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1. Creating a Weekly/Monthly Survival Budget

To live on a budget requires discipline and regular work. It is no use, if you make up an elaborate budget and then, when it comes to spending the money, you do not record where and when you spent it. In a family, especially when it goes through hard times, the cooperation and discipline of all family members is essential. This is often not an easy task, but it is of the utmost importance if the budgeting process is to work. At the start, it is therefore essential to make a few rules, however painful these are:

	The goal of the budget is the survival of the family or group for which it is created.
	There has to be total honesty within the family or group for which the budget is created. There are no secret expenses which other members may not know about.
	No expenditure is too precious to be touched or cut. Social status or consideration of such and expenses associated with them (the "what will the neighbors or my peers think" syndrome), are all open to question.
	Cooperation from all family or group members is the key.
	There has to be continued discipline.

You would think, that all the above is common sense, but most of us have become accustomed, in the times of plenty, to live and spend with a vague relationship to what we earn. There was always the Credit Card! That is finished!

The budget will be structured on the basis of essential and non-essential expenditure. The former are those that we require for survival and are therefore inflexible, the latter those that have some flexibility.

Essential Expenditure		Non Essential Expenditure
	Housing (mortgage, rent, property taxes, home insurance)		Clothing and shoes
	Utilities (Gas, Electricity, Water, Garbage fees) and Phone Line		Club Fees (sports and Gold Clubs)
	Food, cleaning and laundry detergent		Eating in Restaurants (including fast food places)
	Essential Health care, Medical Insurance and essential Medication		School Fees for private schools
	Car Payment for one car, Gas and Car Insurance		Secondary Cars for family members

Each person's list will differ and you have to create your own depending on your particular circumstances. But there should be little discussion about the housing costs. Now, if you have a very expensive house, you might initiate changes that would lower your expenditure (even if foreclosure is not looming, see our foreclosure page for suggestions on how to do that). Apart from variations, you might be able to negotiate your mortgage payments, there are few items that you can vary. The property tax is fixed and home insurance will also be fixed by the mortgage company, apart from your deductible amount. But beware of making that too large, since your finances are under stress and any incident could wipe you out financially.

Utility costs can be reduced by switching off non essential electricity uses, such as the TV or lights in rooms that are not occupied. Similarly, reducing the temperature when heating a house by two degrees less (say to 68 degrees instead of 70) and wearing some pullover inside the house will create significant savings. The same, in the other direction, applies for air conditioning. Phone usage via phone lines and cell phones can usually be cut significantly. A mix of renegotiating your phone plan for the fixed line/DSL internet access, and maybe buying prepaid phones, such as those from tracfone could reduce costs.

Food, cleaning and laundry costs are also highly variable and with some effort can be reduced:

	Plan your meals one week ahead of time and then make a shopping list. Stick to it and don't buy things you do not need!
	Don't buy semi prepared foods!
	Buy meats in bulk (for instance at Sam's), then take it home and cut it up to the size of portions you use for one, or maybe two, family meals! The rest pack in portions and put into sealed bags and freeze them! One of these little machines that seal freezer food now costs around $40.00 and they are well worth it!
	Buy fresh vegetables rather than tinned ones.
	If you cannot cook, learn to cook. Start with simple things and do not try elaborate cook books.
	Buy washing detergents in bulk and wash and iron clothes in a planned manner. Try to air dry them, rather then use to electric dryer. It is not only cheaper but your clothes will last longer.
	Stop using dry cleaners if at all possible. Obviously, you cannot wash a suit, but shirts can be washed and ironed at home! If you do not know how, learn it!

Health Care costs are always part of your life. But try to keep them within reach. Eating good food with vegetables (don't overcook them!) and fresh fruits will help to keep little stomach ailments, heartburn, your cholesterol and your sugar levels in check. Try to keep your health insurance as long as possible. Maybe you can rearrange the coverage with your former employer to lower your costs (for instance by increasing your deductible amounts).

Car Payments, and with it the associated insurance premiums, are only to some extent variable. But if you have several cars, try to make do with one. Yes, your precious little offspring might have to take the school bus (what a let down!), and you might have to bring your wife to and from work. But you have to make hard choices and other family members have to help in that as well!

So once you have settled all that, you can start to make up a budget. Some people prefer to do it on a weekly basis, others on a monthly. The principles stay the same, but a monthly budget needs more care and control in spending. Here is an example of a monthly budget.

Walli's income tax refunds, which given his former income level, he no doubt gets, have not been included in this budget, but obviously, if their amount is known, should be added. You can make these budget tables weekly or monthly. We have, because of the page size available on the internet, made the tables only monthly. Weekly budgets are better, since it will be much easier to control. Often you will not know the exact future amount, say for your income estimates. But be very conservative and do not over estimate what you could earn. We all know you are at the "top of your professions", but will potential clients of yours see it that way? Remember the budget does not become invalid, if you earn more and spend less!

"Walli's" debts to credit cards, revolving credit lines and bank loans are all being paid normally and by the end of the year, he should have reduced his debt by $47,116. At the starting date of his budget (Dec 31 of the previous year) and when he lost his job, his total debt outstanding, excluding mortgages, car and boat loans was $132,910.00. His repayments this year amount to 35.4% of his total debt. You could argue that the $47,116 could have been better used by saving it for future use and defaulting on the credit lines and cards. We would not recommend that, but closing down the cards and trying to renegotiate repayments with lower interest rates is something you should seriously consider.

Walli could get some help to renegotiate the credit cards and revolving credit lines. This is possible, but good companies are not easy to find and, in general, it is not as easy as some of the professional debt renegotiations companies (the ones from which you get e-mails and letters) make you believe. You should also be aware that there are many rogues out there, who offer to renegotiate and pay off your credit, only to extend a more expensive credit line to you. So beware!

2.3.2. The Use of your Non-Liquid and your Retirement Resources

If you are using your "non-liquid" (Table 1.1.3) and "retirement resources" (table 1.1.2.), you have to make up the same table as above (2.3.1.) for them, calling it 2.3.2. and 2.3.3.. If market conditions permit, you can naturally sell the non liquid assets. What kind of loss you can accept, will depend on your individual circumstances. You want to keep control over the depletion of resources and know, when decision time arrives.Because you want to know the situation, before you have used up everything you have. The real key is to be, as the "Wall Street yokels" call it, ahead of the curve, in other words, relatively speaking, in charge of events, rather than reacting to them. This is an important aspect!

Walli is in the lucky position not to have to touch his retirement savings. If at all possible, you should try to avoid that as well. But, when "the wolves are at the door", there might be little choice. If you do, then you should take some tax accountants advice, because it could have tax implications. Don't rely on what people tell you in the Sports or the Gold Club!

You might also have some legitimate choices, like Walli: Should you default on your secondary home and let it go into foreclosure, rather than touch your "nest-egg"? Remember, a foreclosure has serious financial consequences for your future, but so has not having anything to eat! We are not recommending to default on payments, but when things are "down to the wire", you have to look after "number one", and that is yourself and your family! Whatever you do, consult some legal counsel before you do it!

• Budget Expenditure
• Actual Expenditure
• Variance (or difference between the two).

You have to enter the actual expenditure each week and calculate how far you have strayed from your expenditure. Easy, you think, but most people fall down on this part, since they do not have the diligence to follow up on their own expenses. They will do it for a week or two, and then stop. Now, that defeats the purpose.

The convention is Opening Balance plus Income less Total Expenditure equals Closing Balance which in turn is the Opening Balance for the next week.

The above shows that "Walli" does slightly better than budgeted, by spending less. Since the timing between income and outgoing funds is a bit "off", Walli will have to supplement his checking account, temporarily with funds from his savings. It is important that this remains temporary and, that its use is disciplined. But, the last thing he would want to do, is go into an overdraft, since it is expensive.

Make up the above table by week for the whole of the year. It is really important and will give you a lot more confidence, since you know where you stand.

That concludes our budget session. Work through it, and review it several times to make sure you have not forgotten anything. And then talk it over with your spouse and other members of your family. This might not be the way you do things in your family, but you are in a serious "jam" and, maybe this is a time to change in order to survive.

We might create a low cost help and review line, if there is a demand for it. So if you have any suggestions,
e-mail us, mentioning "Survival Budget" in the subject line. If you do not have anything in the subject line, the e-mail will be rejected as spam.

Below are some books that could help you. Buy the cheapest version (2nd hand)!

Good Luck!