What is a bare-bones budget?
A bare-bones budget means that you only budget for the necessities. The definition of necessity means that it is essential for your survival. This means only buying what you need to survive.
Creating a bare-bones budget requires a detailed breakdown of your weekly, monthly and annual expenses.
Do know how to create a budget? click on this link for an introduction to how to create an effective budget.
When creating my bare-bones budget I had to take a ruler and a year’s worth of bank statements and go line by line to determine whether each expense was either fluff or a necessity.
A bare-bones budget should only be for the short-term, typically 2-6 months, it can even last up to a year, but it can be longer depending on your self-control. Any longer than three years, then there is an indication that you need to reassess your budget for core problem areas such as, is it an income problem or are my debt repayment or expenses too high.
The benefits of a bare-bone budget are that it will help stem the problem and help tackle whatever financial problem you may have in the short-term.
The four questions that you need to ask when making a bare-bones budget are;
- How much minimum do I need to spend money on my health?
- How much minimum do I need to spend on the work/job/business/side hustle that earns me money?
- How much minimum do I need to spend on basic survival, Food, shelter and utilities etc
- How much minimum do I need to spend on priority and non-priority debt repayment?
The questions are listed in order of importance.
Your health always comes first, this includes your mental health. You are your number one asset, without you being in a fit condition you would not be able to work to earn the necessary money to survive.
When thinking about your physical health, do you need to take any necessary medication? Are there any changes you need to make to help minimise the cost of your health? In my instance, I know that I need to lose weight, and I can proactively reach a reasonable weight without spending additional money. Instead of going to the gym, I walk around the block.
Mentally, what is it that you require to keep yourself mentally balanced. Having mental clarity and balance leads to making better life decisions.
Work comes before the basic survival necessities because you need the money from your job in order to spend on the basics.
Then comes basic necessities such as food, shelter etc and then comes debt repayment.
In my blog posts Shaney’s debt reduction journey, I have adopted the bare-bones budget for the latter part of the year in order to reach my target to pay of my debt (excluding mortgages) by the end of the year. It’s nearing the end of the year and I am keen in reaching my goal. I don’t know why, but it has become very important to me to reach the target. You can read the start of my debt reduction journey, by clicking this link.
Agree or disagree? Let us know what you think should be part of a bare-bones budget.