What is a ‘bare bones budget’?
A bare bones budget is the ‘no frills’ budget. Ask yourself, “How much money do I need to survive each month?” Your bare bones budget will help you determine that answer.
When people talk about building up an emergency fund, they always wonder if emergency fund should cover their normal expenses or just what they need to spend. I recommend you base it off your bare bones budget. After all, in an emergency, you shouldn’t be watching TV and spending $900 each month on delivered groceries from Whole Foods. Even if you don’t have a bare bones budget figured out, who’s to say you won’t get to the point where you NEED to have a bare bones budget? It’s best just to create one.
Another reason the bare bones budget is so effective is because it’s freeing! It’s great to know it only takes ‘x’ amount of dollars to live. For instance, if you want to start a new company, you may be able to quit your job right after you determine your bare bones budget! You may be surprised at what kind of slash in income you can take. Who knows, maybe after you read this post, you’ll feel secure enough to quit!
Determine Your Needs
What are your actual needs? I’m not talking about all the consumerism junk people sell you: television, gym memberships, decorative soap dispensers, etc.
But I’m also not asking you to design a budget where you can live out of your car.
You need to find that sweet spot. How many things need to be in your budget? Think about things like:
- Cell phone
- Rent/house payment
See How Little You Need to Spend to Fulfill Those Needs
Make this into a fun game. Ask yourself, “How low can I go with all these necessities?”
Your goal is to challenge everything! Find creative ways to lower costs in all categories. It’s not as hard as you think. I bet you could lower your overall costs by 20% in just one Saturday afternoon.
There are a lot of personal finance bloggers who will show you how it’s done. I only pay $18 on car insurance, for instance. Read through the blogosphere to see how people are lowering their costs.
Surprises WILL happen! Contribute a thought-out amount to your emergency fund each month. Typically, the more you spend each month, the higher of an emergency fund you’ll need. Keep in mind insurance deductibles and co-pays you’ll need to spend money on if something happens.
Creating a bare bones budgeting is sooooooooooooooooo freeing! It’s a way of showing yourself that money doesn’t play as large of a role in your life as you may think. You’ll probably find you don’t need much money at all to live on. Personally, I only need about $700 each month to live comfortably. That’s fast food money, right there! Haha but it’s true.
I think everyone should create a bare bones budget. What are you waiting for?
I’m a personal finance freelance writer and webmaster. I welcome you to visit me at www.thefrugalpreneur.com