Recession Saving Budget

Budgeting in a Recession – 5 Steps to Succeed


In an ideal world we would live in a stable financial system with livable income sources and balance saving patterns. Unfortunately, the reality is a world of economic uncertainty that expands and contracts. This is caused by internal/external conditions outside of our control such as recessions, natural disasters etc. In the case of 2020, a public health catastrophe in COVID-19 has caused significant economic damage.

The time-frame for economic recovery and the leanness of our situation vary greatly. However, there are still tips that add value to all situations . They are more extreme than the regular advice on BearMoney (which tries to encourage budgeting that is both positive and measured). Sadly though, sometimes going back to the very basic level of economic activity is the only viable option. Hopefully our budgeting process will help you make good decisions in your lean times.

Step 1: Establish your baseline

There are many different theories as to what ‘basic’ expenditure is. In modern times a lot of new technology has become a basic for survival in the economy and society (for example, owning a smartphone is required to interact with the modern world). However, there are others things that have come alongside technological progress that only seem like basic expenses.

In other blogs we have mentioned the delicate balance between scarcity/abundance and how maintaining this equilibrium is the key to long terms success in budgeting. However, in lean times there is a requirement to pivot towards the scarcity mindset to an unbalanced level.

This is no longer about financial growth but rather, it is about financial survival. Establishing your baseline means figuring out how much money you need to spend to remain able to operate in the economy and meet your basic life needs. It is a harsh but temporary realignment of mindset.

To established your baseline, break your previous 6 months expenditure into the following categories:


  1. Rent/Utilities/Phone/Internet (i.e. NOT Netflix, Spotify, Xbox Live etc.)
  2. Vehicle lease/Gasoline/Insurance/Taxes/Maintenance
  3. Other Transport
  4. Personal Care items with a health and hygiene function (i.e. NOT Aftershave, Makeup etc.)
  5. Food (but NOT any restaurants/bars/coffee shops etc.)
  6. Medical Expenses (including insurance costs, eyecare etc.)
  1. Social items (clothes, makeup, haircuts etc.)
  2. Everything Else

1-7 is your baseline, 8 is your extra expenditure

Step 2: Figure out your waste

Not everything in category X will be a waste of money/something that you can change immediately (e.g. a 24-Month cable contract with huge cancellation fees) but most of it will be wasteful spending. Dining out, gym memberships, expensive hairdressers/barbers*, branded clothing, all of these things are wasteful in lean times. 

You need to be ready to say goodbye to 90% of these things for the foreseeable future. For example, if you have internet access and outdoor access then you have all the entertainment capacity you need. We’re budgeting at the lowest operational level.

You and your family being ‘bored’ was a luxury before economic survival became the core objective. Currently the only relevant needs are shelter, food, socializing, exercise, and keeping your brain active. You don’t need anything else, and that’s the sugar-free truth.

So, what now? Well, you need to sit down and line by line strike out everything that fits into categories A-F leaving you with just G: Social Spending and X: Other Spending. The total amount spent on these two categories is your waste. This is the portion of your expenditure that you’re going to have to overhaul/mostly eliminate until better economic times arrive.

A lot of this process is going to suck but hopefully at the other end of this you will be able to waste some of your money again with the benefit of perspective.

*As said before, remaining economically active is important and cutting these things completely might not be practicable.

Step 3: Calculate your budgeting wiggle room

Once you’ve put together a complete enough list of your expenditures and isolated out the ‘waste’ it is time to break it down again into two final categories, useful and useless.

As hinted at before, the rules by which you place something into the useless category will be a lot broader in lean times. Everything that ends up in this category is going to be something that is either a) a pointless expense that doesn’t benefit you or b) an expense whose return on investment is so low that it’s almost pointless. The useful category contains things that we don’t need to survive but that are socially/economically necessary in wider society. 

Technically you don’t need to buy new clothes if the current one’s function fine but your job may require you to meet both functional and high standards. The same can be true about hairstyles, make up, tools, or even things like coffee shop meetings as a recruiter. Even if you are out of work these expenses are often necessary to land a new job and/or keep your routine and skills sharp. Budgeting must be fitted to our own personal circumstances after all.

These requirements will vary from person to person but it is necessary to make an allowance. After all, there are a broad spectrum of economic activities that people engage in. It is also likely that non-working members of the household or children might require some expenses of this nature. In good communities lacking haircuts etc. shouldn’t matter but that is not always the case and you’ll likely will have to make allowances for this.

Budgeting out the ‘Pointless Expense’

Pointless expenses that don’t benefit you are easily identified. They are always related to a necessary expense that has gone in a different, more expensive location. An example of this would be cable TV. In today’s world access to electronic entertainment fairly close to being a need. The necessary expense for this? Your internet bill plus one streaming service or equivalent (think $15-20). Your pointless expense is every penny after this.

Of course, if you can’t cancel these things without paying cancellation fees this might be a moot point. In a similar vein, eating out at a moderately priced restaurant or ordering takeout once a month or only on special occasions should be the absolute maximum of food expenditure outside of groceries. There is no dietary or social benefit that you derive from this that you can’t do for (practically) free.

In terms of expenses whose ROI is so low they are effectively pointless you should look at things such as gym/fitness class memberships, book purchases etc. Those three examples are things that can help you grow as a person and have a healthier life. Therefore, they are valuable. However, in lean times you have to make do with free alternatives such as libraries, internet, and body-weight fitness.

Also included in this is rolling over any leases on f(e.g. vehicles) that end up more expensive than current plans. Ideally you should stop leasing things all together but this requires significant upfront investment.

Step 4: Cut, Cut, Cut

So, once you’ve had the deep look at your expenses and understand what definitively has to stay, what probably has to stay, and what definitively has to go, it is time to cut into your expenses like Michael Myers on Halloween.

It might seem counterintuitive, but the first place to start is not at the useless expenses but at the baseline. The baseline will represent the majority of your outgoings as well as the most consistent. Switching utility provider for example, may save you several hundred dollars a year and there is definitely space in your grocery bill to do the store brand math for similar savings.

Other areas such as transport, healthcare, and hygiene are going to be more difficult but there is always some way to squeeze a little bit of cash from most places. You might buy generic pharmaceuticals or take public transport more instead of driving. The point overall is that although you might only get a small % savings across categories A-F but they are likely to be a large chunk of the overall total that you do save.

In terms of category X expenditure (useless, or poor ROI) there is not going to be a paragraph on this. You need to eliminate all of this where possible and until you are back in good financial health.

The difficulty of cutting social spending

Cutting expenditure in category G (social spending) is going to be different for each situation as above. This is not a licence however, for you to just waste money because you think you need something for success. If you don’t need to meet client for food/coffee then you shouldn’t. Similarly, if you normally get a $100 hair appointment a month, a $80 one every 6 weeks is not too much of a sacrifice ( the same goes for your $40 hipster barber in case the guys reading this think this isn’t their issue too).

This logic needs to be extended to clothing (accessories aren’t included as they’re mostly category X ) as well as anything you ‘need’. If you are going through lean times you should not be paying for subscriptions or multiple entertainment packages. You also shouldn’t be buying things like board games or non-essential household goods. It’s both a balancing act and sacrifice that is different for each household but in all cases, it is 100% necessary and 100% valuable.

Step 5: Gradually recover

Hopefully your lean economic times will be short-lived and you will soon emerge from being a semi-monk . Whether this period lasts 6 months or 2 years it’s imperative that you don’t just abandon budgeting and resume previous spending patterns.

If you just jump straight back in you will almost certainly end up spending too much in too short a time and create long-term problems for yourself. In addition, there is always at least one expenditure that you will realize is useless and want to commit to cutting entirely. The key is to exit your lean times with as much thoughtfulness and creativity that you entered them.

Gradually Recovering – Budgeting for Life

A good way to start this off is to increase your category G social spending by a predetermined amount, for example, if you were ordering takeout once a month you might now do it twice. Similarly, if you want, you might get a personal care appointment (hair, manicure, massage, etc) extra than what you had been doing.

Another common one is to reactivate your sports subscription. Whatever you choose, make sure that you gradually introduce your excess expenditures starting with the one that brings you the most happiness.

After you have recovered half of your cuts you should stop and look at what is left to add back (as well as what you’ve already resumed buying) and decide what is overall worthwhile. If, as I suspect you will, you end up with a surplus versus your original spending, it would be a great idea to save/invest this surplus into a rainy-day fund to make any further lean times a bit more bearable.


Economic instability is a constant in our world and sadly we all have to navigate it at some point. The vast majority of us engage in wasteful spending that budgeting can help us get through financial challenges. By being mindful of your circumstances and spending you can still live a positive life while you wait for better times. It will vary from person to person and some advice might seen inapplicable to you, but one thing is certain, if you look for sustainable savings, you will find them, and if you can survive the lean times, you will emerge stronger than ever. Save, Survive, Thrive.

2 thoughts on “Budgeting in a Recession – 5 Steps to Succeed”

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