Have you ever logged in to check your retirement or investment accounts and felt a wave of panic? I know I have.
One day, we saw our fund drop by over $800—more than we’d contributed that month.
It’s unsettling, even when you know that market ups and downs are completely normal.
We’re in this for the long haul (our financial freedom plan spans 10+ years), so there’s no need to panic.
Still, it’s hard not to wonder: Are we prepared if something bigger happens?
That moment reminded me of the global financial crisis and how quickly things can change. But this time, I’m not just hoping for the best—I have a plan.
My Two Budgets
It might surprise you 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 the equation, but my vices aren’t cheap.
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.
This allows for a nice meal out once a week (or a cheap takeaway meal twice a week), some spending 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.
You can 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 day care 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 you, having a plan for when things go south makes the thought of an economic downturn much less stressful.
Read more about survival budgeting here
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?
