Anatomy of a Bare Bones Budget

A bare bones budget helped many others navigate through the coronavirus pandemic. In fact, Americans’ savings rate skyrocketed to 33% at the high point since the start of the coronavirus pandemic. In perspective, the savings rate during ’08 – ’09 financial crisis was between 8 – 10%.

People scrambled to save money because countries around the world took DRASTIC measures in response. Countries shut down international travel at the snap of the fingers. Overnight, almost the entire world was shut down from traveling. Sports events shut down in the blink of an eye without any discussion.

There weren’t any considerations or second thoughts. If it felt like a good decision to stop spreading the virus, businesses and people took the action. No hesitation, no discussion, nothing. Overnight, it seemed everyone was confined to their homes with nothing to do. That this was the new norm.

So when people around the world are taking this dramatic of a step, what do you do? You follow suit and prepare for the worst. People started saving almost 4x what they saved even during the Financial Crisis of ’08 – ’09. Companies fired and laid off employees left and right without any end at sight.

That turned out to be a huge mistake because the Great Resignation is upon us. Companies are having a not so pleasant time trying to find workers to grow their business with. Regardless of which, employees still implemented a bare bones budget because expenses were up while they were getting fired left and right.

Therefore, it’s important to recognize how to create such a budget because there’s no telling when you might need it again. it’s a number that determines what’s the least amount of money you need in order to stay alive and exist.

What is a Bare Bones Budget?

A bare bones budget is the minimum spending that you need in order to exist and survive while at the same time meet your financial obligations. There’s no meat on the bones leftover, but rather just the bones leftover for you to work with. Hence the name, “bare bones budget”. It’s not supposed to be a permanent budget.

Rather, a temporary one that gets you through the hard times. The thing about me is that I use my minimum budget quite often. No matter how much I’m making, no matter how much the markets are up, I use my the budget to my advantage. That way, I reach financial independence much sooner than I would want.

Do I do that for every month out of the year? Absolutely not. I would go absolutely bonkers if I had to do it for the entire year. However, I use it in a couple of months when I don’t really need to spend a lot of money. That way, the spread between my revenue and expenses are even wider than I expected it to be.

You may choose to only implement a bare bones budget during a time of crisis. That’s completely OK. Another option is to implement this budget during the boom times as well. That way, you get richer even faster than you expected. It may not be as easy as what others are doing, but let me tell you, it is worth it.

As someone who penny pinches and is frugal with their money, I can attest that if I had the choice, I would do it all over again. However, this is a personal decision and to each their own is absolutely right. The choice is up to you.

What a Bare Bones Budget Includes

Here are the line items on what to include in a bare bones budget. I also personally use the below for a minimum budget.

• Housing
• Food
• Insurance
• Gas. You always need to drive somewhere.
• Utilities
• Phone. It’s become a necessity these days.
• Wifi. You can’t live without wifi.
• Medicine. For me, it’s probiotics that I need to take every day.

These are the things that you absolutely need for your survival. Without it, you cannot function properly. Yes, somewhere along the way, phone and wifi became a necessity, not a want. I cannot survive in the global competition without my phone. I would get slaughtered to pieces.

The overall idea is to only pick items that is absolutely necessary for your survival and existence. If it doesn’t contribute towards it, then it’s not a necessity. A Nicholas Cage pillow does not count.

I need approximately $2,000 – $2,500 a month just to stay alive in this world. It’s very expensive just to exist in this world and it’s something to be proud of if you are already doing it. If you are already doing it, it’s time to give yourself a pat on the back.

If you’re asking how do you define success, one way to tell is if you have a roof over your head.

One essential item to always include is to SMASH that social share button and posting to your favorite social media! Some of your friends may be struggling and this information could literally better their life. If you don’t want to share for your friends, please share for me :).

I’ll appreciate it as these articles take a long time for me to research and write for you.

What a Bare Bones Budget Don’t Include

Now that you know what a bare bones budget includes, it’s important to know what it doesn’t include as well. These are luxury goods that you could easily live without, without it being a detrimental to your life. There are infinitely more categories than the below but these are a good starting point.

• Vacations
• Entertainment spending
• Clothes. You probably already have enough in your closet.
• A new car
• Novelty items / decorative items you use one time
• The fifth pair of shoes
• Additional nonessential furniture
• Jewelry

And the list can go on and on. You can have a reasonable number of any of these things. For example, I own 5 watches that are each between $50 – $150. That is enough of a number for me and I haven’t bought watches since I bought the fifth one.

I also own 4 pairs of good shoes that I’ve used in the past 4 years and haven’t bought another one since. There’s a number when it becomes excessive and that’s when you should stop. Whatever the number is, that’s up to you to decide. However, once you find it, stop spending more money onto it.

Whenever you can, please buy used. When I upgraded my iPhone from the iPhone 5s to the iPhone 10, I bought used. I only paid $280 for it. That is a STEAL compared to the ones who bought it for $1,000+ and I just let them pay for the depreciation. The refurbished phones act just as good as new.

There’s really no point in buying new. Let someone else pay for the depreciation while you enjoy the quality product at a really cheap price. The exact same logic goes for cars as well. Let someone else take the hit.

How do You Cut Non Essential Spending?

Now you may be thinking, “well David, that’s all well and all but how do you cut non essential spending to get down to a bare bones budget”? That’s a great question! The first step has to start with you. You HAVE to want to save money, otherwise it’s going to be a chore. You have to WANT to not spend more money on jewelry.

It has to start with your desire and wants, otherwise it’s not going to happen. Instead of eating out seven days a week, eat out five days a week and slowly cut down from there. There are many money wasters people spend on on a daily basis.

Myself included. No matter how much I try to cut down my budget to the bare minimum, I always buy something that I don’t need. It’s a curse and I don’t like it. There’s always some leftover food at the end of the month that I throw away that I thought I was going to eat.

Something that I bought from Amazon that I was sure I was going to use.

The latest thing that I seem to need to throw away is a replacement battery for my Mac. People advised against replacing my battery with a generic battery that I bought online. Now I’m thinking of leaving the battery replacement with the professionals at Apple because a long lasting quality item is worth more than a temporary cheap item.

However, this doesn’t mean that I don’t try. I always try to cut down on things that I don’t need. I’ll always look for ways to cut my budget down to the bare bones budget.

Use a Bare Bones Budget Temporarily

A bare bones budget should not be a permanent way of life for you. It should always be a temporary bridge to help you go through a difficult financial situation. Or it could be a way you use sparingly during the year so that you save more money than usual one month. Otherwise, you are not going to enjoy life.

You are going to quit halfway through your savings journey. Trust me when I say this because without a $500/month fun budget, I couldn’t continue with this path. It hurts to work hard throughout the years only to be told you can’t spend any of it on fun. You need to let loose and get rid of the stress that’s building up.

If you ever spend even one minute doing work for someone else, you’re going to feel resentful. Why? It makes you feel like that person owes you something. You gave up your time for someone else. However, you are going to be disappointed when they’re not going to make you whole. Their perspective is, “well, you were already paid to work”.

Companies don’t care about you and society accepts this as fact. That’s why you need to have room in your budget to spend on absolutely what your heart desires. It’s a way for you to relieve the stress that you build up throughout the weeks, months, and years.

A bare bones budget, by definition, doesn’t allow you to do such things. Which is good if it’s a temporary fix and solution. It is horrible if it’s a permanent solution. However, a bare bones budget can be a good way to pad up your savings to take on the world again after the storm passes.

Be well equipped to tackle the storm.