Budget Triage: How to Deal with Financial Setbacks

You might be familiar with this term, most frequently associated with emergency medicine — triage: the act of determining priorities within an emergency. Well, money can work like this too. Many of us have experienced a revelation that something is NOT RIGHT with our money. Perhaps you’re just ending the money with more month left at the end? Perhaps you’ve experienced a sudden financial change such as a job loss, income reduction or new expenses.

4 Steps Budget Triage

I’ll instruct you here how to work through a budget triage. How do determine where the bleeding is, and how to stop it.

Step 1. Identify the source of injury.

In the emergency room, it’s important to know — was your patient hit by a bus, or shot with a gun, or suffering an allergic reaction? What changed that moved your financial priorities from hunky-dory to emergency management? It’s one thing if you can easily point your finger at the source of the injury (example: a job loss). It’s another thing if all of a sudden you’re coming up short, and it’s unclear why.

If the answer isn’t clear, review your budget:

• sit down with all of your receipts and expenses and start adding them up.
• then add up your income sources and total income for the period in question.

Ask yourself these questions:

• Did you spend more than you made?
• Did you accidentally pay some bills more than once?
• Were there duplicate or fraudulent charges on your account or do you have any recurring monthly charges that you may have forgotten about?

Step 2. Stop the bleeding.

Once you’ve found the source of the pain, it’s time to stop the bleeding. It might be something as simple as selling a car you can’t afford, but it may also be something more complicated, or a mixture of strategies to fill the gap.

For my family, our big financial crisis arose when I lost a job — and we were dealing with a seriously ill child simultaneously. We elected not to put me back into the workplace until our child’s health condition was under better control, but we had no idea when that would be. We devised a combination of cost reducing and income-generating strategies.

Step 3. Follow the treatment plan.

Just like you wouldn’t discontinue post-op medication or physical therapy, once you’ve patched your financial wound, you don’t get to walk away from maintenance. You must continue to maintain your plan. Make a budget every month budgeting not only your outgoings, but your income too — if income expectations change, you must adjust your outgoings to match.

Step 4. Exceed expectations.

Last year, I damaged a disk in my back. I got some pretty grim news from my doctor — I wasn’t a candidate for restorative surgery, but, this came with a caveat. If I could restore the strength in my back, I may be able to fully recover without any surgery, and in that case, I would be better off than if I had surgery to repair the injury — I could expect a 100% recovery, rather than 60%-80%.

Physical fitness hasn’t ever been a priority of mine, but when it came down to getting athletic, or becoming partially disabled at the age of 30, I chose to rehab my back. It took ten months, but I’m now better than before I injured my back, pain-free and 100% recovered. I’m also preventing future injury and “age related conditions” by keeping my back strong.

The budget has been the same way. Two and a half years ago, we had a financial shock, but since then, have built two small businesses, and slashed expenses. Our quality of life is substantially better, our stress level lower, and our income substantially higher than before the job loss. It’s all about the post-op conditioning/training. Think about your budget as your physical therapy. Keep it up. Each month you get better, stronger, smarter, faster. Each month it’s easier and more successful. Each month, you bank more income and meet more of your goals.

You Can Do This

To get you started, I’m going to leave you with a quick list of triage items. Challenge yourself to adopt as many as you can, and let me know how it worked out for you.

One-day budget triage.

• Start a side hustle. Write resumes, teach piano, mow some lawns, sing for cash. Whatever it is, do something for extra income. (Hard work is a surefire money-making scheme).
• Ask for a raise.
• Call all of your utility companies and ask for a lower or promotional rate or other ways to cut expenses. (Phone, garbage, power, etc. Some will make you a deal, others will give you tips to reduce expenses — such as running your laundry during off-peak hours for lower electricity costs).
• Review your last grocery receipt and find a way to do without or substitute the 10 most expensive items. (We saved a quick $17 a month by making our own laundry detergent).
• Stop paying for convenience. Wash your own car, make your own coffee, and pack your own lunches.
• Your entertainment choices may be infringing on your ability to earn more. Substitute your movie-watching, cable viewing time with another job. Oh, and while you’re at it, cut the cable, money for the cinema and eating out.
• Forget brand loyalty. We gave up the expensive cat litter, which really was a great product, but later found a much better product at 1/3 the price.
• Plan menus and grocery shop only once a week, or once per month. Shop with a plan. (More on this later).
• Cook more, using whole foods — use dry beans, make soup stocks, etc.
• Choose your 4-5 highest expenses each month and aim to cut each by a percentage you choose. (Bonus points if you can eliminate one entirely).
• Start a vegetable garden if you can.

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