Setting up the bare-bones budget, great for beginners

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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Want us to do this for you? 

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.

I just need a few things to get started...

• Your last 3 months of pay stub amounts - I don't need the actual pay stubs. Just the amounts and how frequently you get paid.
• List of bills per month and their amounts - see step 2 below. You could instead just send me the total amount if you know it.
• A percentage you want to save per month (usually something like 15, 20, or 25%).

Once you gather these things, just message me and make sure to leave your email. I'll get started on your budget right away!

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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:

• Netflix - $12.99
• Spotify - $9.99
• Rent - $1300.00
• Electric - Approximately $90.00
• Water - Approximately $60.00
• Student Loans - $400
• Credit Card - $30
• TOTAL - 1902.98

If you have payments you don't pay on a monthly basis, you might have to do some math to figure out the monthly cost. For example, I pay approximately $6000 a semester for my Masters degree. To figure out my monthly cost, I would first multiply by 3 (3 semesters in a year) to get $18,000. Then, I would divide by 12 (12 months) to get $1500 per month. This would be added to my list of required payments. If you need help figuring out your monthly cost for some of your budget items, just message me.

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.

1. Average your last 3 months of pay stubs. If you don't have 3 months, message me and we'll figure out what to do. Whether you get paid bi-weekly, bi-monthly, or monthly, just add every pay stub you got in the last 3 months. Then, divide that number by 3 to get your monthly estimated income.
   [Total 3 month of pay / 3 = monthly estimated income]
2. After you have your monthly estimated income, divide the total required payments (i.e. your bills) you got in number 2 by your monthly estimated income. This gives you your Bills Percentage.
   [ Required Payments / monthly estimated income = Bills Percentage]
3. [Warning: a lot of math. Message for help if needed] Next, subtract the total number of required payments in number 2 from your monthly estimated income, to get your income after bills. Then, multiply this by the percentage you decided on in step three, in decimal form. To convert a percentage to decimal, just move the decimal spot to the left two places. For example, 15% = .15, 20% = .20, and 25% = .25. Multiply this with your income after bills to give you your monthly savings amount. Lastly, divide this by your monthly estimated income to get your Savings Percentage.
   [ Monthly estimated income - required payments = income after bills]
   [ Income after bills * savings goal (decimal) = monthly savings amount]
   [ Monthly savings amount / monthly estimated income = Savings Percentage]
4. We're almost there! The last thing you need to do is just some subtraction. Subtract your bills percentage and your savings percentage from 1 to get your Spending Percentage.
   [ 1 - bills percentage - savings percentage = spending percentage ]

From the four steps above, you calculated three important numbers: Bills Percentage, Savings Percentage, and Spending Percentage.

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.

​Example
Let's call our friend Joe. 

1. Joe get's paid by-weekly, so he's had 6 pay stubs in the last three months. After taxes, these were: $1490, $1440, $1610, $1560, $1400, $1500. He adds these up to get $9000. Then, he divides by 3, to get a monthly estimated income of $3000.
2. Joe's bills are those listed in step 2 above (Netflix, Spotify, Rent, etc.), which is $1902.98 per month. He divides this by 3000 to get,  .634. This is his Bills Percentage.
3. Joe subtracts his bills from his monthly estimated income. So, $3000 - $1902.98 = $1097.02. Joe decided to save 25%, so he multiplies this number by .25. $1097.02 * .25 = $274.26. Lastly, he divides this by $3000, to get  .091. This is his Savings Percentage.
4. Finally, he subtracts. 1 - .634 (bills percentage) - .091 (savings percentage) = .275. This is his Spending Percentage.

He records these numbers, because he'll use them a lot.

• Bills Percentage = .634
• Savings Percentage = .091
• Spending Percentage = .275

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....

• Checking 1 = Bills Percentage
• Checking 2 = Spending Spending Percentage
• Savings = Savings Percentage

So, now, whenever you get paid, you just multiply and split your paycheck into the three categories. You do this for every paycheck and this is the only thing you have to do to keep up with your budget. It doesn't matter if your paycheck is paid bi-monthly, monthly, or bi-weekly, the math will work. To do the math...

• Checking 1 Deposit = Estimated Monthly Income * Bills Percentage
• Checking 2 Deposit = Estimated Monthly Income * Spending Percentage
• Savings = Estimated Monthly Income * Savings Percentage

Example
Joe get's paid $1400 from his bi-weekly paycheck.

• ​He puts $887.60 in Checking 1 for bills. [$1400 * .634 (bills percentage)]
• He puts $385.00 in Checking 2 for spending. [$1400 * .275 (spending percentage)]
• He puts $127.40 in Savings for savings. [$1400 * .091 (savings percentage)]

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!

IMPORTANT!

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!

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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!