It has officially been one month since I was laid off.
It's been a month of new opportunities, aggressive self-care, and lots of happy hours. I've devoted time to setting new goals. This includes deciding what my ideal life looks like and what steps I need to get there.
I've worked hard to embrace the abundance mindset. This means turning down gigs that don't pay enough or don't propel me toward my long-term goals.
I'm confident it's a smart move, but it requires patience while I'm slowly building my income. It also requires sticking with my bare bones budget for a while.
For over a year and a half, I've focused on earning more. But now I'm carefully tracking my spending again. I've analyzed my expenses and learned I need ~$1,750 to get by. $1,750 a month is a realistic goal, but it will require some discipline.
Here is my strategy for covering my bills, avoiding debt, and stretching my emergency fund.
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How To Determine a Bare Bones Budget
A bare bones budget is a handy tool to help you through slower periods of income.
If you have been laid off, fired, or quit your job, a bare bones budget can help determine two things: 1) how much income you need to get by, and 2) how long your emergency fund will last.
Here's a quick recap of how to calculate your bare bones budget:
- If you haven't been regularly tracking your spending, login to your bank and credit card accounts to take inventory of the past six months to one year of your expenses.
- For effortless budgeting, consider trying a free tool like Personal Capital. Their cash flow and expense tracking tools save a ton of time! It's like Mint, but much more robust.
- Once you know how much you've spent each month, you can begin trimming the fat. Separating fixed and variable expenses may make this easier.
Preparing for Leaner Months
Being laid off or fired is often unexpected. But if you're given any warning or severance, you may have some time to prepare for leaner months.
1. Pay off credit cards
When you are no longer earning income, the sting of high-interest credit card debt can be especially painful. If you can comfortably pay off your balance, interest will be one less monthly expense to worry about.
2. Conduct a health care audit
If you haven't been tracking your regular doctor's visits and monthly prescriptions, now is the perfect time to start. Get organized by making a list of everything you have used in the past year.
If you are changing insurance, especially to a high-deductible plan, you may want to schedule all the necessary appointments and refill prescriptions before making the switch.
3. Make a list of annual one-time expenses
Large annual expenses like car insurance can be especially rough during periods without income. Review your past year of expenses and make a list. You can start saving for these expenses every month or set aside the entire amount for when the bill is due.
Managing a Bare Bones Budget
A bare bones budget requires more discipline than a normal budget, but many of the same tactics can be effective.
- Identify your problem areas Do you overspend on food and drinks? Or are you blowing too much money on Amazon every month? By identifying your problem areas, you are more likely to be mindful when future temptations arise.
- Break your budget down weekly It's easy to lose track of certain types of expenses when you're only checking in once a month. Try setting a weekly budget instead. This gives you the chance to improve problem areas more quickly.
- Allow for small indulgences Chances are, you have probably made some pretty dramatic cuts for your bare bones budget. To avoid feeling deprived, allow yourself to have small indulgences from time to time. It may be as simple as a cup of coffee or a special ingredient from the grocery store. Small indulgences can help prevent major missteps.
A bare bones budget is meant to be temporary. By following these steps you can cover your bills, avoid getting into debt, and stretch your emergency fund until your income is steady again.
Readers: Have you ever lived on a bare bones budget? What are your survival strategies?