How to Create a Bare Bones Budget

 

Have you ever found yourself in a bad financial situation, or wanted to reach a big financial goal?  If so, a bare bones budget may be the answer.  A bare bones budget is a type of budget where you cut your spending in order to free up extra money in your budget for debt payoff or to make ends meet.

You might be asking yourself, “why do I need to do this”?  A bare bones budget is an essential personal finance task.  This budget will help you know how much your necessary expenses are and inform you how much to put into an emergency fund.  Setting aside around 3-6 months worth of necessary expenses will be a huge help whenever an expense comes up unexpectedly.

When to Use a Bare Bones Budget

1. Debt Payoff goal
2. Financial hardship
3. Trying to fund your emergency fund/other savings goals

These are the situations where you would use a bare bones budget.  If you are working on a debt payoff goal, you will want to swap between your normal budget and the bare bones budget.  A bare bones budget is something that is sustainable in the short term, not long term.  Remember, this budget is a temporary fix to see you through a financial hardship or to push towards reaching a debt/savings goal.

What to Include in a Bare Bones Budget

You should only include the absolute necessities

• Housing
• Utilities
• Food
• Gas
• Health Insurance
• Household items
• Minimum debt payments

You will need to list these items out and determine how much money you need each month for each category.  If you are unsure, get your past two month’s bank statements or credit card statements and add up how much you spent in each category.  This will give you a pretty good idea of how much you’re spending.

I will note that your grocery budget is something that you can probably cut further if you need to.  If you are not currently budgeting for groceries, take a look at what you’re spending and see if you can come under that for the next month.  If you need additional help with your grocery budget, check out this blog post here and here.

What not to Include in a Bare Bones Budget

Anything that is NOT essential

When you are determining if an expense is truly essential or not, you might have to be honest with yourself and determine if it is a true ‘need’ or a want.

Some of these items might include:

• Gym
• Beauty (i.e. Mani/Pedi)
• Eating out
• Entertainment
• Subscriptions
• Gifts
• Shopping just to shop

Your budget is just that… your budget.  If the purpose of a bare bones budget is paying off debt or saving an emergency fund, then you will have to determine what is most important to you and what you can cut.  If you are needing this budget because you are experiencing financial difficulty, then you should definitely cut everything that is nonessential.  Life throws us curve balls sometimes and we have to adjust and move forward with our current situation.

How to Create a Bare Bones Budget

So now that the uncomfortable part is over, how do you actually put this budget together?

1. List all expenses
2. Cut all non-essential expenses
3. Add up all expenses

You can simply use pen and paper to set up your budget, or there are many free bare bones budget templates on the internet that you can use.  The biggest part of this step is adding up all of your essential expenses and seeing what the total is compared to the income you are bring home each month.

In a nutshell:

Net Income – Essential Expenses = Leftover Money

If you are using this budget in order to reach a large financial goal, you can go a step further and make a financial plan using that leftover money figure.  Determine the dollar amount that you are either paying off or saving and then determine how many months it will take by taking the financial goal amount and divide it by the leftover money amount and that will give you how many months it will take to reach your goal.

Final Thoughts

I hope you never need to use a bare bones budget, but knowing your necessary expenses is beneficial, especially if you have big financial goals you are trying to reach.  Also, if you are using this budget in order to pay off debt quicker, you might look at taking a pause every now and then so you don’t get burned out from the strict spending.

If you are facing financial difficulty, I hope some of these tips help you.  I’m sure you are scared and frustrated, but know that this is temporary and you will make it through.  You can do this!

Do you have any questions?  Let me know in the comments below!