Simulate various scenarios. The point is to have made some tough decisions ahead of time, while you still have some peace of mind. Because the decisions you mak

Simulate various scenarios. The point is to have made some tough decisions ahead of time, while you still have some peace of mind. Because the decisions you make now will be of higher quality than the ones you make when you are under more stress. How would you scale down your expenses (if at all?) if your real income decreased by 10 %? What about 50 %? How long could you survive if you end up with no income? What consumption can you reduce, and what can you cut out entirely? When will you start cutting some things out? How much longer will that make any savings last? Similarly, how would you scale up the household income if your expenses increased? At what rate can you withdraw from any savings? A secondary benefit of this exercise is that it lets you find the pain points and see if you can do something now to limit their consequences later. (Is there e.g. preventative maintenance you can do on a car or your teeth that would avoid a more expensive breakdown later?) ---- In contrast to many others, I don't place such a high value on having an exact day-to-day budget. Generally, both expenses and income follow a fairly statistically stable pattern, i.e. it averages out. You do want to know what the averages are, of course, but you don't need to meticulously track daily expenses and income to learn that -- it's enough to go back in history and sample, say, every sixth day. Much less work for basically all the same benefits.