Why I Have Two Budgets and You Should Too

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Note: This was written in 2020. But the premise still stands.

Some of you may have logged on to your share trading or Kiwisaver 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.

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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???

This 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, am I right?

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 for 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 possible 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 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 when 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 is reduced 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.

You might think I’m a little bonkers having two budgets but only using one.

But I’ve got to 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

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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 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

About Emma Healey

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