One of the best ways to manage your money is to create a budget. A budget is simply a list of bills you need to pay for or buy each month. Budgeting during good times is challenging, but creating a budget for an economic crisis is especially daunting. Nobody wants to think of recessions or the possibility of losing your job, but this is one of those adulting things one has to do because – life is hugely unfair a lot of times; a crisis can hit you anytime. You know, like when a world-wide pandemic induces economic-crushing lockdowns.

Here’s when a “crisis budget” becomes handy. A crisis budget is a budget stripped off “fat”. Think of it as a lean budget, low-fat budget that will enable you to survive. And when I mean survive, I mean the kind of budget that will allow you to continue eating well and keep a roof over your head. So, it would not have things such as TV subscriptions, unlimited data plans for your mobile phone or a trip to London (not that we can go anywhere these days, eh?).

It’s the kind of budget you’d need when you’ve been laid off or am experiencing a financial crisis.

Here are my tips to create a crisis budget:

1. First, strip out the fat

Sit down and see what’s your current budget. If you do not know how much you’re spending right now, spend one week tracking your budget. After the end of that week, sit down and look at what you’ve spent your money on. Are there any items that you can cut away, say that daily bubble tea habit that is costing you RM50 a week? Or those RM20 lunches you take every day at work?

How about that unlimited mobile data plan? Perhaps you don’t need as much data as you think. I recently downgraded my data plan from unlimited to one that just gave 6GB when I discovered that I was consuming less that 5GB a month! By doing this, I’m saving about RM60 a month. In one year, I would be saving about RM720!

Subscriptions are another thing you should consider stripping away. Do you really need the streaming service? Or that magazine you barely read?

However, if there are any subscriptions that will really add value to your life and there are no free alternatives, consider keeping it if it helps your mental health or well-being. For example, my Scribd subscription is something I really love, because it gives me access to thousands and thousands of books, magazines or audiobooks at a really affordable fee. It also has a way to let me “pause” my membership for a few weeks so that I can have a breather once in a while if my finances are too tight.

So, it’s something I keep because it gives me a lot of stress relief and pleasure.

2. Next, add your debts

Your lean budget should also include your debts. List the minimum amount required to pay each. During times of emergency, I would recommend that it’s more important to build an emergency fund than to accelerate your debt repayment plan.

3. List fun activities you can do for free

Now you probably think, a crisis budget equals deprivation budget, but it doesn’t necessarily have to be that way. There’s a lot of ways that you can have fun for free.

For example, you can have a walk in a park or have a picnic with your family. You can even start a garden. Now, that’s really fun because you can not only have a great time outdoors, exercising and having fun with your family, you can also grow your own food. That can actually help immensely to lower your food budget.

5. Practice living your budget

Okay now that you have an idea of how your crisis budget looks, you can practice living it. Basically, try to live on your a crisis for a week and see how it feels like. This will give you a taste of how it would be like to live on this lean budget. It also gives you the chance to adjust it – increase it, decrease it – depending on how you feel.

For the last few years, I would live on on a very lean budget (about RM2,000) off and on to see if I could. What I found was that it was nigh impossible to do so when I was working full-time as travel took up a huge chunk of my expenses and I almost inevitably buy eat out because I’m far too busy to cook every day.

However, during the Movement Control Order, it was far, far easier. I cooked most of my meals. I downgraded my mobile plan. I hardly went out to entertain myself. And I realised, to my happy surprise, that I was quite content and happy to live on a lean budget.

When you’ve already had a trial run of your crisis budget, it won’t be as psychologically difficult for you. It’s like, okay, I’ve done this before. I can do this!

6. Write your emergency budget and remember the RM you need to live on.

Once you add up all the things that you need in a month to survive, keep that figure in mind. Here’s an example of my crisis budget:

• Insurance: RM475
• Apartment management fee: RM280
• Mobile phone bill: RM42
• Food & eating out: RM400
• Travel: RM50
• Misc purchases: RM100
• Utilities: RM150

Total: RM 1,497

(This budget is based on the fact that I have no dependents, work from home, cook most of my meals and no longer have a car or house mortgage to pay. And since I walk everywhere to do my chores and drive only once a week and at that, for a short distance, I hardly spend more than RM50 a month on travel expenses. Yours would probably look different. )

It’s kind of reassuring to know that I need about RM1,500 each month just to survive. Based on that figure, a six-month emergency fund would be RM9,000. Having that amount tucked away goes a long way to give me some peace of mind.

Again, your final crisis budget figure may be different. But knowing that you need RMX,000 to survive will help you create an emergency fund that will go a long way in helping you manage difficult times.

Update: A reader pointed out that there are some expenditures missing from my emergency budget such as property taxes (Cukai Tanah, Cukai Taksiran etc), and car registration and insurance. Do take them into account as well. When I account for these, it adds about RM800-RM1000 per year, which is around RM65 per month, making my emergency budget around the RM1600 mark.