Saving in a Downturn
Economic Downturns occur regularly and can add stress to both personal and professional finances. Additionally, you may experience your own personal economic downturns regardless of the wider economy. These times always make your budget a more difficult challenge.
Although BearMoney holds balance at its core, sometimes a temporary imbalance to correct your financial situation is necessary. For detailed advice on this check out our tips for budgeting in lean times. This article will help you make sense of the scope and scale of changes needed in your household finances.
Budgeting is tough, and this budget will be even more so. Just remember that this stress is temporary and you will come through it eventually!
What is the Budget Tool?
The Lean Times Budget is the level of spending you are going to have to drop to in order find your way through financial hardship. It is a relatively simple tool based on the concept that you can’t cut everything but you can cut from everything.
Overall, the Budget Tool will help you categorize your expenses, identify waste, and set savings targets for your current situation. It will guide you to the position where your ‘Annual Potential Savings’ is a positive figure, which is most basic goal for lean financial times.
Seeing your expense broken down in this way will help you gain perspective on your spending and improve your mindset going forward.
How the Budget Tool Works
The budget tool uses some very simple calculations alongside the categories explained here to give you figures on expenses and required savings.
To use the budgeting tool you must do the following;
- Obtain bank and credit card statements
- Assign each expense to a category in the link above
- Enter the numbers into the budgeting tool
After those three straightforward steps you will be provided with two metrics: Required Savings and Annual Potential Savings. The first is the amount you have to cut from your budget. The second is the long term benefit of this approach to your finances. Annual Potential Savings should always be a positive figure. If it is not positive you need to significantly reduce expenditure across the board. Try tinkering with your expenses to see where this might be possible
Hopefully you find this tool useful, if you have any other tools to recommend please feel free to comment below!
Note:This tool is constantly developing and may show odd results. Please double check calculations if you are unsure on the result.