It might surprise you to learn that although I am a personal finance blogger, I really like to spend money.

Mainly on travel or food if I’m not travelling. I’m a minimalist so stuff doesn’t really enter into the equation, but my vices aren’t cheap ones.

In fact, the entire reason I took action on sorting my finances (and downsizing my house and doing loads of other frugal stuff) was to enable a life of travel.

I don’t believe anyone can live their best life without a budget, we can always be improving amirite?

So for that reason, I have two budgets.

My everyday budget

AKA my ‘life is good’ budget. This budget is what we use in day-to-day life when my husband is receiving a regular wage and our bills are predictable (plus we have savings for emergencies).

This budget dictates what we spend when we are at home in New Zealand, or if we are travelling long-term, this budget tells us what we can spend depending on where we are.

We used the same budgeting strategy living in Spain as long-stay tourists with no income, as we do living in New Zealand as regular wage-earners and taxpayers.

It’s a simple fixed amount, whittled as low as it can for a comfortable life.

Allowing for a nice meal out once a week (or a cheap takeaway meal twice a week), some blow money for my husband and me and plenty for savings and investments.

There’s also childcare for the three days per week which I work on my business uninterrupted, and an oversized mortgage payment.

Read more about how I budget backwards so we can afford to travel and live a great life on one-income here.

My survival budget

My second budget is pure survival (some people call it a ‘bare bones’ budget).

There’s no blow money, nothing extra for fancy food other than grocery staples and savings and investments go on hold the minute the survival budget is activated.

Our daycare cost is halved (as I’d keep my son in for half-days so I could still earn money) and if necessary, our mortgage payment reduces down to the minimum (paying only the interest).

When I’m in survival budget mode I’m doing everything in my power to earn extra money with online surveys and side hustles.

Now you might think I’m a wee bit bonkers having two budgets but only using one.

But I gotta tell ya, having a plan for when things go south makes the thought of an economic downturn much less stressful. Read more about survival budgeting here

How do you prepare to financial changes? By creating a second budget. I have two budgets. One I use for everyday life when things are good, and one budget for when money is tight. It's a solid budgeting strategy, you should try it.

Here’s why you need a survival budget (even if things are great!)

1. A survival budget requires you to take a hard look at your finances and sort your wants from your absolute needs.

Even if you don’t take action on reducing your regular budget, you know what needs to be done when the sh*t hits the fan.

2. Survival budgeting shows you just how much you need in your emergency fund.

I like to have at least 3 months worth of survival budget expenses in the emergency fund at all times. You might prefer 6 months just in case.

Having two budgets helps me keep a clear head, even when I think we’re heading for an economic meltdown (we’re probably not though).

I know that I have a plan for bad times, with enough money in savings to get us through whatever comes our way.

It’s just one of the ways I’ve structured my life to be as stress-free as possible whilst not giving up on everything that makes me happy.

Do you have a plan if your financial situation changes

Like this? Check out more money management tips here.

About Emma Healey

Emma is a recognised family finance and budgeting expert and founder of Mum's Money. Her advice has been featured in Readers Digest, Yahoo Finance, Lifehacker, The Simple Dollar, MSN Money and more.

6 thoughts on “Why I Have Two Budgets and You Should Too”

  1. Yes, we have a regular budget and a survival/bare bones budget. It’s important to plan ahead for the “what ifs” so that as soon as something happens, you can put that plan into action knowing you have the emergency fund to support it.

  2. That’s actually a really good idea. I’ve been reading a bit on finance blogs and this is the first time I’ve heard of a bare bones budget. I’m going to do one up thanks.

  3. Sounds sensible!

    How much do you guys spend on blow? Wouldn’t think it would fit into a frugal budget as its quite expensive isn’t it? We all have our vices though.

    • Haha, Joe! Well, I used to spend quite a lot on that actually, but these days my only vice is coffee which I ‘blow’ about $15/week on 🙂


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