Emergency belt-tightening


Typical personal finance advice would have you divide your budget categories into two groups:  Your fixed expenses and your discretionary expenses.  I generally don't like that distinction much--how is your power bill more fixed than your grocery bill?  When you reach the point of emergency economizing, though, it's a useful way to structure your thinking.

Fixed expenses
can be reduced, but those reductions often require long lead times (waiting for a lease to run out, so you can move to a cheaper place) or they require an upfront investment (buying a more energy-efficient refrigerator).  Even when you can cut them, it's generally not practical to reduce them to zero, (except for those few people living off-the-grid).

So, in a financial emergency, the first place to look is at your discretionary expenses.

Start with zero

If you've got a budget, go through the non-fixed expenses and plug in zero for every number.  Then, go back and adjust up the ones that are really essential.  (Starting from zero and just budgeting what your household needs is, by the way, always a good idea.)

You've got to have food.  In an emergency, though, you can cut your food bill by a lot more than you probably think.  (And, as a bonus, cheap eating is probably healthier than what you were eating before, even if it may have to be less organic and less local.)

You've got to stay healthy.  If you've got medical insurance, keep it in effect if you possibly can.  If you're being treated for a medical condition, call your doctor's office and inquire if the treatment you're getting is the lowest-cost treatment that's available.  (The phone conversation--typically with a nurse or physician's assistant--will probably be free.)  In a financial emergency, it probably makes sense to delay even things that are important, if they're not urgent--eye and dental exams, routine check-ups, etc.

If you've still got a job, you probably need transportation.  In an emergency, though, you should zero out any transportation expense that isn't earning you money.  Every trip should be either to work or from work, with stops for errands along the way and not trips of their own.  Reducing the number of cars your household supports can save a huge amount of money--each car costs thousands of dollars a year in fuel, insurance, and financing expenses.  Consider things like carpooling, public transport, walking, bicycling, and so on.

Education is tricky.  If you're not in school, zeroing out your education budget doesn't save you much money.  If you are in some sort of degree program, disrupting it might reduce your future earnings by vastly more than you're saving--and yet, that might be the right choice in an emergency.  On the other hand, if financial aid is paying most of your education expenses, or if your health insurance depends on your being a full-time student, your education expense may be too good a bargain to pass up if you can possibly afford it.

Debt payments generally can't be escaped, except by filing bankruptcy, which is obviously a last resort.  There may be a few exceptions--student loans can be deferred under certain circumstances, there are moves afoot to develop programs for restructuring mortgages.  For debts that are tied to some specific thing (such as a car), consider selling the thing and putting the money toward the loan.  Doing that will generally leave you out of pocket, but getting the monthly payment off your back can still leave you ahead--the sort of hard choice you sometimes have to make in an emergency.

That's about it.  Every other discretionary expense should go to zero:  recreation, eating out, vacation, travel, clothes, shoes, etc.

Defer what you can't avoid

Many expenses that can't be avoided can be deferred in an emergency.  Generally, don't replace (or pay to repair) things that break or wear out.  For example, instead of getting a broken dryer fixed, dry your clothes on a drying rack until the emergency is over.  (As a bonus, the clothes will last longer.)  You probably can't get away without fixing your furnace or hot water heater, but you can get by without lots of things that you're used to using every day--microwave, toaster, TV, stereo, iPod, etc.  Make them last as long as you can, but when they go, do without until the emergency is over.

Sometimes proper maintenance will save a lot of money in the long run if done promptly--replacing a roof before there's water damage--but in an emergency, it's often necessary to accept that you won't be able to make the choice that's cheapest in the long run, because you're short of cash in the short run.  That's the nature of emergencies--you do what has to be done, and then do what you can to mitigate the harm after the emergency is over.

Ask for necessities

If you have relatives who give you gifts, ask that they give you necessities instead of luxuries.  Nobody wants to get socks and underwear for Christmas--except people with holes in their socks and worn-out elastic in their underwear.

Use your time

If your financial emergency is due to the loss of a job, you've now got time that you didn't used to have.  Some of it--most of it--should probably go toward finding a new job.  But there's still time that can be used in place of spending money.  Cook cheap meals from scratch (much cheaper than prepared meals).  Do stuff around the house that you might otherwise have hired someone else to do.  See if you can't do stuff for neighbors--helping in their garden, showing them how to create a website, and tutoring their kids can keep you on a more even footing when they're sharing produce from their garden, giving you rides into town, and letting you use their tools.  Make things (sweaters & scarves, jellies & jams, beer & wine, cakes & pies) that you can give as gifts or barter for stuff you need but can't make.

Look ahead

Don't dismiss the fixed expenses entirely.  For one thing, even small measures like adjusting your thermostat and turning off lights you're not using will definitely save dollars, even though they won't reduce your utility bills to zero.  For another, even "fixed" expenses are only fixed in the short term.  Depending on how long your emergency lasts, some (or even many) of your fixed expenses will become unfixed.  Know when your lease is up, when your cell phone contract is up, when the term ends for your kid's private school.  Look especially at annual fees that will get charged automatically if you don't cancel something.  Figure out now when you'll have to put the wheels in motion in order to switch to a lower-cost option at the next opportunity.  

If you're not in debt, it's pretty amazing how low you can push your expenses on an emergency basis, simply by zeroing out all your discretionary spending and deferring other spending (including essential spending) until the emergency ends.  As in so many other areas of life, it's really debt that's the killer.  In fact, I'd go so far as to suggest that, in the current economic situation, having any significant debt means that you're already in a financial emergency--even if you've got a good job and a solid emergency fund.  I recommend some preemptive belt-tightening and getting that debt paid off.

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Guest's picture

And you are so right - I'm often amazed at how much I can cut our budget with a little effort. Thanks for the suggestions!

lghbob's picture

Thank you for a really great post.   You've covered the waterfront with a comprehensive and well thought out approach.  In particular, I would recommend that readers utilize your links, as the detailed info about budgets etc, will make any planning  easier.

Zero based budgeting is certainly the way to attack cost reductions. Hunting and pecking around the perimeter of overspending misses too much.

Having lived in the aftermath of the Great Depression, many of your suggestions really hit home, especially the part about working together with others.  Trading goods and services is not common today, but it was a major part of survival when things were really bad.  Hopefully belt tightening doesn't mean "doubling up", but it could be necessary.  Our extended family  shared meals, lodging, transportation and common repair projects as a matter of course.  At times, "stone soup" was less a religious based ritual than a necessity.

The last part of belt tightening, is to "put it down on paper".  Hardship or potential hardship, is accompanied by strong emotions and deep worry. Having a goal with realistic expectations will go a long way toward offsetting that free floating anxiety that comes from fear and depression.  

"This too shall pass".... No matter  a recession or a depression, we will all come out of this.  Jobs will come back, and the economy will rebound.  The important thing is to stay positive, and work towards the future.  


my opinion only

Guest's picture

Finding a local grocery store that delivers (like Safeway or Albertsons) or a grocery delivery service (like Amazon Fresh or Spud.com) is a great way to save money and avoid the transportation costs associated with shopping. You can buy most anything you need for the house (cleaning supplies, toothpaste) along with food, and there's zero temptation to buy junk food. It's also a thousand times easier to make a healthy and affordable meal plan when you're sitting at your computer than when you're at the store - you can immediately see which foods are cheapest and look up their nutrition information.

I use RetailMeNot.com to find free delivery coupon codes, so I only have to pay for maybe one out of every four deliveries - and it's only $6 when I do have to pay, which comes out to $1.50 per trip.

Guest's picture

About health care, if you are working and have insurance, many insurance policies cover annual physical. You just have to come up with the copay. For women, most policies consider annual exams with a gyne covered as well, so don't pass that up.

Also, this time of year is annual enrollment. Many companies are having health fairs where you can get free screenings for blood pressure, glucose, and cholesterol. Sometimes they offer free flu shots for you as well as dependents.

Guest's picture

You covered pretty much everything necessary. How about a spreadsheet zeroed out ready for everyone to use :)

Philip Brewer's picture

Thanks, everyone, for the kind words and useful suggestions!

Guest's picture

Are still the biggest consumer consumption expenditures.

If you can cut down in either of those categories the savings dwarf "eating cheaper meals" - try not to get emotionally attached to your car(s) or housing.

And learn to fix at least some things yourself.

I've never met a dryer (or toilet) that couldn't be fixed by replacing a few parts.

Guest's picture

Over the last year, I reduced my electricity balanced-paying bill from $128 to $98, and that's with two rate-hikes along the way.

I accomplished this by buying more efficient appliances, and won't even think about touching anything that isn't listed on energystar.gov (they have small appliances like telephones and air purifiers too). I also rebuilt my computer with more efficient components like the Western Digital disk drive that spins down when not active, power supplies with the 80Plus label (www.80plus.org), and especially by replacing overclocked gaming video cards with new power efficient cards from ATI (www.amd.com).

I also changed my habits, and bought switched power strips that stop standby power wastage.

It took about a year, but at the end my my balanced budget, I had 2 free electric bills, and a $10 rebate from my power company. I did all this to reduce my carbon footprint, but I should break even in late 2009, and the extra $30 in my pockets helps.

Philip Brewer's picture

@Saraj:  Thanks for the success story!  That's exactly why I've always been unhappy with the practice of lumping things like the power bill into the category of "fixed" expenses--as if that meant that you didn't need to give them just as much attention as you give to all your other expenses.

Guest's picture

Congratulations, Saraj. Though it might not seem like much now, every little bit certainly helps. Over time, I'm sure you'll be even happier with your decision. Check out http://financialtales.com for similar stories or to submit your own.

Guest's picture

I can't seem to figure out why, despite my frugal lifestyle, I never seem to have any money--on hand or stashed in a bank account. I always run out. My rent is about half the average rent for my area; my car is used and paid in full, and I hardly ever drive (I put less than 3000 miles on it last year); I cut my own hair and have done so for the past 10 years; I have only basic cable; I shop discount stores and thrift stores for most items; all my furniture is either from the thrift store or hand-me-downs from friends/family; I almost never go out to the movies or to fancy restaurants, and never buy designer clothing. My only "splurge" is my gym membership, I suppose, but I also consider that an investment in my long-term health, and yes I do go regularly. I don't have much debt (less than $1000 in credit cards). I put 15 to 20 percent of my paycheck into a retirement fund.

I'm doing everything "right" yet I can't make it.

It's just really frustrating to read all these "frugal living" articles and want to scream, "I already DO all that!" and yet I seem to have nothing to show for it. Right now my car is unusable because I can't scrounge up the $600 for repairs that it requires. It's ridiculous and I wish I knew how to fix this problem because it literally keeps me up at night, worrying about money all the damn time.

Guest's picture

It just sounds like you don't make quite enough money to pay for your lifestyle, frugal as it is, as well as put away 20% of your income.

Maybe learn how to fix your own car (tools, parts, and a Haynes manual for your car and some time might add up to $600, but you can use those tools again and again).

Try and find some way of increasing your income too.

Sorry, that's all I see.

Philip Brewer's picture


Do you have a budget and track your spending?  Because the answer to your question will be right there.

You might be interested in checking out my very first Wise Bread post:  A budget is not a constraint.