Job loss. Illness. Family emergency.
For the 38 million American households living hand-to-mouth, the sudden inability to bring home a paycheck can be catastrophic. For this reason, many experts agree that an easily accessible (liquid) 3-6 month emergency fund should always be kept handy to cover the essentials.
While 3-6 months of expenses tends to be a popular rule of thumb among personal finance professionals, this amount can fluctuate greatly depending on what has been deemed essential.
As many of you now know, I've recently quit my job. While I'm not planning to be unemployed for long, I'd be lying if I said I'm not slightly concerned about my finances.
Yes, I've carefully prepared myself for the inevitable job burnout by trimming down my expenses and saving a large percentage of my earnings. But with only eight days left of pay, my August budget is in dire need of being stripped down to its bare bones.
So, it's time to make some financial decisions: which of my monthly expenses can be cut back on temporarily?
Here's a rough look at my August budget compared to a normal month (amounts that may change are highlighted):
My monthly expenses fall into three categories: essential, negotiable, and non-essential.
Essential expenses include: mortgage & home insurance, internet, alarm system, car insurance fund, medications, and utilities.
Negotiable expenses include: health insurance, cell phone, food & drink, personal care, and household.
Non-essential expenses include: car registration fund, savings, dentist fund, haircuts fund, Christmas fund, Cashville Skyline hosting, gas (car), gifts, and other one time expenses.
Note: Cell phone bill is higher than usual because I massively went over my allotted minutes yakking about my employment status with any family member or friend who was willing to listen. Cheaper than therapy, though, right?
Other factors to consider
1. How many months I am expecting to be unemployed for?
2. Are there any additional streams of revenue that I can rely on?
3. Are there any side hustles I can work on in the meantime?
4. Are there any large expenses that may occur unexpectedly during this period?
5. How livable is my bare bones budget?
Readers: Have you calculated your bare bones budget? What expenses have you deemed essential?