As Recession Looms, Planning Your ‘Doomsday Budget’ Is Key to Peace of Mind
How to figure out the bare minimum that you truly need to get by
One of my biggest financial worries, in these tumultuous times, is how my husband and I would get by in an economic downturn.
It’s nearly impossible to predict how a recession would impact my bank account (just as predicting a recession itself is a fool’s errand), but as the main breadwinner in my household, any reduction in my income would have a significant impact.
Guarding against this possibility is an undercurrent to many of my financial decisions, and is exactly why I need a “doomsday budget.”
A doomsday budget, or a bare essentials budget, is different than the classic “emergency fund.” An emergency fund is a pool of money set aside and best utilized when you’re walloped with an unexpected expense, or when you lose all income at once and need to live off reserves. A doomsday budget is a plan that’s deployed when there has been a significant reduction in income.
Mine assumes an income drop of 70% (and that my husband’s job would stay stable), and outlines exactly how we’d scale back on discretionary spending, savings goals, and student loan payments.
