Plan Now For Tough Times: How To Create A Survival Budget

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Plan your survival budget in good times

“Hope for the best. Plan for the worst.”

(First published in August 2017)

Life has its ups and downs. 

Up: 10 years ago we bought our first home.

Down: a few months later the financial crisis hit and I found myself pregnant and out of work. 

The big question hanging over our heads was: could we get by on one low income?

Big changes call for big adjustments. It doesn’t matter if the change was planned, like having a baby or starting a new business, or unplanned, like job loss or illness (or global pandemic). Adjusting your lifestyle to a drop in income is HARD

But the transition is a tiny bit easier if you’ve planned ahead. Plan B, even if you never have to use it, will give you a little peace of mind and build financial resilience

An effective financial backup plan includes these four elements:

  1. debt elimination
  2. an emergency fund
  3. a survival budget; and
  4. practice

Disclaimer: This is general information only. You should always consult a qualified financial expert when making money decisions.

1. Eliminate Consumer Debt

The last thing you want, when times are tough, are creditors knocking down your door. You want to look forward to the future, not deal with past spending.

The future is more secure if you reduce or eliminate as much unnecessary debt as you can now.

Read further: The Seven-Step Plan to Becoming Debt Free

Build an Emergency Fund

An emergency fund is a stash of money specifically put away for job loss and other financial calamities. It’s your hot bath and warm milk at night; it helps you sleep soundly.

The best way to build your emergency fund is to pay yourself first – prioritise and automate your savings a little each payday.

Read further:

Create a Survival Budget

A survival budget will give you an idea of your minimum expenses to get by and how much income you need to cover them.

If you’re a two-income family, maybe you’ll find you can survive on a single income. It might not be ideal, but it will give you peace of mind.

It will also give you a target for your emergency fund. Based on your survival budget, how much do you need to save to cover 3 – 6 months of expenses?

  1. Your Current Budget

You already have a budget and know where your money is going every payday, so making a survival budget is just a matter of cut, cut, cutting away the fat.

Wait, stop! You don’t have a budget?

Then your first step is to know how you spend your money now while times are good.

Read Further:

  1. Readjust your Income

The next step is to work out your survival income.

  • Is your partner still earning income?
  • Were you paid out your leave entitlements? How long can you stretch these?
  • Were you given a redundancy package?
  • How many weeks can you make your emergency fund last?
  • Are you eligible for unemployment benefits? What amount are you eligible for?

If you’ve been retrenched for any reason, make sure you’re paid out all of your leave entitlements, your super and any redundancy payments as offered by your employer.

Also, consider visiting Centrelink to discuss options and unemployment benefits. While the amounts are small and the process is painful, these can help you meet your expenses while you’re looking for more work. Depending on your circumstances, there may be a waiting period before you are eligible for payment, so it’s a good idea to consider your options as soon as possible.

  1. Eliminate Discretionary Spending

It’s time to get ruthless and slash all unnecessary expenses.

These expenses are wants as opposed to needs. Needs include food and shelter. Everything else can be cut temporarily.

And it’s amazing what ‘essential’ expenses can be eliminated when there’s just no money to pay them.

When I looked at our budget when I was first out of work, I thought we couldn’t cut much at all. A few weeks later and we were living on a fraction of what we had been.

So go through all your subscriptions and memberships and cut these from your survival budget. Cut dining out, new clothes, entertainment, alcohol and any other discretionary spending.

And remember, it’s only a temporary measure until you get back on your feet.

  1. Negotiate Fixed Expenses

Fixed expenses aren’t always as fixed as we think – it’s possible to reduce fixed expenses like insurance or utilities by shopping around.

Read further: How to Switch and Save

If you have debts, then it’s a good idea to contact your creditors and discuss repayment options while you get back on your feet.

You may be able to negotiate a reduced repayment schedule or repayment holiday on your mortgage.

If you are struggling with debt or your creditors won’t negotiate, there are free and qualified debt counselling services that can help you.

Read Further: How to Negotiate Your Debt and Where to Find Free Help

When it comes to housing expenses, it’s not easy to just pick up and move if your rent or mortgage is too high, but if times are really tough and you think things will be tough for more than a few months, it might be a necessary option.

Alternatively, you can consider sharing to help pay rent or mortgage.

Car payments are another big drain on the budget. Again, it’s not always easy to just sell your car and get a cheaper one, but run the numbers to see if this is an option that will work for you.

  1. Adjust Flexible Expenses

Flexible expenses include expenses like petrol, groceries and internet and to some extent utilities like electricity.

When you’re creating a survival budget, think about the bare minimum you need to get by. Budget for enough petrol to drive to essential places, enough grocery money for basic groceries and switch to the minimum internet available (or if you can, temporarily opt for free wi-fi public hotspots).

Take steps to reduce the amount of energy and water you use.

Read further: Reducing grocery expenses


Living on your survival budget when you don’t have to, even if it’s just for a few weeks or a month has several benefits.

First, practising empowers you. Rather than worrying about the worst, you are empowered by knowing you can cope. And if you do struggle, it can be the motivation you need to reduce debts, build savings and examine alternative income streams.

Practising for just a little while will also help you to pay off current debts and build your emergency fund.

Read further: Challenge Yourself with a No-Spend Month

Create a survival budget now while times are good. If you have a drop in income in the future, you’ll be glad you did, because the transition will be a little less stressful. A survival budget gives you the confidence you can cope and get back on your feet. 

a budget for tough times


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  1. I love this! I recently lost my job and we had to adjust to our new income as well. Luckily we don’t have any debt and I still get a bit of government money so we can adjust to a single income in steps. But it’s so true to prepare yourself for it!

  2. Hi Melissa
    This is a good prompt for me as I am close to retirement to review my budget with a lower income in the future.

  3. Hi Melissa,
    This is a wonderful blog!
    Thank you for your great articles.
    I really like the article you wrote in 2015 about food to thrive on. I hope to read Luise Light book.
    many thanks

  4. For some time now I have gradually been adjusting to spending less and for the past couple of years have been been living on what will be my pension amount, and saving the rest. When I retire I will be used to the limited income and will have savings for emergencies. How I wish I had learned this year’s ago.