You would think high interest rates and recent years of higher inflation would devastate people’s finances, but the data keeps telling us that the economy is still humming along nicely. Still, have you thought of what you would do if you experienced a financial crisis recently? A sudden job loss or a medical emergency could leave a family without it’s usual income. Even if a healthy severance package was given or a large emergency fund existed, you wouldn’t want to keep on living as if nothing happened. You’d still want to cut your expenses as much as possible if a financial crisis occurred. You’d want to conserve the funds you had until a normal flow of income returned.
How much could you quickly cut from your monthly budget if you experienced a financial crisis?
I went through my monthly expenses and added up the things I could quickly cut:
Cable Services
We have cable television, broadband service, and land line phone service through our cable company. We could live without all of these services. Cutting all three would save a total of $240 a month.
Mobile Phone
All four members of my family have a phone and we share a data plan. As much as it seems that mobile phones are a necessity these days, they’re not. We’re not on a contract and can cancel at any time. Doing so would slash another $100 of spending.
Gym Membership
We have a family membership to a full service health club. Our family does make good use of the membership, but we’ll have to find ways to stay in shape without the use of the gym if money is tight. Dropping the gym membership would save our monthly budget $170 each month.
Second Car
We have two cars, but my wife and I really only use one. She carpools to work with a friend, while I drive our van to and from work. Our son drives the other vehicle to school and work. In the face of a financial crisis, my son would have to become re-acquainted with riding the bus, and we’d have to work out getting him to and from work. We likely wouldn’t sell the car unless the crisis became prolonged, but we could drop the insurance by parking the vehicle, saving $150 each month.
Entertainment
If we’re experiencing a full blown financial crisis, it doesn’t make sense to spend precious funds on entertainment. That’s $100 per weekend, for a total of $500 a month.
Totaling up the cuts:
- Cable: $240
- Mobile Phone: $100
- Gym Membership: $170
- Car Insurance $150
- Entertainment: $500
Total: $1,160 per month
In order to maintain some sort of contact with the outside world, we would likely have a low cost pay as you go cell phone, but we could easily reduce our spending by over $1,100 a month.
Even if the financial crisis was thought to be temporary, it would be a smart move to cut as much costs as possible just in case. All of the items listed are easily cut, and easily restarted. As income begins to rise again, you can add back in the items that contribute the most value to your life.
How much could you cut from your monthly spending if you faced a financial crisis?
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Be careful about that car insurance; check with your agent and make sure you’ve done what you need to do to be legal; at least in Louisiana, if you own a driveable car, you have to carry at least 15/30 insurance on it. Now, if you want to park the car and reduce the insurance to that amount, that’s fine.
Thanks for the reminder. Don’t forget about car registration fees too, because (at least in California) the yearly fee is much cheaper for a vehicle that isn’t going to be on the road.