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Have you ever been in a crisis where your finances were challenged, and it left you wondering how you could survive? Building antifragility into your budget can help you adapt to unexpected financial circumstances and change. How do you ensure that your budget is antifragile? Taking your budget from fragility to resilience to antifragility can be accomplished in a few short months.
What is a Fragile Budget?
A fragile budget is a budget that can fracture and the slightest change in your life circumstances. This could range from an unexpected doctor's visit where you have to pay a high copay to your child needing a new pair of shoes for an athletic event. These things you don't typically build into your budget but require immediate payment to maintain your health and your child's happiness. They may seem like a small expense to some, but for you, it could mean you may not have enough money for groceries for the month or week. You can take action now to buy less and save more to help get you out of the cycle of living paycheck to paycheck.
See my feature in The case for buying less — and how to actually do it
What is a Resilient Budget?
Have you started to build your emergency fund that could get you through the next three months of your living expenses if you lose your job? If you are in a car accident, can you afford the deductible on your insurance? Keeping track of your monthly income and expenses can help determine if you have a resilient budget. If your budget accounts for your needs, wants, and expenses, then you are building resiliency into your budget. If you haven't started saving yet, even the most minimal amount of 1% can help you build a saving pattern. You can continually increase your savings percentage as you pay down any outstanding debt or address your immediate financial concerns.
How Do You Build an Antifragile Budget?
An antifragile budget can help you keep your head above the water when a financial emergency occurs. No longer will it feel like you are drowning in debt with the feeling that you are sinking without a lifesaver. There are a few steps you can take to build an antifragile budget.
Cut Unnecessary Expenses - Evaluate your weekly and monthly spending to determine where you can eliminate subscriptions and unused gym memberships or reduce the frequency at which you eat out. In many budgets, eating out is the most significant expense that occurs frequently.
Take Immediate Action - There's no time like now to address your concerns with your budget and start saving and investing in your future. Take immediate action to cancel unnecessary expenses. Log on to Amazon, your Iphone Store App, or any other app to cancel reoccurring subscription costs.
Own Your Past and Current Decisions - Understanding that you have made mistakes in the past with your budget can allow you to move forward to make future changes. You learn from your mistakes by avoiding making the same decisions repeatedly. If you make a decision that goes against your goals, learn from it and move on. Don't beat yourself up about it, and return to the cycle of a fragile budget. You will achieve your financial goals if you learn from the decisions you made and make future course corrections.
Stay Focused on Your Goals -The most important aspect of having an antifragile budget is staying focused on your goals. If your goal is to save $50,000 for your child's education or $5,000 for a down payment on your car, then staying focused on your goals can help you achieve your goals. Setting SMART goals can ensure that you stay on track and provide you with a timeline by which you want to reach your goals.
You can take your budget from fragile to resilient to antifragile and achieve your journey toward financial freedom and independence.