There are many situations where you may find yourself needing to tighten your budget, whether it's because you were just laid off or, on a brighter note, you're preparing to make a big purchase.
Insert: A bare-minimum budget.
A bare-minimum budget (aka a bare-bones budget) is exactly what it sounds like. It's a budget that accounts for only the nonnegotiable essentials and removes everything else. The idea is that it's a temporary way to get by so that you can endure a layoff or save up big-time; it's not permanent. This may not be the most glamorous way to reach your financial goals, but it's pretty simple. Follow the steps below to create your own bare-bones budget.
Creating a bare-bones budget
Start with the nonnegotiables
First thing's first: Figure out what exactly you can't live without. This includes monthly costs like housing, utilities, food, transportation, insurance and even minimum debt payments (like on a credit card). Paying the minimum is part of a bare-bones budget because you're paying just enough to not get flagged for late or insufficient payments and to prevent your credit score from taking a hit.
Write down what each of these essentials cost and total that number up.
Figure out your monthly take-home pay
You then want to figure out your monthly income after taxes, or how much you take home. If this varies month to month (perhaps you're a freelancer), use your lowest recent month to be on the conservative side.
Once you subtract your nonnegotiable amount from your monthly take-home pay, that's basically your bare-bones budget. If there's money left, this gets put into a safe and accessible high-yield savings account (see some top picks below). In this account, your money will grow with an above-average return and it's there whenever you need it. If there's no money left after accounting for your essential costs, then you'll have to find ways to make those essentials cheaper. For instance, perhaps you can negotiate a utility plan or try shopping at a less expensive grocery store.
Top high-yield savings accounts
Utilize a budgeting app
When it comes to stripping down your expenses, it's easier said than done. Beyond just the acknowledgment of telling yourself to stop spending on takeout and such, there are likely memberships and subscriptions that you have to figure out how to cancel, too, and all that can take time. A budgeting app can actually help here.
Even with the free version of Rocket Money, you can get subscription tracking. This means that you can see all your recurring subscriptions in one place, which is much nicer than having to scroll through your bank and credit card statements. You'll also be able to link your financial accounts, create budgets and track all other expenses.
Rocket Money
Cost
The basic plan is free. Rocket Money Premium is $7 to $14 a month with a 7-day free trial. Bill negotiation services cost 35% to 60% of the first-year savings, if the negotiation is successful.
Standout features
Easily cancel unwanted subscriptions, track your spending and credit score, automate savings and get help lowering bills. Rocket Money Premium includes additional services like net-worth tracking, credit reports and a subscription cancellation concierge service
Security
Rocket Money accesses transaction data via an encrypted token, uses Plaid API so user credentials are never stored, provides bank-level 256-bit encryption and hosts servers on Amazon Web Services
Availability
Offered online and on both the App Store (for iOS) and on Google Play (for Android)
Terms apply.
Pros
- Allows you to easily view and cancel unwanted subscriptions
- Offers a free version
- A+ from Better Business Bureau
Cons
- Nonrefundable bill negotiation fee can be up to 60% of savings
- Premium pricing varies
Monarch is another budgeting app that stands out for its easy-to-use mobile app, customizable transaction categories and ability to collaborate with your partner or spouse. The platform also offers features like net worth tracking and goal creation. Monarch is a good choice once you find yourself in a more stable financial position (if you got laid off) or once you're closer to your savings goal (if that was why you needed a bare-bones budget) since it does cost $14.99 per month, or $99.99 annually.
Monarch
Standout features
Customizable transaction categories, net-worth tracker, investment portfolio tracking, financial forecasting
Cost
$8.33/month (billed $99.99 annually); $14.99/month (billed monthly). Get 50% off your first year of Core Plan with code CNBC50
Categorizes your expenses
Yes, but users can modify
Links to accounts
Automatically syncs with bank accounts, credit cards, loans, retirement plans, investments and more at over 13,000 institutions
Availability
Offered for both iOS and Android. Web version also available
Security features
Maintaining only read-only access, Monarch utilizes AES 256-bit encryption and multi-factor authentication. It is SOC2 Type 2 certified and syncs accounts via Plaid, MX and Finicity.
Terms apply.
Pros
- Seven-day free trial
- Easy-to-navigate dashboard with fully customizable reports and visuals
- Connects with more than 13,000 financial institutions
- Couples or partners can budget together in collaboration mode (each with their own login at no extra cost)
- AI Assistant lets you ask questions about your finances
- Can track property value via Zillow
- Ad-free experience
- Consistent product updates with new features added regularly
Cons
- No free version
- Subscription is more expensive than competitors
- Investment tracking is solid for most users but lacks advanced tools like retirement modeling, fee analysis or Monte Carlo simulations
- Recommendations in the "advice" tab are generic
- No undo feature when reallocating money across budget categories
And if you liked the practice of separating your nonnegotiable essentials from all other costs, try Goodbudget. This app offers the digital version of the cash stuffing method where you deposit funds into different virtual envelopes that represent spending categories like housing, transportation, food and savings.
Goodbudget
Cost
Free for 20 total envelopes, $10/month (or $80/year) for unlimited envelopes
Standout features
Allows couples to track debt and use a digital "envelope" system to budget funds
Categorizes your expenses
Yes, but free users must manually input transactions
Links to accounts
No, users must manually input purchases and transactions
Availability
Offered in both the App Store (for iOS) and on Google Play (for Android) and for desktop
Security features
Information is protected using bank-grade 256-bit SSL
Terms apply.
Pros
- Free tier available
- Can share budget and spending with a partner in real time across multiple devices
- Digital envelopes help couples and households stay aligned on spending goals
- Offers money management courses and educational resources
- Available on iOS, Android and desktop
Cons
- Free tier doesn't sync with bank accounts (all transactions must be entered manually)
- No bill-paying or investment-tracking features
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