What is the bare-bones budget?
The bare-bones budget is designed by Better Budget to help you get started with finances. With it, you can set up a solid budget that's extremely easy to maintain and understand. Your budget will be divided into three categories: Bills, Spending, and Savings. You'll setup a budget following best practices and even start to grow a savings! Read the steps below to get started!
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I'll help you set up your bare-bones budget for free! I recommend doing this if you don't like math or find it overwhelming. I also recommend it if you're having a hard time getting through the steps below.
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Steps to the bare-bones budget
1. Open two checking accounts and a savings
The first step is to simply have two checking accounts and one savings account. It's not required, but you'll see later how much easier it is if you have the three. Eventually, you'll have just the accounts you need, but that's for more advance budgeting methods. For now, we're keeping it easy and simple. We just want you to get you started with budgeting.
2. Add up all your bills
Add together all the bills you're required to pay per month. Netflix, Spotify, rent, electric, water, student loan payments, credit card payments, etc. I want you to find every thing you pay for per month. Then, add it all together. Here's an example:
3. Figure out a savings goal
A savings goal will be a percentage. You'll hear many different recommendations, ranging from 10%-50% of your take home pay. We'll be taking a percentage of your after-bills (the required payments from step 2) pay, so you can take a little bit of a higher percentage and still be okay. Something normal would be like 15%, 20%, or 25%.
4. Calculate your percentages
This will probably be the most math you have to do. You may have not realized it, but you just divided your paycheck into three categories: Bills, Savings, and Spending. Now, we have to figure out the percentage of your paycheck for each category. Don't worry, I'll walk you through it and if you still need help, just message me. I highlighted the formulas in blue below.
I know the math can be difficult. Just message me for help, if you need it. Math comes easy to me, so I'm confident I can figure out your numbers in only a few minutes.
Let's call our friend Joe.
5. The hard math is over, finishing things up
You will now have three important numbers, your Bills Percentage, Savings Percentage, and Spending Percentage. Remember the 2 checking accounts and the savings account you had from step 1? This is how it maps....
Joe get's paid $1400 from his bi-weekly paycheck.
6. Keep up with it
This budget is called bare-bones because it's made to be not complicated. The math might have seemed hard, but keeping up with it is simple and easy. You just repeat step 5 every time you get paid. Then, simply use checking 1 for all your bills and checking 2 for any spending. If you do this, you're practicing budgeting and on your way to becoming a budgeting expert!
For this budget to work, pay your bills from Checking 1 (i.e. your bills checking) and spend from Checking 2 (i.e. your spending checking). If you don't follow this, you'll make keeping up with the budget harder for yourself!
I'm really happy with how this post turned out. Again, I'll help you get started with your budget if you just message me. I only need a few details to get started on your awesome bare-bones budget! Thanks for reading the Better Budget blog.
Update: As you probably can see, I updated the style to the blog. Let me know what you think! This is only temporary, as I'm working on a Better Budget website now, which will give it an even newer, sleeker look. We've also started social media accounts! You can follow us on Instagram @BetterBudgetCo. You can also find the direct link to our accounts on the right. More social media accounts to come!
A couple months ago, my budget was set up on a bi-monthly schedule, which was aligned with my paychecks. It was easy to budget each bi-month and I could allocate leftover money easily. However, I never had much leftover money. Actually, most bi-months, I was negative. To understand how I was negative, you first need to know my wife and I use the envelope budgeting method. For those of you who already know what the envelope budgeting method is, skip the next paragraph. Otherwise, read on!
The envelope budget system derives from the way grandma used to do her budget. She would get $100 every bi-month. Then, allocate $20 for groceries, $40 for bills, $30 for savings, and $10 for tithing. Each dollar is physically placed in four different envelopes: groceries, bills, savings, and tithing. Then, when it came time to pay for something, she would take the envelope with her. For example, she would take the grocery envelope with her to the grocery store and leave the rest at home. That's essentially the envelope budgeting method. I follow the same method, but instead of physical cash, I do everything electronically.
With us being negative quite often in our envelopes, I had to find a solution, because it made things stressful. If we overspent even $5, then we felt defeated. It wasn't us being hard on ourselves, because we knew that $5 adds up quickly. I have hundreds of virtual envelopes. If I overspend $5 in even 20% my envelopes, then we're hurting financially that bi-month. It's hard to be perfect every month with our budget and I had to figure out a way that I could give my wife and I a little bit of a buffer.
When my wife got a new job, this was the opportunity I needed to implement my new idea to help us with overspending in envelopes. I called this the "disposable income" envelope and it has been the solution to our problems. Every budget cycle, I put $50 in this disposable income envelope. What this does for us, is give us a little bit of a buffer from cycle to cycle.
For example, this cycle we drove a little more than normal and had to fill up on gas twice. Typically, this would hurt us and we would have to pull money from our savings (thus, our savings never grew). But now, this doesn't hurt us. We use some our disposable income to set our gas envelope back to full during the next budget cycle.
Another advantage to having a disposable income envelope is that it gives a fresh start every cycle. Now, we're still strict with it. If we overspent in our spending envelopes, we don't use the disposable income for a fresh start. I have a soft rule that if I can get it refilled over the next couple cycles, then I won't use my disposable income for it. For example, if my gas envelope was negative, I probably won't be able to refill it over the next couple cycles, because we're constantly driving to and from work, needing gas. However, if my spending envelope was negative, I could go a couple cycles until it was refilled. Plus, I need to learn from overspending, so it would be good if I didn't spend for a little bit.
The amount of disposable income you need each cycle is dependent on your budget. If you implement a disposable income folder and find yourself constantly using all, if not more, of what you have, that indicates that something is wrong with your budget. You need to reevaluate your numbers and adjust where needed. I also think it takes a good bit of self discipline to not overspend, knowing that the disposable income is there to catch you. That will defeat the purpose of a disposable income.
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My name is Corey and I have a passion for budgets and personal financing. I can talk about it for days (weirdly enough). Hope you enjoy the blog!
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