The Lockdown Financial Survival Guide - Extreme Budgeting - Part 1

As I write this here in the UK, we are roughly 10 days into our government imposed lockdown. Although the government has said that they will review the situation after easter, it looks very likely that the lockdown will be extended for several weeks beyond this point. 

We are not alone - all over the world, people are now locked in their homes, businesses are closed and the economy has ground to a halt.

Of course the real crisis here is the health crisis and nothing can be taken away from that. The scenes playing out on the news each night break my heart and my sympathies go out to anyone who has been impacted by this crisis.

But - we also have a financial crisis on our hands. Across the world millions of people have lost their jobs already (and unfortunately there could be many more to come), businesses are closed and those people left working are being placed under increased strain.

As someone who has dealt with very uncertain times before (if you are not familiar with my near-death experience, please click here to ready my story), I feel that I have a somewhat unique perspective to bring to the situation.

Yes - the situation is bad. You might say very bad. 

BUT - I firmly believe that your mindset in the coming weeks and months will determine your outcomes. The way you think about your business, you job, your life and your finances over the coming weeks could well have an impact on your life for many years to come.

You see, some people will give up. They will resign to their fate and you can see why. For some people, things look quite bleak right now.

BUT - some people will fight. They will use this time as an opportunity to re-invest themselves, design new businesses, new lives, new careers. And some people will want to use this time as an opportunity to organise their finances and finally feel in control.

Wouldn't it be nice to feel in control right now?

I have been thinking over the past 10 days what I can do to help. I run a brick and mortar financial planning business and we are busier than ever supporting our clients through what is clearly a tough time.

But, I can do something to help fellow mutineers as well. And, over the next month or so, I am going to be posting as often as I can with one actionable tip (supported by tools and resources) to help you get control of your financial situation in these most unusual of times.

We can't control the situation, but we can control how we react to it.

So, today we are going to focus on creating a budget. This is something I have written about before, but special times call for special measures - this calls for 'extreme budgeting'.

Build Your Budget

The first step for any good budget, in my view, is to look back and see what you have spent over the past 12 months. I always encourage people to look back over a full 12 month period because there are always some expenses that don't happen every month. Think car repairs, holidays, eating out. These expenses often change or happen infrequently and so I think the best way to build an accurate budget is to look back over the full 12 months.

Although you might be thinking 'why the heck do I need to look at the last 12 months - it's the next few months I'm worried about'. In order to make progress, you first have to look back at where you have come from.

This is true in budgeting as it is in any area of life. If you don't know what you were spending before, it is very tricky to work out what you can cope on now.

So, for today - let's focus on the past 12 months - the actual spending you have done over the last year. Tomorrow, we will get to work on thinking about the future.

Download Your Bank Statements

Step 1 is to download your bank and credit card statements for the past 12 months. Most banks and credit card providers will allow you to export this data into a csv file (a kind of excel spreadsheet) and this is the best format for this exercise.

If you can, get all 12 months in a single sheet - this will save time later on.

Next, you will want to download my free ultimate budgeting spreadsheet. This will help you to categorise all of your spending and will save a ton of time. You can grab this for free by filling in the form below:

Now you have your budget planner, the aim is to add up all of your spending over the year and then categorise it, so we can see where your money has been going over the past 12 months.

This is a valuable exercise at the best of times and is almost essential in tough times like these.

The spreadsheet has loads of different categories for your spending - you don't have to use them all. I would suggest that you try to make your sheet as detailed as possible though as this will help you with the next steps over the coming days.

There are more detailed instructions in the budgeting spreadsheet itself to help you get started.

Put In The Hard Work

Although this initial exercise will take a little bit of time, it is so worth it!

All good financial plans start with a good, honest look at what you have been spending in the past. This might be surprising, it could be a little bit painful (how much did I spend on lunch!?!), but I guarantee you will learn a lot about your spending habits and about yourself.

The Next Steps

If you are lucky enough to still have secure employment or your business is doing well - then good for you. I would suggest you complete the steps above, read some of the other articles on budgeting below and then you are good to go.

5 Reasons Why Envelope Budgeting Rocks

5 Budgeting Mistakes Almost Everyone Makes

If you are in financial trouble though - you will need to go a little further.

Budgeting in extreme times is a little different to usual, but don't worry - I have your back.

Over the next few days, we are going to look at the next 3 'phases' of your emergency budgeting plan. The beauty of this process, is that you can activate or de-activate these 'phases' as things get worse (or better) in your situation.

Phase 2 - Your New Reality

In this phase we will talk through the spending that you simply might not be able to do at the moment - these items will have come off of your budget almost by default if you are in lockdown. Think holidays and eating out - you simply can't do them at the moment.

Phase 3 - Cutting Back

This is where we will look at your 'minimum viable budget'. What is the very minimum you can get by on and still keep the wolf from the door?

Phase 4 - Special Measures

This is where you are in serious trouble. I hope you never get here, but it happens to the best of us sometimes. Here we are going to focus on negotiating with lenders, landlords and everyone else to temporarily reduce expenses.

Tune in over the coming days for more on each of these other phases.