You may have already mastered your household budget based on your current income. But what if that income suddenly disappears or is drastically cut due to a job loss or illness?
You may qualify for E.I. benefits, sick benefits under E.I. if you don’t have disability insurance, or disability insurance benefits. However, these benefits will never equal 100% of your income. E.I. benefits are usually 55% of your salary and disability insurance is 65% to 70%, depending on the provider.
Besides applying for any benefit you are entitled to, you also need to take a hard look at your expenses. Eliminate any non-essential ones and most likely reduce others. This is the basis of a bare-bones budget.
Usually, you won’t be able to get rid of your fixed expenses. These include housing (mortgage/rent, condo fees, property tax, and hydro), various insurance premiums (health, home, life & disability insurance), loan repayment (any type), minimum payments on credit cards and lines of credit (if applicable), alimony and child support (if applicable).
Obviously, there are variable expenses that you will still need such as groceries and transportation. But these are where you can make the biggest cuts. For example, you would only use your car when necessary, i.e. to go to job interviews or to medical appointments thus cutting on both gas and insurance costs. You may also use public transit instead. You would probably also be more careful when grocery shopping, only buying what you need and looking for deals.
Also review both your cable and cell phone services and make adjustments if you can.
Non-essential expenses include vacation, gifts, clothing, restaurants, gym, entertainment, personal care items such as spa treatments. These are not part of a bare-bones budget.
Living on a bare-bones budget will definitely not always be easy, but by definition it is temporary. I think it is also a good exercise in willpower and creativity.