Bare-Bones Budget: How To Create One

There are many situations where you may find yourself needing to tighten your budget, whether it’s because you were just laid off or, on a brighter note, you’re preparing to make a big purchase.

Insert: A bare-minimum budget.

A bare-minimum budget (aka a bare-bones budget) is exactly what it sounds like. It’s a budget that accounts for only the nonnegotiable essentials and removes everything else. The idea is that it’s a temporary way to get by so that you can endure a layoff or save up big-time; it’s not permanent. This may not be the most glamorous way to reach your financial goals, but it’s pretty simple. Follow the steps below to create your own bare-bones budget.

First thing’s first: Figure out what exactly you can’t live without. This includes monthly costs like housing, utilities, food, transportation, insurance and even minimum debt payments (like on a credit card). Paying the minimum is part of a bare-bones budget because you’re paying just enough to not get flagged for late or insufficient payments and to prevent your credit score from taking a hit.

Write down what each of these essentials cost and total that number up.

You then want to figure out your monthly income after taxes, or how much you take home. If this varies month to month (perhaps you’re a freelancer), use your lowest recent month to be on the conservative side.

Once you subtract your nonnegotiable amount from your monthly take-home pay, that’s basically your bare-bones budget. If there’s money left, this gets put into a safe and accessible high-yield savings account (see some top picks below). In this account, your money will grow with an above-average return and it’s there whenever you need it. If there’s no money left after accounting for your essential costs, then you’ll have to find ways to make those essentials cheaper. For instance, perhaps you can negotiate a utility plan or try shopping at a less expensive grocery store.

Top high-yield savings accounts

When it comes to stripping down your expenses, it’s easier said than done. Beyond just the acknowledgment of telling yourself to stop spending on takeout and such, there are likely memberships and subscriptions that you have to figure out how to cancel, too, and all that can take time. A budgeting app can actually help here.

Even with the free version of Rocket Money, you can get subscription tracking. This means that you can see all your recurring subscriptions in one place, which is much nicer than having to scroll through your bank and credit card statements. You’ll also be able to link your financial accounts, create budgets and track all other expenses.

Monarch is another budgeting app that stands out for its easy-to-use mobile app, customizable transaction categories and ability to collaborate with your partner or spouse. The platform also offers features like net worth tracking and goal creation. Monarch is a good choice once you find yourself in a more stable financial position (if you got laid off) or once you’re closer to your savings goal (if that was why you needed a bare-bones budget) since it does cost $14.99 per month, or $99.99 annually.

And if you liked the practice of separating your nonnegotiable essentials from all other costs, try Goodbudget. This app offers the digital version of the cash stuffing method where you deposit funds into different virtual envelopes that represent spending categories like housing, transportation, food and savings.

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