What is a Crisis Budget and When Do You Implement it?

Unless you are one of the wealthiest people in the world, sooner or later you will probably have some type of financial setback. At some time in your life you are likely to face a family financial crisis such as a job loss, business reversal, illness, death of a family member, or military deployment of the breadwinner. Even a worldwide financial crisis can have an impact on our personal finances.

Some events can shake our world and turn everything upside down. When that crisis does come will you look at it with despair and angst or will you look hard to find the silver lining that God always provides?

Think about some crises in the Bible. Joseph’s brothers sold him into slavery. In a few hours, Job lost everything—his children, all of his financial resources, even his health. Moses was caught between the Red Sea and the most powerful army in the world. Paul was beaten, stoned and left for dead.

It would have been easy for each of these people to feel abandoned by God. Yet in each case, God used their crisis for good. When we face a crisis, it is important for us to remember that God loves us deeply and in any situation, he is with us each and every step of the way. This verse from James 1:2-4 sums it up: “Consider it all joy, my brothers, when you encounter various trials, for you know that the testing of your faith produces perseverance. And let perseverance be perfect, so that you may be perfect and complete, lacking in nothing.”

God is able to use all circumstances, even difficult ones, for our ultimate good. We can use difficulties as opportunities to grow closer to God and learn things we just could not learn any other way.

There are several things we can do to survive a crisis. The first is to have our finances in order before the crisis occurs. If you have your finances in good order, the financial impact of the crisis can be a little less stressful.

It also helps to have support through the crisis by seeking advice from Godly people who have been in the same or similar circumstances. They can be a great source of blessing and encouragement to you. You can learn from their experiences, they can tell you about resources they have used and help you avoid mistakes they made.

Focus on one day at a time. Matthew 6:34 tells us: “Do not worry about tomorrow; tomorrow will take care of itself.”  In a crisis, it’s easy to get several steps past where you are, and worry about what’s next.  The important thing is to focus on the present and not worry about the future.

In a stressful situation when we are praying for help, we expect God to resolve things in our way, in our time, exactly the way we want it to go. This just sets us up for disappointment and frustration as God does not work according to our demands. It is important for us to trust him and believe in his divine providence without giving him deadlines or directions.

One of the best things you can do to prepare for a crisis is to prepare a crisis budget. Figure out the most likely crisis and find ways to cut your budget to meet the circumstances of that crisis.  For example, if you or your spouse were to lose your job, what would you do?  If you are on commission and don’t make your quota, how would you adjust your finances? If the stock market completely tanks, will it impact you?

After you determine the most likely scenario, figure out the impact to your current income and spending. Look at your current budget. What can you eliminate? If your family income were cut by 30% how would you adjust your spending? Can you get rid of cable TV, gym memberships, music lessons, sports camps, convenience meals? What other spending can you reduce?

One reason people don’t create a crisis budget is because they really don’t understand how much they are currently spending so they cannot anticipate any adjustment. But figuring out how to adjust your spending before the crisis occurs makes it easier to make objective decisions, not decisions based on emotion. 

Most times people will face the financial challenges in a crisis by using credit cards to maintain their standard of living. This is very dangerous because you not only have a reduced income or increased expenses, but now you are adding debt payments to your expenses, PLUS interest, so you are making the situation worse.  We have seen many people in this situation and it drags them down faster and faster.

The important thing is to know how much you spend on a monthly basis – that is the only way you can possibly be prepared to adjust in a crisis.  Then implement the crisis budget as soon as you anticipate the problem happening. For example, in most cases if there are layoffs at work, you can see them coming maybe weeks or even months in advance. Or if there is a worldwide financial meltdown, how does it impact you personally and how can you adjust your spending to be financially stable?

As soon as you anticipate the crisis, implement the crisis budget.

The worst thing that is going to happen is you’ll save some money if the crisis never occurs.  The best thing that will happen is that you will survive the crisis with minimum damage to your financial future.

A good meditation verse during a crisis is from Jeremiah 29:11: “For I know well the plans I have in mind for you—plans for your welfare and not for woe, so as to give you a future of hope.  When you call me, and come and pray to me, I will listen to you.” 

In the crisis you are facing, know that God is always with you even when it’s hard for you to recognize it, and his plans for you are better than any plans you may have for yourself.

Listen to our Podcast to learn more about a crisis budget.