How To Create A Crisis Budget For Christian Millennials.
Estimated reading time: 9 minutes
Having a budget when things are going great is a good thing. However, sometimes people go through a financial crisis and this is where a crisis budget comes in. In today’s blog, we will look at how to create a crisis budget for Christian millennials. What would you do when your income is reduced by half? Do you have the plan to sustain you until things return to normal? An emergency fund is great, but it will only serve you for so long. Without further ado, let’s get right into it.
Table of Contents
- What is a crisis budget?
- Characteristics of a crisis budget.
- The importance of creating a crisis budget.
- How to create an effective crisis budget.
- Some key- takeaways
- Scriptures to help you during a financial crisis
What is a crisis budget?
A crisis budget helps you identify the essential expenses that need to be met to help you survive. This budget differs from a normal budget in that the focus of the crisis budget is the expenses you cannot do without, while a normal budget has some non-essential expenses as well. A crisis budget will have close to no music subscription expenses, while a normal budget could have one or two.
Characteristics of a crisis budget.
- It is very realistic to your current situation. This budget factors in your crisis income. You don’t overstate your income.
- Includes only essential expenses. Rent/ mortgage, bills, etc are included while expenses like eating out are excluded. You focus on the needs and not the wants.
- You create a crisis budget after a normal budget and often is temporary.
- A crisis budget only includes guaranteed income.
The importance of creating a crisis budget.
- Having a crisis budget will help you determine if, in the event of a financial crisis, e.g., layoffs, sickness, natural disasters, loss, and other unexpected events, you can meet your expenses and sustain yourself.
- A crisis budget helps to curb overspending in times of crisis and also helps you prioritize what is important and what is not. You will make lifestyle changes to reflect your current financial position.
- Having a crisis budget will help avoid stress because you will have prepared for the worst-case scenario. In doing this, you will bounce back sooner because of prior preparation. Depression will not destroy you because you will have an already established plan.
- A crisis budget will help you avoid debt which could keep you stuck in financial distress for a longer period. When you have a crisis budget, you will be prepared for long-term emergencies and you will know how to scale back.
How to create an effective crisis budget.
Jot your crisis income.
If you were to lose your job today, do you have other sources of income? And what is the amount? Do you have a spouse? Does your spouse work? What if instead of losing your job, you get a 50% pay cut because of some natural disaster? ( Remember 2020?) Asking yourself these questions will help you determine the income amount you are sure of.
If you are self-employed, what will you do when the business is not doing well? Let’s not forget the business life cycle where a business goes through launch, growth, shake-out, maturity, and decline. In the seasons of decline, how will you deal with the slump in income? What about during an economic crisis that leads to a decline in people using your service? (Hello, inflation and recession.)
In both these scenarios, consider reducing your income by half.
Categorize your expenses as essential and non-essential.
List down all your expenses and categorize them as essential and non-essential. Remember, during a crisis, you don’t consider wants but focus on your needs. Wants are simply expenses you don’t need to survive, while needs are essential for your survival.
Examples of needs.
- Rent/ mortgage
- Utility bills
- Groceries
- Transport
- Health insurance
- Medication
- Insurance
Examples of wants.
- Eating out
- Mani/Pedi
- Extra shopping
- Entertainment fund
Having categorized your expenses look for ways you can cut expenses on both lists. Of course, expenses like rent and insurance remain constant, so you cannot cut them. What you can reduce expenditure on cut back on that. Just to give you a practical example.
- Rent/ mortgage =1000
- Utility bills= 200 = consider reducing to 150
- Groceries = 300 consider reducing to 200
- Transport =200 consider reducing to 150
- Health insurance =95 reduce to 80
- Insurance =50
This means that you will have saved $215. It might not look like much, but it can help. When it comes to wants, instead of having a specific budget for each line item consider setting aside a specific amount let’s say $100, and prioritize what you will spend it on every month.
If you are renting, you could consider downsizing to an even cheaper apartment or house. This will also help you save. Of course, you should factor in the consequences of getting out of your lease before its expiration. How else can you reduce your expenses? Carpooling? Public transport instead of the car? Weigh in all the options and make the changes necessary. The goal is to ensure that you don’t end up in more debt than you already are.
When it comes to lowering your mortgage, you could consider;
- Lowering your interest rates. A lower interest rate can mean big savings. For example, on a $200,000 30-year-fixed loan, reducing the interest rate 1% can mean a monthly savings of almost $120. If you’re looking to lower your mortgage payment, keep an eye on the market. Look for rates that are lower than your current interest rate. When mortgage rates drop, contact your lender to lock your rate.
- If a lower payment is your goal, extending the term of your mortgage with a new loan or loan modification can help you get there. A longer mortgage term spreads out the loan balance over more payments.
- Appeal your property taxes. If you have an escrow account on your mortgage, then you’re probably paying for your property taxes as part of your monthly mortgage payment.
- Get rid of mortgage insurance. Mortgage insurance can add quite a bit of money to a borrower’s monthly payment. How you get rid of mortgage insurance depends on what type of loan you have.
Investigate loan or debt-repayment options
If you have the funds to make minimum payments, then you should do that. Prioritize paying debt with the highest interest rates like credit cards. The reason for this is that you end up paying fewer interest charges which will save you more money in the long run.
But in the event you cannot, you should consider these options.
- Talk to your lender. Some lenders and creditors are lenient and can provide relief options like investing or deferring payments.
- Debt consolidation. This method allows you to combine several high-interest debts into one new loan with preferably lower interest rates. This new loan is then used to pay off your debt and you only have to make one payment. Many debt consolidation companies offer to pay your creditors directly.
- Debt settlement. This is when you decide to work with a debt settlement company to negotiate with your creditors on your behalf the amounts you will be paying. Unfortunately, as the negotiations are going on, you will have to halt making payments which can have some negative effects. These include harming your credit score, inability to take out loans in the future, and the worst being your creditors suing you.
Delay nonessential expenses and analyze monthly subscriptions.
Expenses like extra shopping, eating out, home renovation, gift giving, and entertainment can be delayed and halted altogether. After all, you are in a crisis. You cannot live the same lifestyle you lived before the crisis. Opt to cut back on such expenses until you have stabilized. This will also help set you up in the future as you will have learned to live in less than before, giving you room to save more in the future. Truth be told, we can do without most of these expenses. Cut off on expenses that are non-essential. These seemingly small expenses can add up. Having 10, $10 monthly subscription translates to $100 a month.
Commit to avoiding debts at all cost.
Getting into debt will sink you into more financial distress, especially if there is no room for additional income. This translates to there being a higher chance for you to default on your payment. This will affect your credit score and ability to borrow in the future when you need to. Debt has other effects like the increase of lifestyle diseases like stress, depression, anxiety, and high blood pressure. And aside from that it can lead to strain in relationships.
Some key- takeaways
A crisis budget should be created after a normal budget. If you don’t have a budget now, it is essential for you to have one. One thing you should remember as a Christian millennial is that wisdom and preparation are key. Look at Joseph, he helped Pharaoh store up food during famine and because of that, they had enough to feed the country and the entire world in general. When you learn to plan for the future you will thrive during the famine as you will have put strategies in place to help you overcome adversity.
Don’t wait for a crisis for you to take action. The Bible reminds us that the wise store up their choice food for the future. And again, effective crisis management comes from proper preparation. Take time to create a crisis budget. You can even make it cute by going on an actual money date and having a journal to write down all your expenses and obligations. If you feel overwhelmed, you could consider hiring a budget coach to help you with that. There is no problem with you asking for help. In fact, asking for whelp is a sign of wisdom. Even the Bible reminds us that success comes from seeking wise counsel. And in the presence of many counsels, there is victory.
Scriptures to help you during a financial crisis
Mathew 6:31-34. “So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.”
Philippians 4:19. “And my God will meet all your needs according to the riches of his glory in Christ Jesus.”
Psalm 37:25 “I have been young, and now am old, yet I have not seen the righteous forsaken or his children begging for bread
God will take care of you. He will not forsake you. But at the same time, remember to live below your means during times of crisis. It is what you do in crisis that will determine if your life will work out for good or not. But let me ask you this, do you know your financial position? Do you have an emergency fund and do you have a savings account? Use wisdom. And always ensure that you have someone to keep you accountable to ensure that you remain consistent and disciplined both in times of crisis and in good times too.
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Radiantly Resurging
Mercy is the author and founder of radiantly resurging. She is a Christian and having gone through the wilderness season, she decided to impart the knowledge learned to help others navigate their wilderness season too
