What Is a Bare Bones Budget?+How to Create One

In March 2020, I watched our state’s governor on TV as he announced that all schools were closed due to the Covid-19 pandemic. One part of me was very relieved as I was planning to probably keep my son at home with me anyway while officials figured out how to mitigate the spread of Covid.

The other side of me was nervous knowing that this announcement also meant my husband would be out of work. He was working part-time for a school bus company while managing his coursework for trade school.

The fact that schools were closed meant he’d be out of a job and it would impact our income. A few days later, we sat down together and I laid out all our expenses as we tried to game plan what was important and how we would cover our basic needs.

We Essentially Created Our First Bare Bones Budget

I didn’t know it at the time, we were creating what’s commonly referred to as a bare-bones budget. A bare-bones budget can also be an ‘emergency budget‘ but doesn’t have to be.

I hope to never experience another global pandemic again, but I do plan to use my bare-bones budget in the future from time to time.

What Is a Bare Bones Budget?

Simply put, a bare-bones budget is a budget that only includes your bare necessities. Think expenses like housing, transportation, and food. With this budgeting method, you essentially strip down your spending to only include your basic needs.

Other costs like subscriptions, shopping, and dining out are not included. To determine what goes into your budget, it helps to know your needs vs. wants. Some things you spend money on each day, whether a latte or a hobby, probably won’t be included in your bare-bones budget.

When most people use this type of budget, frivolous spending is also one of the last things on their minds.

Benefits of Creating a Bare Bones Budget

A bare-bones budget is not particularly fun to use, but it can come in handy during a financial crisis or while you try to reach a particular goal. There are quite a few benefits to using this type of budget though.

Knowing Exactly What your Core Expenses Are

Have you ever wondered how much you truly need to get by and live comfortably each month? Most of us spend more than we truly need on extras which is totally fine. But with a bare-bones budget, you can find relief knowing that your needs are met whether the means having a place to lay your head, food in the fridge, and utilities paid so you can use the internet or turn on the heat in a cold house. Even if you don’t plan to use it now, I always recommend anyone create a bare-bones budget in advance.

Helpful During an Emergency

In the unfortunate event that you lose your source of income or cannot work for some time, a bare-bones budget will come in handy. If you find that you spend $6,000 per month but your bare-bones budget is only around $3,500, this will provide some relief. Additionally, you can plan which bills and expenses to prioritize based on this budget.

Essential When Budgeting with a Fluctuating Income

Another benefit of using a bare-bones budget is if you have a variable income. I’m self-employed and never know how much I’ll earn each month. Without a bare-bones budget, I would probably drive myself crazy wondering how much I need to be able to afford to live. Instead, I use this budget to help me determine the minimum amount to earn each month. Then, anything over that is just extra and goes toward goals or enhancing my life.

RELATED: 4 Easy Budgeting Tips For a Fluctuating Income

Key Tool in Reaching Aggressive Financial Goals

Aggressive money goals like building your emergency fund, maxing out investments, or paying off debt quickly require you to have a sizable amount of extra income. If all your money is tied up in monthly expenses, it will be nearly impossible to reach these goals.

Some people voluntarily choose to use a bare-bones budget to cut back on expenses drastically. This frees up a ton of money to be able to put toward certain goals.

RELATED: How to Align Financial Goals With Your Partner Before Marriage

Start By Determining Your Core Expenses

You’ll want to be honest and realistic about your spending and needs in order to determine your core expenses. I know bare-bones budgeting isn’t exciting, but that’s the great thing about it. It’s super basic and can help relieve you from financial stress when you need it most.

You don’t want a ton of expenses listed in your budget. But here are some common ones to consider:

  • Rent/Mortgage: Obviously, you need to pay your housing costs no matter what. During the height of the COVID-19 pandemic, landlords and banks were a little lenient and offering relief, but they aren’t doing this anymore. Prioritize your rent or mortgage by planning to pay it over most other costs.
  • Utilities: It’s important to keep the lights on and hot water running. List out your monthly utilities and average out how much your bills were for the past 3 months to come up with more concise figures for your budget.
  • Transportation: Fuel and car maintenance are also crucial if you rely on your car to get to work, go to the store, pick up kids, etc.
  • Childcare: If you have kids in daycare, this could be another cost to include. Not being able to pay for childcare could impact your ability to work.
  • Groceries: Determine how much you need to spend on groceries per month and don’t include dining out since this is more or a luxury.
  • Household essentials: Don’t forget to budget for things like laundry detergent, toilet paper, and soap.
  • Insurance: Consider your costs for insurance such as health, auto, life insurance, and renters or homeowners insurance.
  • Cell phone/internet: Sometimes these can be essential costs too. In my household, the internet is a core need since makes a living working online.

Summary: Use a Bare Bones Budget to Get Ahead

If you have some big financial goals this year, consider using a bare-bones budget to get ahead. Challenge yourself to commit to it for 30 days to see how much you can save. You may be able to make a larger debt payment or put money toward another goal.

Even if you don’t plan on using a bare-bones budget right now, I’d highly recommend creating one. It only takes about 10-15 minutes to do this. Plus, you never know when it will come in handy.