Inflation Ate My Paycheck 108: What is Your Recession Budget?

The Federal Reserve needs to send America into a recession. Why? Because a recession is the best way to combat high inflation quickly.

What does a recession mean for the average person? It means we will struggle with our livelihoods if we do not adjust our mindsets.

Today, I want to review our budgets to see where we can improve as we enter a recessionary and inflationary time. Things will get rough, so prepare for the worst. Let’s begin.

I’m Buying 30-Year Bonds Over 4%

Budget review. Let’s take a look at our standard budget. I trimmed down my list because I have kept it running on bare minimums for the last three years.

1. Car Payment
2. Car insurance
3. Cell Phone Bill
4. Electricity
5. Water
6. Trash/Sewer
7. Internet
8. Loans/Credit Cards/Debt
9. Netflix/Hulu/Disney
10. Music subscription
11. Kids’ sports/extracurricular
12. Gas/maintenance
13. Home maintenance 
14. Food

What can we trim? Wow, that’s a massive amount of accountable items. Going into a recession, we need to aim to cut at least 20% of our budget.

For example, if my bills currently total $2,000, I want to reduce them by $400/month. Is this a realistic number? It sure is, but we will have to make sacrifices. 

Turkey vs. Turnkey 2

Start with the car. Of the easiest ways to reduce your expenses is your car payments. However, cars are a mindset. Unfortunately, cars are a mindset that keeps most people broke.

How much do you owe on your car? How much can you sell it for today? Chances are you can turn a small profit. The hard part would be turning around and buying a $3,000-$5,000 car.

If you knew a recession was coming, could you exchange your nice car for a beater (older car)? Most people would not make this exchange. However, most people will never become wealthy.

Your car insurance costs would also decrease, but your maintenance expenses may increase. It’s a give-and-take situation, but we know your payment would go down. Your car is the best place to start your recession-reduction budget.

Roth IRAs vs. HSAs

Say bye-bye to extras. I love having my extras services such as Cable TV, Hulu, Disney Plus, HBO Max, Netflix, and YouTube Premium. My favorite is YouTube Premium (Family) for $20/month.

However, my passive income pays for these services. Before I had passive income, I cut these services to the bone—I only keep Netflix because of the kids.

You can probably save $40-$80 in this area alone. How much content does your family consume? Can you consolidate a few services so that you can cut the extras?

Stop eating. I am just kidding. But you will need to reduce your food bill. This will be especially tough because all the food prices continue to rise. 

Pumpkin Spice & Royalties 2

You can start couponing to reduce some of the cost increases. Another good way is to move to eat more salad. I love making a salad with cabbage, tomatoes, and cucumbers.

Even better, you can grow your own salad products and sell the excess. You can stop eating out as much and cooking at home. Not only does it save money, but it will create family cohesion and bonding time. 

Pay off debt. Try not to go into recession while carrying debt, especially with rising interest rates. If you have a variable rate credit card, you will feel the pain shortly. 

Not only are your payments going up, but the interest is compounding against you. Get out of debt as fast as humanly possible.

How to Thrive in a Long-Distance Relationship

If you can’t pay everything off, get everything into a fixed-rate credit card or personal loan. The banks will want to stay profitable and have no problem using you as the means to the end.

Personal Budget. Lastly, let’s look at your personal budget. Do you have a personal budget for yourself? If not, you and your spouse should look into creating one separately.

My individual budget when I was in Okinawa, Japan, earlier this year was $800/month. It included food, gas, and fun. Now, I live in San Diego, California, which is $1,500/month.

The math works out to a whopping $50/day. However, I do my best to stay under my allotment every day. I also keep track of my daily spending on a spreadsheet.

Fruits of the DGI Tree

Is this overkill? Not at all. You can’t expect to become rich if you don’t take your money seriously. You don’t necessarily need to keep detailed reports, but beware of budget creep.

All of these coffees, snacks, and trips to the movies add up quickly. I like to keep a daily account because I can plan for the next day accordingly. If I am positive for the month, I can treat myself.

If I am down for the month, I know to sit in my room until I break even. It’s a fun game to play, and I can invest whatever I save in the end. 

Make more money. As a quick aside, don’t forget you can make more money. When you combine cost-cutting with increased income, you create more cash flow.

Is Budget a Bad Word?

Some ways to build income streams are creating content, renting rooms, and starting a small business. 

Conclusion. Things will be tough moving forward. We have high inflation already, and a recession is on the horizon. Expect the job market to crumble as people start to lose their jobs.

Businesses will close, house prices will stagnate, and banks will stop lending. This is how the Federal Reserve will slow inflation by draining all the liquidity (extra money) from the economy.

Retire Rich, Retire Comfortable with a Business 4

Knowing what will happen, how will you prepare yourself for the pain? More importantly, what will you do to prepare your family? “I don’t know” is not the correct answer.

I am doing everything I can to protect my family and resources. I am building my cash reserves, as well as investing in dividends. I am renting rooms and creating content to increase my cash flow.

Life is very serious, so beware of social media messaging; they want you to keep spending. If you’re going to create true freedom, live on a restrictive budget. It sounds counter-productive, but give it a try. Good Luck!

1. PDF of the Month: Retire Rich with a Business 4 (Free 149-Page PDF)
2. Free PDF Downloads: Download FREE PDF LIST here
3. Financial Mindset: Become CEO of Yourself 2 (Free 196-Page PDF)
4. Retirement Planning: Your Retirement Planning Guide 2 (Free 255-Page PDF)
5. Investing: How We Plan to Retire on Dividends 2 (165-Page Free PDF)
6. Cryptocurrencies: Counting on Crypto 2 (Free 159-Page PDF)
7. Real Estate: Financial Independence through Real Estate 2 (Free 123-Page PDF)
8. Business: Retire Rich, Retire Comfortable with a Business 2 (Free 185-Page PDF)
9. Latest DGWR: Don’t Gamble with Retirement 8 (Free 445-Page PDF)
10. Everything!: The Biggest Book on Passive Income Ever 2! (book)(Web Edition)(Art Edition)
11. I bought a Kindle Oasis: Check it out on Amazon
12. Read My Books for Free: Free Kindle Books Schedule
13. Crypto Exchange: My Favorite Crypto Exchange VOYAGER (Join Voyager)
14. Kindle Unlimited: Why I Finally Subscribed Kindle Unlimited (learn more)
15. Book Reviews: 505 Takeaways from 101 Books (pdf)
16. Writing: The Publishing Chronicles (Part 1, Part 2, Part 3, Part 4, Part 5)
17. Best REIT- Fundrise: REITs vs. Homeownership (Join Fundrise)
18. Follow us: On our Facebook Page and Join our Facebook Group
19. Support the Channel on Cash App: $Kingmarine1981
20. For more detailed analysis, join my Youtube: MFI YouTube Channel

Monthly Dividend Tracker Template: Buy on Etsy

Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing