Updated on 04.16.15

How to Create a Bare-Bones Budget

Cutting down to core expenses can help you save more aggressively or pay down debt.

dangling light bulb

Keeping the lights on, the fridge full, and a roof over your head are essential expenses. Cable TV is not. Photo: Gisela Giardino

Whether you’re struggling to get your debt under control or simply want to build up an emergency fund or a down payment as quickly as possible, a bare-bones budget is a powerful tool to help get you there. It’s just what it sounds like: your essential expenses, and nothing else.

A simple, stripped-down budget can be helpful for an aggressive savings plan, but also if you experience job loss, take a pay cut, or need to pay down debt. Even if you don’t need to go bare bones now, you never know when you will. Since my husband and I are self-employed, we plan our spending around a basic, bare-bones version of our budget that we modify each month based on our fluctuating income.

Using the zero-sum budgeting method in conjunction with a bare-bones budget has worked wonders for both our finances and our sanity. Because no matter where you are on your path to financial security, it is immeasurably helpful to know what your core expenses really add up to each month.

Creating a Bare-Bones Budget

But you may never know unless you take the time to figure out what your bare-bones budget really looks like. Want to create a bare-bones budget of your own? Here’s how:

Step 1: Nail down your spending from previous months.

To figure out where your money is going, break out your bank and credit card statements from the last few months. Put all of your regular expenses in common sense categories and tally them up. Some potential categories can include things like food, utility bills, transportation, clothes, restaurants, and rent or mortgage. Create other categories as needed and figure out how much you’re spending in each total for the previous two months. Make sure to include debt repayment in its own category so that you know exactly how much you owe each month.

Step 2: Slash non-essential expenses.

Once you’ve categorized your spending from the previous two months, it’s time to see what you could live without. And that’s where the term “bare bones” comes into the equation.

Essential expenses are things like your mortgage or rent payment, utilities, and transportation costs, while non-essential expenses include new outfits for work, dinners at Olive Garden, and new home décor. Basically, anything you could live without is a non-essential expense, so keep that in mind as you figure out how to get everything down to the bare bones.

Step 3: Dig a little deeper.

As you whittle your budget down to the bare bones, you’ll probably find yourself on the fence about some of your bills. For example, your cable bill is a monthly liability you’ve gotten used to, but do you really need it? Same thing with your monthly smartphone bill, your entertainment spending, and any money you’re spending on non-essential personal care or upkeep.

Remember, a bare-bones budget is supposed to be how it sounds – stripped down to the essentials: shelter, food, and basic living expenses. If it hurts a little to cut so deep, it’s only because it’s supposed to.

Step 4: List your new bare-bones expenses and tally them up.

Once you’ve weeded through the needs vs. wants in your life, it’s time to create a new monthly budget based only on your basic, core expenses. Everyone’s bare-bones budget will look different, but most will follow the same general outline. We all need a place to live, the utilities turned on, basic transportation, and food in the fridge, but everything else is optional. Your budget should reflect that.

When to Break Out Your Bare-Bones Budget

Whether you’re feverishly trying to pay down debt, learning to live on a smaller percentage of your income, or simply want to save as much as possible, your bare-bones budget can help you get there. Not only can it help you remember which of your expenses are needs and wants, but it can also help you learn to live – and even thrive – on less money than you ever thought possible.

And you never know, you might even like living on a basic version of your budget without all of the “extras.” The additional money you save could go a long way towards helping you buy your dream house, start a business, or even retire early.

Regardless, the more money you have saved, the more options you’ll have. And that’s why most of us want to get our finances together in the first place, isn’t it? Above all else, we want choices.

Have you ever used a bare-bones budget? What were the biggest challenges you had to overcome?

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