Budgeting after a major illness or injury
When you have less income than you did previously—or more bills—it isn’t always easy to manage. Start with an in-depth look at your budget to understand how much you’re spending and where you’re spending.
The basics of budgeting
First, figure out your average monthly expenses to know how much money is coming in versus going out. If you use credit cards, go online and look at year-end summaries to see where you spent the most money last year. Make note of any surprise categories of spending. Do the same with online bank statements.
Next, identify your ongoing monthly bills, like subscriptions or landscaping, and decide if you need to continue all these services. Read Tips on how to spend less money
for additional suggestions.
Then, look through your past bills to identify expenses that you may not be paying now—for instance, you may not have commuting costs if you’re not working. Last, categorize expenses into “essential” and “discretionary.”
Cover essential expenses
Some expenses simply aren’t optional—you need to eat, and you need a place to live. Essential expenses include:
- Housing. Include your mortgage, rent, property tax, utilities (electricity, water, gas, etc.), homeowners or renters insurance, and condo or home association fees.
- Food. Budget for groceries only. Don’t include takeout or restaurant meals, unless you really consider them essential, for example, if you’re unable to cook.
- Health care. Account for health insurance premiums, unless you make them through payroll deduction, and out-of-pocket expenses like prescriptions and copayments.
- Transportation. Try to get the full picture, including car loan or lease payment, gas, car insurance, parking, tolls, maintenance, and commuter fares.
- Child care. Include all day care costs, tuition, and fees.
- Debt payments and other obligations. Focus on essential expenses like credit card payments, student loan payments, child support, alimony, and life insurance.
If possible, try to rebuild your savings
Once you’ve accounted for your necessities, you can begin budgeting for extra payments on debt and rebuilding savings. Little may be left over for fun if your income has dropped drastically. However, rebuilding your emergency fund may be worth the effort.