Three Reasons You Should Create a Bare Bones Budget
I have two spending plans — one that amounts to a bare bones budget, and another that’s what I really typically spend each month.
Why do I have a bare bones budget that I don’t use? (And why do I think you should give creating one a try too?) Three reasons.
1. It forces a detailed look
Creating a bare bones budget forces you to take a detailed look at all of the things you’re spending money on. You can evaluate just how easy/hard it would be for you to live without them (and how much value you’re currently receiving in exchange for your money.)
Often this results in a savings, because you discover things you were spending money on that you aren’t even using. (Subscriptions are frequent culprits there.)
2. Creating a bare bones budget can be a wake up call
Pretend you’ve lost your job and can’t find another one for oh, say, a year.
How long before you’re in trouble financially even after you’ve cut back to the bare minimum? What happens if your spouse also loses a job at the same time?
If things don’t like as pleasant as you’d like, you can use this information as motivation to better prepare.
3. Creating a bare bones budget can provide a sense of security.
Once you have prepared for a possible extended job loss, you can look back at the budget with a sense of relief. If you are hit with a job loss, you’ll know exactly where to start cutting, without having to figure things out in a moment of panic.
And if you aren’t hit with a job loss, you can examine the difference between your bare bones budget and your current spending with an eye toward improving your financial situation.
You never know, you might discover more wiggle room than you’d thought, and have more money available for savings, debt repayment, or investing.
I list out our budget from “set” expenses and it transitions down to “optional” expenses as it goes. That way, I can always see where we could easily cut off spending if we had to. If our business failed, my husband and I would need to find new jobs, but we’d have rental income and our side hustle income while we looked. That wouldn’t cover everything, but it makes a big enough dent that we could live off of our cash savings for more than a year while we found long-term options if we cut out some of our convenience budget items.