May 26, 2021 • 44 mins
If you were faced with a financial emergency, how would you respond? Imagine you just found out that today was your last day at work and you had no other income- do you know how you would cut back in order to get by? That might be a terrible scenario to envision, but we believe that having a bare bones budget in your back pocket is necessary as it can be powerful in case of a financial emergency. It’s all about keeping your needs and cutting your wants in order to prevent you from relying on debt or making other ill-advised financial moves. During this episode we discuss what you should include in your own bare bones budget, as well as the additional benefits that accompany thinking through some of the worst case money scenarios that you might encounter.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to How the Money. I'm Joel and I am Matt,
and today we're discussing why you need a bare bones budget,
(00:25):
you know, bare bones budget. It's got that BBB action
going on. It's some nice alliteration for our listeners today,
like the better business here. Okay, So here is what
this episode makes me think of. You know, when, uh,
you start acquiring items for your closet, like your wardrobe,
and you kind of just add another hanger in there,
and you're like, oh, you know, I ran out of hangers.
Let's let's buy another pack of hangers, and you start
filling your closet. It starts bulging. Uh, it's about the
(00:47):
bust at the seams. I feel like our budgets can
act that way, right, Like, over time, as we add
line items to our budget, it can start to swell.
Maybe now that we're you know, we've got a legit job.
Maybe you go on like a vacation every year with
your friends or something like that. Or maybe you like clothing,
like that's something that you really value, or maybe you
really like electronics. It's okay to spend money on the
(01:08):
things that you enjoy, the things that bring you value.
But the effect that has on our budget is it
it starts getting kind of kind of thick, it gets
a little bit plump. And so with this episode where
we want to introduce this idea of essentially like a
thought experiment for folks, right, we want folks to think
through what what happened if you were to pare down
your budget to the bare essentials. Yeah, we're not gonna
(01:29):
force you to create and then adhere to this bare
bones budget, but we do think there's a whole lot
that could be gained by by just trying it out
and seeing what happens by at least creating one. And
so we're gonna talk about how you do that and
what you're gonna gain by doing that in today. So
there's a lot of benefits from partaking in this exercise,
no doubt. Before we get to that, Mat, I want
to quickly mention listener Holly send us an email and
(01:51):
she had mentioned this app that I hadn't heard about,
and I feel like we had to look into it
called Giveling, And it's just like student loan app or
people come together, they play trivia games and sometimes they
pay money to play more trivia games. And so if
they can they can move up the standings in order
to win a big prize to help pay off their
student loans. And yeah, I mean I know you took
(02:13):
a look at this too. Yeah, what would you think
about it? Dude? Yeah, it seemed a little too good
to be true because one of the things they say
is that once you get to the number one spot,
you're eligible for the for the grand prize, which is
a fifty dollar student loan payoff, which you know, to
anybody who has a bunch of student loans is like,
that's that's music to mynors exactly. And here's the thing, dude,
I was. I was almost even hesitant for us to
even talk about it because I don't want people to
(02:34):
get the idea that this is something that they need
to do, because there are some serious red flags, right
Because you're able to move up that queue by acquiring
I think what they call queue points, and you do
that by you can answer trivia, you can watch ads
within the app. You can also make purchases like from
their uh just different companies that they've partnered with, and
(02:55):
also by referring people from reading up on it. Those
are all ways that you can get closer to that
kind of in prize, but specifically that last way of
getting points referrals. Dude, that's the part of this that
makes me feel like that this is more of a
pyramid scheme than anything else, right, because essentially they are
counting on the additional people that are coming in in
order to pay off the prizes for the folks at
(03:18):
the top, right, And anytime you have any sort of
model like that that's dependent on the acquisition of more
customers in order to be successful, because there isn't truly
an actual product. It makes me feel that at some
point if there are not enough folks kind of at
that base of the pyramid, you know what happens that
the pyramid essentially gets inverted, and so you've got a
fewer number of people at the bottom paying into it.
(03:40):
You've got a lot of people invested who are waiting
for that big payout at the top and exactly and
it's going to fail. Um. And so something like this,
you can have so many people who are invested, like
literally invested. The uh we can link to an article
that we came across, but there's folks who have paid
in thousands of dollars and there's nothing really keeping a
company like this from from going bankrupt next year or
(04:00):
like tomorrow, right, Yeah, I think it is. It's one
of those things where people get excited to think that
they can win a big sum of money that would
help them in a massive way, maybe pay off all
their student loans or at least pay off a huge
chunk of it. But it's kind of like the lottery
in my opinion. It might be a pyramid scheme. I'm
not sure, but it definitely has some lottery feel to it.
And they get you in there and you start to
(04:21):
pay money so you can continue to move up this leaderboard,
making you think you have a greater chance of winning
a big chunk of money that's going to help you
in a big way. And I think, yeah, there are
certain freeways that you can participate in this app where
you don't have to spend a time, and I would say, like,
even be careful doing that, because I think, um, it
might get you in the mental state where you're more
willing to part with some of your money to try
(04:42):
to move up and and to try to win some cash.
And I think the likelihood that's gonna happen for you
is is skim just like winning the lottery. So so
I would say, yeah, avoid gibbling, and I think it's
an app that doesn't make sense for for almost anybody. Yeah,
the free aspects of it we don't have any problems with.
But like you said, it's like they probably the hump
a little bit and it gets you ready to pay
a little bit more money into it. Uh, And specifically
(05:04):
because it's the leaderboard, Like I think that's the part
of it that that the gamification of this, and I
get it, like I understand how it's kind of fun,
but essentially there's the expectation that at some point you're
going to reach the top, right with a lottery, when
when folks you know, play the lottery, they know that
there's a slim chance of them getting any money, right. Uh,
there's not a leaderboard where it's like, Okay, eventually, if
I work hard enough, I will I will achieve it.
(05:27):
It's it's chance. And so there's in my mind, there's
a huge difference between working towards something where you're expected
to pay out versus you know, one and I don't know,
ten million chance of winning the lottery or something like that,
where there's a huge payout. Yeah, And gamification we think
can be a really healthy and good part of personal finance.
Right that we've talked about that before on the episode.
There are ways that you can gamify your own personal
finances that are going to help you in your pursuit
(05:49):
of saving more and building wealth. This is a way
that's like praying on that behavioral tendency, that allure of
gamification that's actually gonna part you from your money. So, yeah,
don't participates games with friends that could cost you thousands
of topics. Right, Well, so, all right, Matt, let's mention
the beer that we're having on the show today. This
one's called Ethereal Vibrations by Monday Night Brewing, one of
(06:09):
our favorite local breweries, and they collapsed with Burial out
of Asheville to make this really good looking I p
am looking forward to having this one on the show
today with you. Yeah, it's hard to go wrong when
you've got one of your favorite local breweries teaming up
with one of your favorite national breweries to make a
delicious beer. Looking forward to enjoying this one on the show, Dude,
me too, alright, But for now, onto the subject at
the hand, Why you need a bear bones budget that's
(06:31):
what we're talking about today. And Matt, I don't know
if you've seen this show. There's a there's a History
Channel show called Alone. Have you seen it? I'm not okay?
So basically sounds like your worst nightmare, though it does.
I like people, I would be sad. I would probably
deal okay with it. You probably would. Uh. But basically
what happens is that the folks are allowed to bring
ten items with them as they're dropped off in this
(06:51):
remote section of the wilderness to survive a monks like bears, bobcats,
other various treachery um. But yeah, so like ten people,
they're competing gainst each other to see who can stay
out there the longest, whether it's like thirty days, forty days,
Like how long can you be out there? And you
don't know how everyone else is doing. You're just trying
to survive. And like the idea of doing that with
(07:12):
only ten items, with like bare bones resources makes the
show so much more interesting than if those folks were
able to bring any or all of their possessions with them,
right like, um, like, I'm thinking of dropping them in
the woods with a tiny house and a wood burning
stove and like it's like not as not this interesting
of the show, I'd pay to go there, yes, Like
(07:32):
like that's what's on the first page of Airbnb right now.
It's just like, you know, these secluded cabins in the
woods with the wood burning stuff, right, and maybe an
Xbox or something, yeah, solar panels, it's all it's all
set ready to go. Yeah, and I'm just thinking, like,
not a very fun TV show to watch the dude
play Xbox in the woods, right, But like seeing what
people can do with limited resources, it's actually kind of
fascinating and for some of the individuals who have gone
(07:54):
on the show, even if they don't win, it seems
like it can be like this meaningful and empowering experience. Well,
we think that having a bare bones budget, it's not
gonna make you the next Bear Grills. You know, you're
not gonna be able to survive in the wilderness for
months on end, like sleeping inside dead animals. I think
I saw him do that once. Dude, he does a
weird stuff that's a that's a Star Wars reference. Yeah,
I guess that's true too, But he is he's impressive, man.
(08:15):
But we do believe that having you know one of
these bare bones budgets in your back pocket is necessary,
it's helpful, and it can be powerful in the case
of an emergency popping up. Yeah. Essentially, we we think
that having a bare bones budget uh is about prioritizing
your needs, not your ones, right, so it reflects only
those most essential monthly expenses, and having one comes in
(08:37):
handy in a lot of ways. So, for instance, you
may feel trapped working in a high paying job that
you hate, but because the pay or the benefits are
so good and you need that income, you're stuck, or
at least you you feel like you're stuck. Maybe you
don't get treated as well as you should, or the
hours or the demands of that job are overwhelming. You're
not going to be left with many options if you
(08:58):
don't think you can seriously downsize your budget, and so
creating that bare bones budget can help you to see
the path to exit that job, even if you don't
have a new one lined up yet um Or maybe
it can even help you to realize that you can
take a job or a position that pays less because
your finances are still gonna be okay. It's essentially about
giving you options flexibility and the freedom to act in
(09:20):
ways that you want to act. That's right, Yeah, And
so I guess, like, who is a bare bones budget for.
We would say that it's for everyone, that everyone should
really attempt this experiment, right. Uh. Even if you love
your job, there's no guarantee that your employer keeps you
around as long as you'd like to stick around. So
some people might be like, but I really like what
I'm doing. I probably don't need a bare bones budget
(09:41):
because I plan on working, you know, here for a
long time. But you know what if your employer goes
through a rough patch, or the economy in general goes
through a rough patch, and you don't have that job anymore. Right,
So we think it's important for for everyone. You know,
I personally have seen the difficulties that unexpected employment can
create firsthand, and it's not pretty. I would say to
having that bare bones budget on hand before an awful
(10:04):
event like that happens to you can help you whether
the storm much better than you'd otherwise be able to.
It's so much harder to try and slash expenses when
you're in the midst of the emotional and financial turmoil
that you're going through in the aftermath of something like
a furlough, a job loss, or a reduction in hours.
Trying to get your budget in order and pare it
down in the middle of the emergency is overwhelming. So
(10:28):
that's why we woulsly just getting this bare bones budget
done now, and it can be a helpful resource for
you in the future if you need it. Yeah, dude,
rarely do we think that the worst things are gonna
happen to us. But it's good to start thinking about
these things ahead of time. It actually makes me think of, uh,
have you ever changed a tire like on your car?
I have, it's been a while. Most people haven't done it,
but if they already get a flat tired, they've never
(10:49):
done it, and so it's like they're stuck in the
position of being like, Okay, wait, do I have a
spare tire like on this vehicle? Where is it? How
do I go about it? You know? Should I put
the parking brake on? Yes, it's gonna be really important
that you do that. I even have a jack in
my car, like, and so there's all these things, and
I mean, honestly, it sounds a little bit like prepping,
but it's just thinking through the worst case scenario a
(11:10):
little bit and making sure that you're familiar with what
you're gonna need to do if that situation ever arises.
I feel like that's a part of the reason why
we're recommending for folks to start thinking about this ahead
of time. The bare bones budget. It's almost like a
fire escape plan that you had to come up with
an elementary school, you know. I remember, my folks, like
you remember back in the nineties, there's those ladders, like
if you had a bedroom in the second floor, you're
(11:31):
supposed to get one of those ladders that you can like,
you know, roll out the window so you can escape.
I tried to, you know, tell my parents that we
needed one of these things, because like I think every
elementary school kid did. Um and I feel like they
didn't love because we never got that. Okay, so my
bedroom was there was actually this column outside my bedroom window,
and we never got one of those things. But I
remember thinking, Okay, well, you can slide down that. Yeah.
(11:52):
Remember I remember thinking, well, at least I bet I
could jump out my window, grab onto that and just
kind of slide down like fireman post. But I mean,
in the same thing, just even as adults. If you
work in uh an office building or an office park,
you know, like once a year you have a fire
drill and everybody goes out to the parking deck or
the parking lot. Hopefully they have the ice cream truck
there where everyone gets the free ice cream, that kind
of thing, And it always kind of seems silly for
(12:13):
adults to be doing that, but it was an important
thing to do to make sure that we knew where
to go, knew how to get out of the building
in case there was a fire. It's not likely to happen,
but planning for the worst is still a good idea.
And in regards to your budget, knowing that you will
you know that you have this bare bones budget made,
and then just being able to just easily flip the
switch in an instant to spending a good bit less
(12:34):
than you currently are. This just offers some peace of mind,
you know, And it's truly helpful if you find yourself
in a precarious financial spot just down the road. Yeah,
so I'm mad, I'm an optimist. You know this about me?
That's true. Maybe maybe to a fault, might say and
I'm I might even say that I don't know and
I'm a realist. I'm more the prepper type. Yea, I
know exactly where the jack is on my van, you
(12:55):
know where yours is? Yes? Yeah, okay, I do so. Yeah.
It's I gotta say, like, I think it's good to
be an optimist. I think hoping for the best is
a really good thing. But we would say, and I
would say, even as an optimist, budgeting like a pessimist
and planning for the worst, it's just a smart thing
to do, right, um, And that that doesn't mean that
you can't have a normal, healthy budget where you use
(13:17):
up all of your money every month, right, with hopefully
a healthy amount headed towards savings and investing goals. But
it does mean that you should at least have this
bare bones budget in case you need it. Right. It's
the budget equivalent, I would say, of an emergency fund.
You you're hoping to never have to use it, but
having it is clutch, right if the worst were to happen,
if job loss does occur. I think both of those
(13:40):
things actually work really well in tandem, right if something
hard does come along da. Plus, having that bare bones
budget can also be a confidence builder, right if you've
got a solid emergency fund and a bare bones budget
that's far less than your normal monthly budget. It can
really boost the assurance right that your your finances are
going to be okay no matter what. It can be
(14:01):
an eye opening experience to realize that you actually can
live on far less than you might have previously thought,
because you know, like fearly unknown that is such a
real thing, especially when it comes from money. But the
bare bones budget can just bring some concrete reality to
quell some of those fears. You don't have to stay
awake at night wondering like, well, what happens if I
lose my job? Like what if I'm riding my bike
and I fall off and I break my arm and
(14:22):
I can't go to work or you know, I guess
I can still talk you and I can continue to podcast.
Like then you start thinking, well, do I need accident
you know, income replacement insurance, and you know, do I
need affleck? Like no, Like, we wouldn't point you in
that direction, but we do think that this is a
really valuable step to making sure that you've got that
peace of mind. We want you to know that you
would have options, yeah, that you're gonna be okay in
(14:43):
the event of an emergency and the fund and the
bare bones budget simultaneously is really going to provide I
think a lot of that peace of mind. It's like
a nice one to punch. Yeah, for sure. I think
to Matt, this exercise of creating a barre bones budget,
we're gonna talk about how to get there in just
a second. It might present some helpful questions about the
expenses that are in your current budget too. I think
this is a healthy exercise to realize that the expenses
(15:06):
in your life they're not fixed. I mean, some of
them are, we're gonna talk about that, but many of
them are actually just spending choices that we've made, and
we all make them. Uh yeah, this lifestyle. Yeah, and
there are some things obviously, like we think it's okay,
and it's actually good to prioritize certain expenses in your
life that others might think are crazy, purely because you
(15:28):
love them and you enjoy them. Your fancy socks, like
my fancy socks. Yeah, I don't know, I like my socks.
It's I mean, that's a lifestyle thing. You think. You know,
I'm a I'm an adult now, I'm not gonna wear
socks that have holes in them, whereas I am cheap
in that way, like I don't care man like, so
in my mind, I don't call it cheap. It's frugal,
Like I am willing to have socks with holes in
them because I don't care. But then, of course I
(15:49):
spend money on other things that you would you know,
you might think are foolish, like I got this new
bike bag that I can wear around town, or we know,
while I'm running my bike fancy like my old one.
It totally still carries off, it contains things. It's just
that I kind of I wanted one that was updated,
that looked a little more sleek. Yeah, but I think
that's pies. I know we have different priorities and that's okay,
But I think like, as we go through this exercise,
(16:10):
it's good to point some of those things out, and
it's good to realize that some of the things that
are currently in your budget they are there because of
choice and not because of necessity, and creating a bare
bones budget figuring out the minimum amount that you could
live on, can be a helpful mindset shift in how
you think about the money that's going out of your
account every single month. So We're gonna talk more about
(16:32):
what's included in a bare bones budget and how to
create one, and we'll get to that right after this.
All right, dude, we are back and we just covered
all the different reasons why it is that we should
all have a bare bones budget, uh, in our lives.
(16:53):
And so now let's talk about what is actually in
a bare bones budget. At the top of the list.
We're gonna put beer because beer is the essential to life.
Uh No, actually it's not right. I mean, water is
virtually free, and if it came to it, I would
be willing to pair back how much I'm spinning on
beer if I was in a tight spot, wouldn't you? Yeah,
I totally would. And I also think that would be
(17:15):
one of the last things I cut, definitely when I
made my beer bones budget. Beer was not a part
of that, because it should not be a part of
your bearer bones. But that's not what it's for. That
This exercise is literally for like, how a little amount
of money can you live? That is true. Yeah, We're
we're looking at the essentials. Uh. And again, this isn't
the budget that you're hoping to ever have to use,
And so we want you to slash to the point
(17:35):
to where it starts to hurt, you know. And so
let's talk about some of the different categories that will
make the cut, let's talk about which ones won't make
the cut. And as we do this, I think it
can be helpful to think about Maslow's hierarchy of needs
here as we discuss the basic needs that it actually
takes for us to survive. Uh So, Jill, you want
to kick it off food obviously the basic need that
we all have, right, But well, we don't all have
(17:57):
as a basic need to survive Chipotle or like Chick
fil a or whatever fast food or whatever food in
general that that you enjoy. Like, in all likelihood, you're
going to need to, and you should, in this bare
bones budget exercise, pare down your food budget. Your current
budget might include eating out and fancy cheeses at the
(18:18):
grocery store, maybe some fine craft beers, but the bare
bones budget shouldn't include any of those things. You know,
we're not expecting you to survive on bread and water alone.
That's not healthy. But I guess if you're in that
show alone on the History Channel, maybe that's what you're
doing it. If you can't kill a critter that night
to roast over and open flame. Maybe, but uh yeah,
rice and beans are tons of protein and fiber basically
(18:40):
stripped down your food budget to what you can actually
get by on without all the extras, without all the fluff,
without all the niceties. Uh. It's helpful knowledge to have
on hand to know how low you can actually get
your grocery budget if you needed to. Yeah, dude, seriously, like,
like you mentioned rice and beans and like it, I
don't know, it can kind of be a rallying cry
of certain folks who are like trying to get out
of debt. But there's a good reason why, and that's
(19:01):
because there, I mean, you can get a lot of
protein for rice and beans. I guess it's specifically the beans,
but like the combination of those two foods together, Like
you don't have to buy some fancy protein, you know,
you don't have to get the fresh Alaskan salmon that's
never been frozen. There are other ways to make sure
that you're getting the nutrients you need. And so we're
going to go from food to shelter because this is
one that everyone needs. This is one that's usually not
(19:24):
going to change honestly from your regular budget. So are
you gonna suggest that people should pitch a tent in
the woods near where they live. Is that all that
can make the cut in the bare butt? I mean
they could, but most people aren't gonna do that, right, Like,
that's not the position that most of us are in. Um.
But you know, if you are nearing the end of
your lease, maybe moving to a smaller place, smaller home
or smaller apartment, that might make sense, uh, if your
(19:44):
financial situation has changed, but you can't, you know, really
change the reality of your current monthly you know, housing
expenses in most cases. And so as you're putting together
your bare bones budget, you're probably going to transfer this
lime at him uh, pretty much directly from your regular budget.
Although it's it is importan and to point out though,
that we do have control to a certain extent of
how much our housing costs, right because your mortgage payment
(20:06):
isn't going to change, but the amount that you're paying
towards that mortgage payment can change. Uh. Maybe you've got
an extra bedroom and you've got that room set aside
for friends who might come to visit place for them
to crash. Now it's set aside for strangers. Well now
as yeah, it's a set aside for a roommates. And
so if you're able to all of a sudden realize that,
like wait a minute, like I've got this extra room,
maybe I've got two extra rooms, I can get two
additional roommates who would gladly pay four hundred dollars a month,
(20:29):
you know, just just for their own small room. Uh,
you get two of those rooms set up, you're bringing
eight hundred bucks a month. That could offset a mortgage
in a significant way. And so it's worth pointing out
that you're probably not going to sell your house just
because you're having maybe a tough time with your finances.
But there are other smaller moves that you can make
without putting your your house on the market, right, Like
get some roommates. That's definitely a way that you can
(20:50):
bring down your your housing costs. And you don't have
to go live in a van down by the river either.
Like that. It is true, it's an option, I guess,
but I'm not sure that the legalities of that probably
depends on your local municipality. I shouldn't do that. Rest
in peace, Chris Farley, I love that guy. He is
a good one. I think another thing that obviously needs
to enter into your bare bones budget is utilities associated
(21:11):
with you know, your shelter utilities aren't a fixed cost,
but they are largely fixed right. But at the same time,
we do think that you can trim this back slightly
from your normal budget, maybe five. Just depends on how
much you're willing to sweat in the summer. You know,
if you just keep cranking that thermostat up, man, utilize
those fans, drink ice water. That's what he used to do.
(21:31):
I gotta say, seventy eight degrees in summer is is
what I feel like should be. Okay, and and uh my,
my wife might disagree. But then you, I think you
can pull it down to seventy six at times that
you need it if you're going below seventy six. Though
I don't. I don't even know who you are, man,
You're just living in luxury. And he said, how fancy
are you? Okay, here's the thing. I would much rather
keep it at seventy six seventy seven in the summer
(21:53):
and keep it cool, uh, and then keep it really
cold in the winter. I would be much more willing
to take it to the extreme in the winter and
drop it down to like fifty nine or six, which
I've done before. My in laws actually accused me one time.
They were like, no, I swear you know, like after
katting I got married and back when we were super cheap.
They're like, one time, like when we were visiting, you
had your heats at a fifty seven and I was like,
I don't think so, that seems kind of crazy, and
(22:15):
they swear by it. So it sounds pretty close to
what you do. Though. Well, luckily things have changed a
little bit. I'm not nearly as as cheap and imposing
as I used to be. Dude. Let's talk about transportation,
because this is another area that can be hard to change,
especially if you hop over to that bare bones budget
because an emergency hits. It's hard to think about selling
a car in the middle of a difficult situation. It's
(22:36):
hard to hop out of a car payment or a
lease if you're in one, although there are ways of
doing so swap a lease, please, trainer. And so this
is a line item that probably needs to be a
part of your bare bones budget, but see if there
are ways for you to pair it down and another
piece of advice here is just to not necessarily buy
a car at the top end of your budget, right,
because you're buying that car and hopefully you're not financing it,
(23:00):
but if you are, you've got payments, and you've got
payments that go along with your budgets when everything is
going exactly as it should, you know, sort of the
best case scenario. And so I feel that this is
a good reason to have the vehicle that will obviously
work for you when things are going well, but one
that you can afford or one that you can support
when things are not going so well as well. Yeah,
(23:20):
that's right. So buying that car in cash is definitely
something we would recommend everyone. And that comes in handy
too when you're creating your bare bones budget. You like,
I could to my car, and I don't have a
matter what exactly, like at least the car's mind. You
can go sleep in that, like you said, by the river,
that's right. One of the things that definitely needs to
make your bare bones budget is your recurring monthly debt obligations. Right.
(23:42):
You can't stop paying your creditors if you lose your job,
so this definitely needs to be factored into Let's say
you do have credit card debt that you're working on
getting down student loan debt. Obviously, federal student loans have
been put on pause for the time being. Eventually those
are going to resume. You can't factor those out of
your bare bones budget that has to be there because
you're gonna need to continue to pay those payments every
(24:03):
single month, even if you've been put in difficult financial circumstances. Yeah,
but you, I mean, you bring up a good point though, too, right,
which is it's worth noting that we do have some
control over those those payments to a certain extent, just
like with with housing. There, you know, there might be
ways that you can modify the terms a little bit
so that you're paying less, right. I mean, there's a
national forbearance, you know, on on federal student loans, but
(24:24):
you can go to a specific lender and see if
you can get a forbearance so you can see if
you can get the loan extended or even a lower
interest rate. If you're looking at a credit card, right,
there are ways to potentially modify the terms of that debt.
And so while you don't want to necessarily count on that,
know that if you ever, do find yourself in an
in dire straits, you're looking to all the different types
of ways that you can reduce your expenses. And so, Joel,
(24:46):
maybe we left some stuff out, but we feel that
those are the basic requirements that we need in order
to survive in a in a modern world. Right, And
so let's talk about what doesn't make the cut. Right.
There are probably quite a few things that might be
in your normal budget that you don't want to give
u up in an ideal world, and that makes sense.
But the bare bones budget, dude, is not for ideal worlds.
(25:06):
It's for the world that you hope never comes into being.
So let's cover a number of different expenses that I
think maybe some folks might feel are necessary to life.
But we're gonna cover several of these to point out that,
in fact that they are not necessary. Yeah, man, I
feel like, you know, one of the things that that
needs to go quickly, and it's pretty easy actually to
cut off from your life is no cable or streaming
(25:26):
services in your bare bones budget. Even though over the
past year and a half it feels like that that
has been kind of like a non negotiable. You know,
people are like no gotta have gotta have a Netflix.
Maybe you're only saving grace having a couple of good
shows to watch, right, But we would say that, you know,
when worse comes to worse, living on that bare bones budget,
you can't be spending a dime towards those things. Instead,
you should be watching free stuff on the Roku channel
(25:49):
or a YouTube even. You know, when when you're in
bare bones budget territory. You know most of us have
like a digital antenna. There's a bunch of stuff you
can watch free over the air, that free HD content. Ag. Yeah,
it looks it looks good. It looks better HD over
you know, over air, it looks better than the stuff
they stream, right because it gets downgraded us. Right. I
don't know how the technology works, but I've been told that.
(26:11):
And maybe on the bare bones budget too, you go
from you know, watching stuff more frequently to reading more
because reading is essentially free to you. You can read
free stuff on the libby app. I use that all
the time. They're little free libraries in tons of neighborhoods,
uh near where you live. In all likelihood, man, I
think we've got so many just in our neighborhood alone.
Like people love the little free libraries in our part
(26:33):
of town. The number of little free libraries doubled during
the pandemic because it was just like a little I
don't know, I felt like it was a fun project
that maybe some households were like, oh, let's make one
of those and stick it, you know, at the sidewalk
in front of our house. There's one actually a couple
of blocks. Way. Have you seen the little free puzzle library.
I have seen that one. Ye. Yeah, Like they used
a like the old school newspaper. Uh, Like you stick
(26:54):
a quarter and push the button and it allows you
to open the door and you grab you know, you're
supposed to grab one newspaper. Whatever kept you from grabbing
like all the newspapers general stability just honestly, I mean,
what would you do with more newspapers? And I know
exactly right, I guess trying to start selling them again.
But one of our neighbors somehow got their hands on
one of those, and now this thing is packed full
(27:14):
of different puzzles and so it's just a fun freeway
to entertain yourself without paying for cable, without paying for
streaming services. Uh and so, And obviously, dude, you know
we're talking about like entertaining ourselves. How about vacations and travel?
If things get tough financially, it is crucial to put
spending on fun stuff like that summer trip on hold,
even though you've been itching to go on a trip, right,
(27:35):
So we would recommend for you to remove leisure travel
from your bare bones budget and make sure too that
you don't fall into the sunk cost fallacy because you
might think, well, shoot, I've already got a deposit down
on this place. If I don't go, I'm gonna lose
that deposit. Uh. And here's the thing, it doesn't really matter,
because if you don't have the money to actually go
on that vacation, then it might be worth losing that deposit. Right.
(27:56):
Hopefully you're able to get all of your money back,
but even losing out on like fifth percent of the
cost of a trip might be worth doing if that
keeps you from spending additional money that you wouldn't spend
were you to stay home. And so the sunk cost
fallacy comes into play because you think, well, I've got
money invested into that trip, I need to see it through.
But that's not the case if you can't afford it. Yeah,
those are hard words, but I think they're true words. Yeah,
(28:18):
I think it's important to put stuff like that on
hold if you're in a tough spot. And Matt. Another
thing I think that definitely does not make the bare
bones budget is clothing. I'd say that, you know, maybe
thrift store purchases only, and because you can get stuff,
they're pretty cheat. But on a bare bones budget, you
should be able to have this line at him at
zero and just wear stuff you already own, unless your
(28:39):
socks are getting so holy that I mean, like evidently
years were, like they're so bad that you couldn't wear
them anymore. They weren't, But I also wasn't on a
bare bones budget, and I could afford some new socks, right,
But in the bare bones budget, I'm not buying the
semi nice socks that I like, you're not buying your
bombs exactly. They're they're off the table, right. The one
exception might be getting close for your kids, but still
(29:01):
you should be able to go without that for a time.
You know, keep clothes out of the bare bones budget
all together. If you gotta pull the trigger and start
using it, there's just no reason to be spending on
clothes in that situation, and I think that's an instance
where you can look to your community, right, dude. Recently
we had two families donate us some clothes, uh, multiple
large trash bags full of clothes because their daughters are
(29:22):
older than our oldest. And what that meant for us
was a ton of free clothes. Man. The girls loved
it because they're just kind of sitting there, like, you know,
flipping through all these clothes and like, I'm gonna keep this.
I wanna keep this. Kate loved it because she didn't
have to go to the store. She didn't have to
like order stuff you know online, have a ship. If
it doesn't fit, she has to ship it back. And
then of course it was good for the budget because
that junk was free. Yeah. Hand me down clothes are
(29:42):
the best, absolutely. Uh. And you know, we already kind
of touched on the entertainment, but you know, I'm thinking
of like concerts and movies like that kind of thing
as well. We've all seen how we can get by
without those over the you know, the past year and
a half. Again, it's not ideal, maybe it's have no
entertainment funds in your normal budget, but this is again
we're we're looking to how we can pare down our
budget in the most extreme way. And let's also talk
(30:05):
about like self care. You know, I think a gym
membership is something that a lot of folks have also
learned that they can do without over the past year.
Push ups at home, baby dudes that in the kettlebell.
Folks don't want to hear me talk about that. I
talked about that enough, but a lot of folks are
working out at home. If you're having a tough time
with your money, but if you're not eliminating that like
thirty bucks up to two looking looking at you cross
(30:28):
CrossFit folks pay a lot of money for that accountability.
I mean essentially, that's what it is. It's accountability, and
I get it, But man, is there not a way
that you can get more affordable accountability? Well, I will say,
you know, if that's in your normal budget and you
love it, I don't care. That's fine. Like I don't
mind if you're spending. I think the first time I
heard a friend was joining CrossFit and they told me
(30:48):
how much it was, I almost puked, Like I was like,
that's really I guess I'm gonna open across bit Jim like,
that's definitely the business I'm getting into. But I was like,
that doesn't make any sense to me. But the more
I've heard people talk about it, it does make sense
to me. And it is kind of a community based thing.
I get it. But in your bare bones budget, sorry,
you're gonna have to hang out with those people like
on your front porch or at your house, So you're
(31:10):
not gonna work out with them at two hundred bucks
a month. Yeah, dude, hanging out outside, going hiking with friends,
like hanging out on the front porch, like playing games
that you already have. These are all great alternatives, you know,
to entertainment that's gonna cost you money, but you know
with like gym memberships, like that's something you can do
at home and even other self care, you know. Again,
Like one of the other things I feel like folks
learn from the pandemic is that like, Okay, I can
actually cut my hair at home. Maybe it's not pretty,
(31:32):
it wasn't pretty the first time, but like, I bet
you learned a lot after that first haircut. You learned
how to make it look pretty good. I've been cut
my own hair for I don't even know how long,
but it's something you you get used to in the
and dude, the money that I've saved has compounded, let
me tell you, over the years of not having to
pay for a haircut. So that's were thousands in your
roth ira and it's tens of thousands, maybe will be
a lot. All right, Well, yeah, I think to one
(31:55):
of the great things. Again, we're not telling people to
to create this bare bones budget and start living according
to it now, right. It really is this exercise that
can be a confidence builder, that can reveal some of
the spending choices that are easily changeable in your life,
that you feel like are immovable. But once you've created
this bare bones budget, once you've got it alongside the
(32:17):
budget that you're using right now every single month, you're
gonna notice there are a lot of differences. There's gonna
be one big difference, right, the number that is coming
out of your accounts every month to pay for your
monthly expenses. We'll talk more about that and how a
bare bones budget can be implemented into your life, not
just in the case of an emergency. Will hit that
right after this break, al Rachel, we are back to
(32:48):
the break and you know, we've been talking about what's
it include in your bare bones budget? What you definitely
should not include, like basically anything that we didn't mention
in that first little section as far as like the
you know, the bare essentials, like everything else you can
kind of, you know, cut from your budget. What about
my Gulf Stream matt, like my my private airplane, your
helicopter membership, Yeah, that also has to go. Did you
(33:08):
have you ever heard of those? There's these things where
you can pay to be a member and you can
kind of get airlifted from I don't know if this
is something that died out like years ago, but I
remember seeing that one time and thinking, holy crap. There
are people who you know, are essentially have like a
gym membership, but it's like Uber for helicopters. Who's got
that kind of money? Elon Musk, I'm sure, you know,
call up a helicopter whatever he wants. But uh, you know,
(33:30):
before we're gonna talk through some additional benefits of creating
one of these bare bones budgets, but I wanted to
mention some of the different tools that you can use
if you're not already budgeting, if you're want to go
more analog. You can you can be like me and
kind of copy and paste your expenses over into an
Excel sheet. I've got uh over a decade's worth of
budgets that I you know, I could go back and
(33:50):
look at my expenses, but I don't. It's not like
I reminisce, oh, you know what I spent in June
of two thousand and seven, but I could. But for
both normal folks, you can check out mints uh win
nap or you need a budget that's a totally great
app that you can use. And so once you've kind
of paired that thing back, once you know how little
it actually takes for you to survive, and you've got
(34:12):
you know, this small, hopefully smaller number than what you
normally have flowing out of your account, you might be
wondering when should I actually implement this uh And we
think that there are a couple instances where you might
put this to use. You can switch over to a
bare bones budget, maybe because of an unexpected job loss.
We kind of touch on this earlier, but that's absolutely
a case when you're gonna wanna like, you know, like
(34:32):
we said, flip the switch. It's almost like you're operating
on like safe mode when you're booting up your computer
because there's a virus or or something that's attacking it.
You know, you want to make sure that you can
do the bare essentials, but everything else kind of falls
by the wayside. That's kind of the primary reason that
you'd want to switch to a bare bones budget. But
you can also go bare bones if you're looking to
accelerate your ability to achieve a financial goal, like maybe
you're paying off a massive amount of credit card debt.
(34:54):
If that's the case, then you're gonna stick with that
bare bones budget for however long it takes too crush
that goal. Yeah, I think either you do it, like
you said, out of necessity, right, you need this. You
need to live on the bare bones budget in order
to be able to make your money stretched further until
you can get through whatever, you know, difficult circumstances have
presented themselves, or also to you kind of impose it
(35:16):
on yourself on purpose in order to achieve something in
the short term. I think you know one other way
maybe people might use it. Some people in the financial
independence community might essentially be living on a bare bones
budget because they're trying to retire in five or ten
years or something like that, and that's that's their higher
goal that they're trying trying to achieve. Right, So it's
not necessarily credit card debt, but it's a certain lifestyle
(35:37):
in their case to maybe step away from a job. True.
I think, you know, it might be demoralizing though, to
try to do a bare bones budget for five or
ten years, Like that's a really really long time to
try to adhere to that and to cut back you're
spending to that extreme, although it is possible if that
is your greater goal and if you feel like you
can actually handle it, yeah, man. And you know, the
(35:57):
additional benefit of having a barebone budget is that you
get to see that you truly have power and control
over the amount of spending in your life. You know, like,
like we might think that it takes a certain amount
of income for us to survive, but really we're just
making ourselves subservient to that assumption. Right. It's important to
know that we have control over our lives and we
(36:18):
definitely have control over the things that we we spend
our hard earned money on. It makes me think of like, like,
you know, if you're subscribed to Netflix, you know this
isn't the second time does It's come up as an
example and you're not really watching anything on Netflix, and
maybe you say to yourself, Oh, well, like I'm still subscribed.
I'm just gonna kind of let that keep billing me.
Like no, Like, why would you do that. You wouldn't
do that. You would make changes. You have control over
(36:39):
your spending. We have control over the direction of our lives,
and I think it's easier to kind of keep doing
what we've been doing rather than making those changes and
rather pivot towards something either unknown or something different, or
something that might be just a little more difficult. It's
easier for us to not ask any questions and continue
plotting on Yeah, I think to Matt, when you see
the difference in your normal budget versus the bare bones budget,
(37:03):
when you see how big of a chunk you can cut,
Just like that, you're able to visualize the changes that
you can implement in your personal finances just by doing
this exercise. And I feel like that sense of independence
that you get by doing this can weave its ways
into other parts of your life. Right now, you might
be empowered to ask for a bigger raise. It work,
then you might otherwise do because you need the job.
(37:25):
If you're like, you know what, I can cut four
out of my month tomorrow if I need to, I
feel like I can ask my boss for a raise
and not feel bad about it. That that's definitely one
of the side effects that is possible. I think when
you create a bare bones budget right also to like,
you might realize that you can invest more of your
income than you previously thought. You thought maxing out a
roth ira that's just for other people. Well, you know what,
(37:46):
maybe it's not. Maybe it's for you. Maybe creating a
bare bones budget helps you realize how much waste there
actually was in the budget you've been using, and you
can come back a few of those things. You don't
have to you have to cut everything. You don't have
to go all the way down to using that bare
bones budget. But it does help you realize that there
are things that you can cut pretty easily that don't
(38:06):
make that big of a difference, and you can start
investing more for your future. So yeah, I think the
bare bones budget exercise goes way beyond just creating this
piece of paper that you're hoping you never have to
use or implement. Putting together the bare bones budget goes
beyond just having this backup in case the worst possible
thing where to happen. Although though it is good for
(38:27):
that reason, it can be empowering in all these other
ways of your personal finances. Yeah. Yeah, and you're saving
and what you invest in, dude, Like, I feel like
the discipline that we gain by taking control of our
spending like that can apply that like that can bleed
into other areas of our life, right like. It makes
me think of just like getting fits and like controlling, um,
how much you eat, how much you exercise, Like these
(38:48):
are all things that we have control over, even like
our relationships, Like within our social circles, we can initiate
hanging out with a friend that we haven't seen in
a while. You know, these are all areas in a
life that could benefit from this crossover of of discipline
that could result from cutting back on your expenses. It
seems crazy to say that, right like that, just simply
(39:10):
by seeing that, oh, I truly could live on a
third of what my current monthly budget is, which, by
the way, dude, so I kind of crunched the numbers
and I won't give specifics, but our bare bones budget
is about a third of what we currently live on.
It's incredible and that crazy, which means that two thirds
of it is basically lifestyle clove. It's seriously and that's okay,
(39:32):
but it's just good to see that. Wow, if it
came to it, we really could cut back a lot.
And so regardless of which area in your life you're
looking at, and obviously we're focusing here primarily on finances,
but it can affect a lot of the different areas
in your life. Yeah, for sure. And I think to
a lot of people in all likelihood might decide to
use the bare bones budget to inform their current budget
(39:53):
to come up with something like and in between budget,
right like maybe maybe mad after that you say, wow,
you cut that much, Well, you know, maybe I can
have a monthly budget somewhere in between if you have
other goals that you're looking to accomplish, If you're thinking
you have to subscribe to like one or the other, like,
that's a false dichotomy, right Like, Like, there's there's plenty
of spots in the middle that you can go with exactly.
(40:13):
I feel like, yeah, seeing the difference in what you're
currently spending versus what you could get by on could
help you realize, like how big this gap is. Seeing
the difference in what you're currently spending versus what you
could get by on can help you realize how big
of a gap you can actually have between what's coming
in and what's going out. You know, you might be
able to even a chief financial independence earlier than you
(40:34):
thought by letting that bare bones budget, not not by
living on that bare bones budget for a decade, but
by letting it at least inform your normal budget to
a larger extent in the here and now. I mean
it also like when you're looking at it from an
emergency fund standpoints, when you know that you can pare
down your budget to maybe a third of of what
it currently is, that's empowering. I get a lot of
(40:56):
confidence knowing that our emergency fund, we could actually stretch
that out for much much further. And so you know,
and a fully funded emergency fund that normally would be
around three to six months worth of expenses might in
fact translate more into maybe six to twelve months worth
of expenses. And so I don't think I'm alone and
and gaining some peace of mind from that, especially, Dude,
you know, being self employed when our income varies significantly,
(41:20):
it's nice to know that we, you know, can have
enough set aside to allow us to even out those
annual expenses, those ups and downs, no doubt. So it's
a helpful exercise for everyone out there. Even if in
the end you decide I'm sticking to my normal budget
as is not changing a thing. Having that bare bones
budget is going to provide peace of mind and some empowerment,
(41:41):
I think in your corner. All right, Matt, let's get
back to the beer that we had on this episode.
We have not yet cut it out of our budget.
We're still enjoying good craft here, that is true. But yeah,
this one was called Ethereal Vibrations. It's an I p
A from two of our favorite breweries, Monday Night Brewing
and Burial Brewing. What what were your thoughts on this
delicious beer? Man, Yeah, this is a double New England
I p A uh And dude, this has all the
(42:03):
different flavors I'm looking for in a New England hazy
I p A uh. It poured a super hazy orange color.
It's got all the kind of floral notes uh as
well as all the hoppy dankness that you would come
to expect from some I p A S from both
of these breweries. Like, I don't feel like there's anything
stand out about it except that it was just flat
out delicious and amazing. Like there wasn't anything like super
(42:26):
unique about it. But when I think about a double
New England I p A, this is one, uh what
I'm picturing or what I'm imagining myself tasting. Yeah, I
feel like to make an NBA comparison, I feel like
Monday Night and Burial, you know, combining forces would be
like Lebron uh, Colin Steph curry up and being like
come over and play playing the Lakers with me? Like
can you imagine what that team would be like? Like
(42:47):
how they would demolish people. The beer was delicious. It
was just like blend, I think perfect blend of like
bitter and sweet. It was juicy and delicious. I don't
know how descriptive I can get beyond that. It was
just it was just a really good example of the style.
They crushed it on this one. Yeah, it's not one
of these I pas where there's like a bunch of adjuncts,
which means like they're adding different ingredients or just kind
(43:08):
of doing a random fruits yeah, or like a weird
process that they're participating in. This was just a really
good all Star of New England. I p A and
glad that you and I got to share this one
on the show, but me too. Man. All right, well,
that's gonna do it for this episode. For folks that
want the show notes for this episode links to anything
and everything we mentioned, we'll put those up on our
website at how to money dot com. That's right, And
(43:30):
if you've been listening to the show, and if you
have not yet left us a review over at Apple Podcasts,
we would love it if you did that. That helps
us to get the word out. It helps others to
find the show who haven't yet found it, and so
we would appreciate that over at Apple Podcasts or wherever
it is that you listen to your shows. And so Joel,
that's gonna be it, buddy for this episode. Until next time,
(43:51):
Best Friends Out, Best Friends Out. M
Welcome to How the Money. I'm Joel and I am Matt,
and today we're discussing why you need a bare bones budget,
(00:25):
you know, bare bones budget. It's got that BBB action
going on. It's some nice alliteration for our listeners today,
like the better business here. Okay, So here is what
this episode makes me think of. You know, when, uh,
you start acquiring items for your closet, like your wardrobe,
and you kind of just add another hanger in there,
and you're like, oh, you know, I ran out of hangers.
Let's let's buy another pack of hangers, and you start
filling your closet. It starts bulging. Uh, it's about the
(00:47):
bust at the seams. I feel like our budgets can
act that way, right, Like, over time, as we add
line items to our budget, it can start to swell.
Maybe now that we're you know, we've got a legit job.
Maybe you go on like a vacation every year with
your friends or something like that. Or maybe you like clothing,
like that's something that you really value, or maybe you
really like electronics. It's okay to spend money on the
(01:08):
things that you enjoy, the things that bring you value.
But the effect that has on our budget is it
it starts getting kind of kind of thick, it gets
a little bit plump. And so with this episode where
we want to introduce this idea of essentially like a
thought experiment for folks, right, we want folks to think
through what what happened if you were to pare down
your budget to the bare essentials. Yeah, we're not gonna
(01:29):
force you to create and then adhere to this bare
bones budget, but we do think there's a whole lot
that could be gained by by just trying it out
and seeing what happens by at least creating one. And
so we're gonna talk about how you do that and
what you're gonna gain by doing that in today. So
there's a lot of benefits from partaking in this exercise,
no doubt. Before we get to that, Mat, I want
to quickly mention listener Holly send us an email and
(01:51):
she had mentioned this app that I hadn't heard about,
and I feel like we had to look into it
called Giveling, And it's just like student loan app or
people come together, they play trivia games and sometimes they
pay money to play more trivia games. And so if
they can they can move up the standings in order
to win a big prize to help pay off their
student loans. And yeah, I mean I know you took
(02:13):
a look at this too. Yeah, what would you think
about it? Dude? Yeah, it seemed a little too good
to be true because one of the things they say
is that once you get to the number one spot,
you're eligible for the for the grand prize, which is
a fifty dollar student loan payoff, which you know, to
anybody who has a bunch of student loans is like,
that's that's music to mynors exactly. And here's the thing, dude,
I was. I was almost even hesitant for us to
even talk about it because I don't want people to
(02:34):
get the idea that this is something that they need
to do, because there are some serious red flags, right
Because you're able to move up that queue by acquiring
I think what they call queue points, and you do
that by you can answer trivia, you can watch ads
within the app. You can also make purchases like from
their uh just different companies that they've partnered with, and
(02:55):
also by referring people from reading up on it. Those
are all ways that you can get closer to that
kind of in prize, but specifically that last way of
getting points referrals. Dude, that's the part of this that
makes me feel like that this is more of a
pyramid scheme than anything else, right, because essentially they are
counting on the additional people that are coming in in
order to pay off the prizes for the folks at
(03:18):
the top, right, And anytime you have any sort of
model like that that's dependent on the acquisition of more
customers in order to be successful, because there isn't truly
an actual product. It makes me feel that at some
point if there are not enough folks kind of at
that base of the pyramid, you know what happens that
the pyramid essentially gets inverted, and so you've got a
fewer number of people at the bottom paying into it.
(03:40):
You've got a lot of people invested who are waiting
for that big payout at the top and exactly and
it's going to fail. Um. And so something like this,
you can have so many people who are invested, like
literally invested. The uh we can link to an article
that we came across, but there's folks who have paid
in thousands of dollars and there's nothing really keeping a
company like this from from going bankrupt next year or
(04:00):
like tomorrow, right, Yeah, I think it is. It's one
of those things where people get excited to think that
they can win a big sum of money that would
help them in a massive way, maybe pay off all
their student loans or at least pay off a huge
chunk of it. But it's kind of like the lottery
in my opinion. It might be a pyramid scheme. I'm
not sure, but it definitely has some lottery feel to it.
And they get you in there and you start to
(04:21):
pay money so you can continue to move up this leaderboard,
making you think you have a greater chance of winning
a big chunk of money that's going to help you
in a big way. And I think, yeah, there are
certain freeways that you can participate in this app where
you don't have to spend a time, and I would say, like,
even be careful doing that, because I think, um, it
might get you in the mental state where you're more
willing to part with some of your money to try
(04:42):
to move up and and to try to win some cash.
And I think the likelihood that's gonna happen for you
is is skim just like winning the lottery. So so
I would say, yeah, avoid gibbling, and I think it's
an app that doesn't make sense for for almost anybody. Yeah,
the free aspects of it we don't have any problems with.
But like you said, it's like they probably the hump
a little bit and it gets you ready to pay
a little bit more money into it. Uh, And specifically
(05:04):
because it's the leaderboard, Like I think that's the part
of it that that the gamification of this, and I
get it, like I understand how it's kind of fun,
but essentially there's the expectation that at some point you're
going to reach the top, right with a lottery, when
when folks you know, play the lottery, they know that
there's a slim chance of them getting any money, right. Uh,
there's not a leaderboard where it's like, Okay, eventually, if
I work hard enough, I will I will achieve it.
(05:27):
It's it's chance. And so there's in my mind, there's
a huge difference between working towards something where you're expected
to pay out versus you know, one and I don't know,
ten million chance of winning the lottery or something like that,
where there's a huge payout. Yeah, And gamification we think
can be a really healthy and good part of personal finance.
Right that we've talked about that before on the episode.
There are ways that you can gamify your own personal
finances that are going to help you in your pursuit
(05:49):
of saving more and building wealth. This is a way
that's like praying on that behavioral tendency, that allure of
gamification that's actually gonna part you from your money. So, yeah,
don't participates games with friends that could cost you thousands
of topics. Right, Well, so, all right, Matt, let's mention
the beer that we're having on the show today. This
one's called Ethereal Vibrations by Monday Night Brewing, one of
(06:09):
our favorite local breweries, and they collapsed with Burial out
of Asheville to make this really good looking I p
am looking forward to having this one on the show
today with you. Yeah, it's hard to go wrong when
you've got one of your favorite local breweries teaming up
with one of your favorite national breweries to make a
delicious beer. Looking forward to enjoying this one on the show, Dude,
me too, alright, But for now, onto the subject at
the hand, Why you need a bear bones budget that's
(06:31):
what we're talking about today. And Matt, I don't know
if you've seen this show. There's a there's a History
Channel show called Alone. Have you seen it? I'm not okay?
So basically sounds like your worst nightmare, though it does.
I like people, I would be sad. I would probably
deal okay with it. You probably would. Uh. But basically
what happens is that the folks are allowed to bring
ten items with them as they're dropped off in this
(06:51):
remote section of the wilderness to survive a monks like bears, bobcats,
other various treachery um. But yeah, so like ten people,
they're competing gainst each other to see who can stay
out there the longest, whether it's like thirty days, forty days,
Like how long can you be out there? And you
don't know how everyone else is doing. You're just trying
to survive. And like the idea of doing that with
(07:12):
only ten items, with like bare bones resources makes the
show so much more interesting than if those folks were
able to bring any or all of their possessions with them,
right like, um, like, I'm thinking of dropping them in
the woods with a tiny house and a wood burning
stove and like it's like not as not this interesting
of the show, I'd pay to go there, yes, Like
(07:32):
like that's what's on the first page of Airbnb right now.
It's just like, you know, these secluded cabins in the
woods with the wood burning stuff, right, and maybe an
Xbox or something, yeah, solar panels, it's all it's all
set ready to go. Yeah, and I'm just thinking, like,
not a very fun TV show to watch the dude
play Xbox in the woods, right, But like seeing what
people can do with limited resources, it's actually kind of
fascinating and for some of the individuals who have gone
(07:54):
on the show, even if they don't win, it seems
like it can be like this meaningful and empowering experience. Well,
we think that having a bare bones budget, it's not
gonna make you the next Bear Grills. You know, you're
not gonna be able to survive in the wilderness for
months on end, like sleeping inside dead animals. I think
I saw him do that once. Dude, he does a
weird stuff that's a that's a Star Wars reference. Yeah,
I guess that's true too, But he is he's impressive, man.
(08:15):
But we do believe that having you know one of
these bare bones budgets in your back pocket is necessary,
it's helpful, and it can be powerful in the case
of an emergency popping up. Yeah. Essentially, we we think
that having a bare bones budget uh is about prioritizing
your needs, not your ones, right, so it reflects only
those most essential monthly expenses, and having one comes in
(08:37):
handy in a lot of ways. So, for instance, you
may feel trapped working in a high paying job that
you hate, but because the pay or the benefits are
so good and you need that income, you're stuck, or
at least you you feel like you're stuck. Maybe you
don't get treated as well as you should, or the
hours or the demands of that job are overwhelming. You're
not going to be left with many options if you
(08:58):
don't think you can seriously downsize your budget, and so
creating that bare bones budget can help you to see
the path to exit that job, even if you don't
have a new one lined up yet um Or maybe
it can even help you to realize that you can
take a job or a position that pays less because
your finances are still gonna be okay. It's essentially about
giving you options flexibility and the freedom to act in
(09:20):
ways that you want to act. That's right, Yeah, And
so I guess, like, who is a bare bones budget for.
We would say that it's for everyone, that everyone should
really attempt this experiment, right. Uh. Even if you love
your job, there's no guarantee that your employer keeps you
around as long as you'd like to stick around. So
some people might be like, but I really like what
I'm doing. I probably don't need a bare bones budget
(09:41):
because I plan on working, you know, here for a
long time. But you know what if your employer goes
through a rough patch, or the economy in general goes
through a rough patch, and you don't have that job anymore. Right,
So we think it's important for for everyone. You know,
I personally have seen the difficulties that unexpected employment can
create firsthand, and it's not pretty. I would say to
having that bare bones budget on hand before an awful
(10:04):
event like that happens to you can help you whether
the storm much better than you'd otherwise be able to.
It's so much harder to try and slash expenses when
you're in the midst of the emotional and financial turmoil
that you're going through in the aftermath of something like
a furlough, a job loss, or a reduction in hours.
Trying to get your budget in order and pare it
down in the middle of the emergency is overwhelming. So
(10:28):
that's why we woulsly just getting this bare bones budget
done now, and it can be a helpful resource for
you in the future if you need it. Yeah, dude,
rarely do we think that the worst things are gonna
happen to us. But it's good to start thinking about
these things ahead of time. It actually makes me think of, uh,
have you ever changed a tire like on your car?
I have, it's been a while. Most people haven't done it,
but if they already get a flat tired, they've never
(10:49):
done it, and so it's like they're stuck in the
position of being like, Okay, wait, do I have a
spare tire like on this vehicle? Where is it? How
do I go about it? You know? Should I put
the parking brake on? Yes, it's gonna be really important
that you do that. I even have a jack in
my car, like, and so there's all these things, and
I mean, honestly, it sounds a little bit like prepping,
but it's just thinking through the worst case scenario a
(11:10):
little bit and making sure that you're familiar with what
you're gonna need to do if that situation ever arises.
I feel like that's a part of the reason why
we're recommending for folks to start thinking about this ahead
of time. The bare bones budget. It's almost like a
fire escape plan that you had to come up with
an elementary school, you know. I remember, my folks, like
you remember back in the nineties, there's those ladders, like
if you had a bedroom in the second floor, you're
(11:31):
supposed to get one of those ladders that you can like,
you know, roll out the window so you can escape.
I tried to, you know, tell my parents that we
needed one of these things, because like I think every
elementary school kid did. Um and I feel like they
didn't love because we never got that. Okay, so my
bedroom was there was actually this column outside my bedroom window,
and we never got one of those things. But I
remember thinking, Okay, well, you can slide down that. Yeah.
(11:52):
Remember I remember thinking, well, at least I bet I
could jump out my window, grab onto that and just
kind of slide down like fireman post. But I mean,
in the same thing, just even as adults. If you
work in uh an office building or an office park,
you know, like once a year you have a fire
drill and everybody goes out to the parking deck or
the parking lot. Hopefully they have the ice cream truck
there where everyone gets the free ice cream, that kind
of thing, And it always kind of seems silly for
(12:13):
adults to be doing that, but it was an important
thing to do to make sure that we knew where
to go, knew how to get out of the building
in case there was a fire. It's not likely to happen,
but planning for the worst is still a good idea.
And in regards to your budget, knowing that you will
you know that you have this bare bones budget made,
and then just being able to just easily flip the
switch in an instant to spending a good bit less
(12:34):
than you currently are. This just offers some peace of mind,
you know, And it's truly helpful if you find yourself
in a precarious financial spot just down the road. Yeah,
so I'm mad, I'm an optimist. You know this about me?
That's true. Maybe maybe to a fault, might say and
I'm I might even say that I don't know and
I'm a realist. I'm more the prepper type. Yea, I
know exactly where the jack is on my van, you
(12:55):
know where yours is? Yes? Yeah, okay, I do so. Yeah.
It's I gotta say, like, I think it's good to
be an optimist. I think hoping for the best is
a really good thing. But we would say, and I
would say, even as an optimist, budgeting like a pessimist
and planning for the worst, it's just a smart thing
to do, right, um, And that that doesn't mean that
you can't have a normal, healthy budget where you use
(13:17):
up all of your money every month, right, with hopefully
a healthy amount headed towards savings and investing goals. But
it does mean that you should at least have this
bare bones budget in case you need it. Right. It's
the budget equivalent, I would say, of an emergency fund.
You you're hoping to never have to use it, but
having it is clutch, right if the worst were to happen,
if job loss does occur. I think both of those
(13:40):
things actually work really well in tandem, right if something
hard does come along da. Plus, having that bare bones
budget can also be a confidence builder, right if you've
got a solid emergency fund and a bare bones budget
that's far less than your normal monthly budget. It can
really boost the assurance right that your your finances are
going to be okay no matter what. It can be
(14:01):
an eye opening experience to realize that you actually can
live on far less than you might have previously thought,
because you know, like fearly unknown that is such a
real thing, especially when it comes from money. But the
bare bones budget can just bring some concrete reality to
quell some of those fears. You don't have to stay
awake at night wondering like, well, what happens if I
lose my job? Like what if I'm riding my bike
and I fall off and I break my arm and
(14:22):
I can't go to work or you know, I guess
I can still talk you and I can continue to podcast.
Like then you start thinking, well, do I need accident
you know, income replacement insurance, and you know, do I
need affleck? Like no, Like, we wouldn't point you in
that direction, but we do think that this is a
really valuable step to making sure that you've got that
peace of mind. We want you to know that you
would have options, yeah, that you're gonna be okay in
(14:43):
the event of an emergency and the fund and the
bare bones budget simultaneously is really going to provide I
think a lot of that peace of mind. It's like
a nice one to punch. Yeah, for sure. I think
to Matt, this exercise of creating a barre bones budget,
we're gonna talk about how to get there in just
a second. It might present some helpful questions about the
expenses that are in your current budget too. I think
this is a healthy exercise to realize that the expenses
(15:06):
in your life they're not fixed. I mean, some of
them are, we're gonna talk about that, but many of
them are actually just spending choices that we've made, and
we all make them. Uh yeah, this lifestyle. Yeah, and
there are some things obviously, like we think it's okay,
and it's actually good to prioritize certain expenses in your
life that others might think are crazy, purely because you
(15:28):
love them and you enjoy them. Your fancy socks, like
my fancy socks. Yeah, I don't know, I like my socks.
It's I mean, that's a lifestyle thing. You think. You know,
I'm a I'm an adult now, I'm not gonna wear
socks that have holes in them, whereas I am cheap
in that way, like I don't care man like, so
in my mind, I don't call it cheap. It's frugal,
Like I am willing to have socks with holes in
them because I don't care. But then, of course I
(15:49):
spend money on other things that you would you know,
you might think are foolish, like I got this new
bike bag that I can wear around town, or we know,
while I'm running my bike fancy like my old one.
It totally still carries off, it contains things. It's just
that I kind of I wanted one that was updated,
that looked a little more sleek. Yeah, but I think
that's pies. I know we have different priorities and that's okay,
But I think like, as we go through this exercise,
(16:10):
it's good to point some of those things out, and
it's good to realize that some of the things that
are currently in your budget they are there because of
choice and not because of necessity, and creating a bare
bones budget figuring out the minimum amount that you could
live on, can be a helpful mindset shift in how
you think about the money that's going out of your
account every single month. So We're gonna talk more about
(16:32):
what's included in a bare bones budget and how to
create one, and we'll get to that right after this.
All right, dude, we are back and we just covered
all the different reasons why it is that we should
all have a bare bones budget, uh, in our lives.
(16:53):
And so now let's talk about what is actually in
a bare bones budget. At the top of the list.
We're gonna put beer because beer is the essential to life.
Uh No, actually it's not right. I mean, water is
virtually free, and if it came to it, I would
be willing to pair back how much I'm spinning on
beer if I was in a tight spot, wouldn't you? Yeah,
I totally would. And I also think that would be
(17:15):
one of the last things I cut, definitely when I
made my beer bones budget. Beer was not a part
of that, because it should not be a part of
your bearer bones. But that's not what it's for. That
This exercise is literally for like, how a little amount
of money can you live? That is true. Yeah, We're
we're looking at the essentials. Uh. And again, this isn't
the budget that you're hoping to ever have to use,
And so we want you to slash to the point
(17:35):
to where it starts to hurt, you know. And so
let's talk about some of the different categories that will
make the cut, let's talk about which ones won't make
the cut. And as we do this, I think it
can be helpful to think about Maslow's hierarchy of needs
here as we discuss the basic needs that it actually
takes for us to survive. Uh So, Jill, you want
to kick it off food obviously the basic need that
we all have, right, But well, we don't all have
(17:57):
as a basic need to survive Chipotle or like Chick
fil a or whatever fast food or whatever food in
general that that you enjoy. Like, in all likelihood, you're
going to need to, and you should, in this bare
bones budget exercise, pare down your food budget. Your current
budget might include eating out and fancy cheeses at the
(18:18):
grocery store, maybe some fine craft beers, but the bare
bones budget shouldn't include any of those things. You know,
we're not expecting you to survive on bread and water alone.
That's not healthy. But I guess if you're in that
show alone on the History Channel, maybe that's what you're
doing it. If you can't kill a critter that night
to roast over and open flame. Maybe, but uh yeah,
rice and beans are tons of protein and fiber basically
(18:40):
stripped down your food budget to what you can actually
get by on without all the extras, without all the fluff,
without all the niceties. Uh. It's helpful knowledge to have
on hand to know how low you can actually get
your grocery budget if you needed to. Yeah, dude, seriously, like,
like you mentioned rice and beans and like it, I
don't know, it can kind of be a rallying cry
of certain folks who are like trying to get out
of debt. But there's a good reason why, and that's
(19:01):
because there, I mean, you can get a lot of
protein for rice and beans. I guess it's specifically the beans,
but like the combination of those two foods together, Like
you don't have to buy some fancy protein, you know,
you don't have to get the fresh Alaskan salmon that's
never been frozen. There are other ways to make sure
that you're getting the nutrients you need. And so we're
going to go from food to shelter because this is
one that everyone needs. This is one that's usually not
(19:24):
going to change honestly from your regular budget. So are
you gonna suggest that people should pitch a tent in
the woods near where they live. Is that all that
can make the cut in the bare butt? I mean
they could, but most people aren't gonna do that, right, Like,
that's not the position that most of us are in. Um.
But you know, if you are nearing the end of
your lease, maybe moving to a smaller place, smaller home
or smaller apartment, that might make sense, uh, if your
(19:44):
financial situation has changed, but you can't, you know, really
change the reality of your current monthly you know, housing
expenses in most cases. And so as you're putting together
your bare bones budget, you're probably going to transfer this
lime at him uh, pretty much directly from your regular budget.
Although it's it is importan and to point out though,
that we do have control to a certain extent of
how much our housing costs, right because your mortgage payment
(20:06):
isn't going to change, but the amount that you're paying
towards that mortgage payment can change. Uh. Maybe you've got
an extra bedroom and you've got that room set aside
for friends who might come to visit place for them
to crash. Now it's set aside for strangers. Well now
as yeah, it's a set aside for a roommates. And
so if you're able to all of a sudden realize that,
like wait a minute, like I've got this extra room,
maybe I've got two extra rooms, I can get two
additional roommates who would gladly pay four hundred dollars a month,
(20:29):
you know, just just for their own small room. Uh,
you get two of those rooms set up, you're bringing
eight hundred bucks a month. That could offset a mortgage
in a significant way. And so it's worth pointing out
that you're probably not going to sell your house just
because you're having maybe a tough time with your finances.
But there are other smaller moves that you can make
without putting your your house on the market, right, Like
get some roommates. That's definitely a way that you can
(20:50):
bring down your your housing costs. And you don't have
to go live in a van down by the river either.
Like that. It is true, it's an option, I guess,
but I'm not sure that the legalities of that probably
depends on your local municipality. I shouldn't do that. Rest
in peace, Chris Farley, I love that guy. He is
a good one. I think another thing that obviously needs
to enter into your bare bones budget is utilities associated
(21:11):
with you know, your shelter utilities aren't a fixed cost,
but they are largely fixed right. But at the same time,
we do think that you can trim this back slightly
from your normal budget, maybe five. Just depends on how
much you're willing to sweat in the summer. You know,
if you just keep cranking that thermostat up, man, utilize
those fans, drink ice water. That's what he used to do.
(21:31):
I gotta say, seventy eight degrees in summer is is
what I feel like should be. Okay, and and uh my,
my wife might disagree. But then you, I think you
can pull it down to seventy six at times that
you need it if you're going below seventy six. Though
I don't. I don't even know who you are, man,
You're just living in luxury. And he said, how fancy
are you? Okay, here's the thing. I would much rather
keep it at seventy six seventy seven in the summer
(21:53):
and keep it cool, uh, and then keep it really
cold in the winter. I would be much more willing
to take it to the extreme in the winter and
drop it down to like fifty nine or six, which
I've done before. My in laws actually accused me one time.
They were like, no, I swear you know, like after
katting I got married and back when we were super cheap.
They're like, one time, like when we were visiting, you
had your heats at a fifty seven and I was like,
I don't think so, that seems kind of crazy, and
(22:15):
they swear by it. So it sounds pretty close to
what you do. Though. Well, luckily things have changed a
little bit. I'm not nearly as as cheap and imposing
as I used to be. Dude. Let's talk about transportation,
because this is another area that can be hard to change,
especially if you hop over to that bare bones budget
because an emergency hits. It's hard to think about selling
a car in the middle of a difficult situation. It's
(22:36):
hard to hop out of a car payment or a
lease if you're in one, although there are ways of
doing so swap a lease, please, trainer. And so this
is a line item that probably needs to be a
part of your bare bones budget, but see if there
are ways for you to pair it down and another
piece of advice here is just to not necessarily buy
a car at the top end of your budget, right,
because you're buying that car and hopefully you're not financing it,
(23:00):
but if you are, you've got payments, and you've got
payments that go along with your budgets when everything is
going exactly as it should, you know, sort of the
best case scenario. And so I feel that this is
a good reason to have the vehicle that will obviously
work for you when things are going well, but one
that you can afford or one that you can support
when things are not going so well as well. Yeah,
(23:20):
that's right. So buying that car in cash is definitely
something we would recommend everyone. And that comes in handy
too when you're creating your bare bones budget. You like,
I could to my car, and I don't have a
matter what exactly, like at least the car's mind. You
can go sleep in that, like you said, by the river,
that's right. One of the things that definitely needs to
make your bare bones budget is your recurring monthly debt obligations. Right.
(23:42):
You can't stop paying your creditors if you lose your job,
so this definitely needs to be factored into Let's say
you do have credit card debt that you're working on
getting down student loan debt. Obviously, federal student loans have
been put on pause for the time being. Eventually those
are going to resume. You can't factor those out of
your bare bones budget that has to be there because
you're gonna need to continue to pay those payments every
(24:03):
single month, even if you've been put in difficult financial circumstances. Yeah,
but you, I mean, you bring up a good point though, too, right,
which is it's worth noting that we do have some
control over those those payments to a certain extent, just
like with with housing. There, you know, there might be
ways that you can modify the terms a little bit
so that you're paying less, right. I mean, there's a
national forbearance, you know, on on federal student loans, but
(24:24):
you can go to a specific lender and see if
you can get a forbearance so you can see if
you can get the loan extended or even a lower
interest rate. If you're looking at a credit card, right,
there are ways to potentially modify the terms of that debt.
And so while you don't want to necessarily count on that,
know that if you ever, do find yourself in an
in dire straits, you're looking to all the different types
of ways that you can reduce your expenses. And so, Joel,
(24:46):
maybe we left some stuff out, but we feel that
those are the basic requirements that we need in order
to survive in a in a modern world. Right, And
so let's talk about what doesn't make the cut. Right.
There are probably quite a few things that might be
in your normal budget that you don't want to give
u up in an ideal world, and that makes sense.
But the bare bones budget, dude, is not for ideal worlds.
(25:06):
It's for the world that you hope never comes into being.
So let's cover a number of different expenses that I
think maybe some folks might feel are necessary to life.
But we're gonna cover several of these to point out that,
in fact that they are not necessary. Yeah, man, I
feel like, you know, one of the things that that
needs to go quickly, and it's pretty easy actually to
cut off from your life is no cable or streaming
(25:26):
services in your bare bones budget. Even though over the
past year and a half it feels like that that
has been kind of like a non negotiable. You know,
people are like no gotta have gotta have a Netflix.
Maybe you're only saving grace having a couple of good
shows to watch, right, But we would say that, you know,
when worse comes to worse, living on that bare bones budget,
you can't be spending a dime towards those things. Instead,
you should be watching free stuff on the Roku channel
(25:49):
or a YouTube even. You know, when when you're in
bare bones budget territory. You know most of us have
like a digital antenna. There's a bunch of stuff you
can watch free over the air, that free HD content. Ag. Yeah,
it looks it looks good. It looks better HD over
you know, over air, it looks better than the stuff
they stream, right because it gets downgraded us. Right. I
don't know how the technology works, but I've been told that.
(26:11):
And maybe on the bare bones budget too, you go
from you know, watching stuff more frequently to reading more
because reading is essentially free to you. You can read
free stuff on the libby app. I use that all
the time. They're little free libraries in tons of neighborhoods,
uh near where you live. In all likelihood, man, I
think we've got so many just in our neighborhood alone.
Like people love the little free libraries in our part
(26:33):
of town. The number of little free libraries doubled during
the pandemic because it was just like a little I
don't know, I felt like it was a fun project
that maybe some households were like, oh, let's make one
of those and stick it, you know, at the sidewalk
in front of our house. There's one actually a couple
of blocks. Way. Have you seen the little free puzzle library.
I have seen that one. Ye. Yeah, Like they used
a like the old school newspaper. Uh, Like you stick
(26:54):
a quarter and push the button and it allows you
to open the door and you grab you know, you're
supposed to grab one newspaper. Whatever kept you from grabbing
like all the newspapers general stability just honestly, I mean,
what would you do with more newspapers? And I know
exactly right, I guess trying to start selling them again.
But one of our neighbors somehow got their hands on
one of those, and now this thing is packed full
(27:14):
of different puzzles and so it's just a fun freeway
to entertain yourself without paying for cable, without paying for
streaming services. Uh and so, And obviously, dude, you know
we're talking about like entertaining ourselves. How about vacations and travel?
If things get tough financially, it is crucial to put
spending on fun stuff like that summer trip on hold,
even though you've been itching to go on a trip, right,
(27:35):
So we would recommend for you to remove leisure travel
from your bare bones budget and make sure too that
you don't fall into the sunk cost fallacy because you
might think, well, shoot, I've already got a deposit down
on this place. If I don't go, I'm gonna lose
that deposit. Uh. And here's the thing, it doesn't really matter,
because if you don't have the money to actually go
on that vacation, then it might be worth losing that deposit. Right.
(27:56):
Hopefully you're able to get all of your money back,
but even losing out on like fifth percent of the
cost of a trip might be worth doing if that
keeps you from spending additional money that you wouldn't spend
were you to stay home. And so the sunk cost
fallacy comes into play because you think, well, I've got
money invested into that trip, I need to see it through.
But that's not the case if you can't afford it. Yeah,
those are hard words, but I think they're true words. Yeah,
(28:18):
I think it's important to put stuff like that on
hold if you're in a tough spot. And Matt. Another
thing I think that definitely does not make the bare
bones budget is clothing. I'd say that, you know, maybe
thrift store purchases only, and because you can get stuff,
they're pretty cheat. But on a bare bones budget, you
should be able to have this line at him at
zero and just wear stuff you already own, unless your
(28:39):
socks are getting so holy that I mean, like evidently
years were, like they're so bad that you couldn't wear
them anymore. They weren't, But I also wasn't on a
bare bones budget, and I could afford some new socks, right,
But in the bare bones budget, I'm not buying the
semi nice socks that I like, you're not buying your
bombs exactly. They're they're off the table, right. The one
exception might be getting close for your kids, but still
(29:01):
you should be able to go without that for a time.
You know, keep clothes out of the bare bones budget
all together. If you gotta pull the trigger and start
using it, there's just no reason to be spending on
clothes in that situation, and I think that's an instance
where you can look to your community, right, dude. Recently
we had two families donate us some clothes, uh, multiple
large trash bags full of clothes because their daughters are
(29:22):
older than our oldest. And what that meant for us
was a ton of free clothes. Man. The girls loved
it because they're just kind of sitting there, like, you know,
flipping through all these clothes and like, I'm gonna keep this.
I wanna keep this. Kate loved it because she didn't
have to go to the store. She didn't have to
like order stuff you know online, have a ship. If
it doesn't fit, she has to ship it back. And
then of course it was good for the budget because
that junk was free. Yeah. Hand me down clothes are
(29:42):
the best, absolutely. Uh. And you know, we already kind
of touched on the entertainment, but you know, I'm thinking
of like concerts and movies like that kind of thing
as well. We've all seen how we can get by
without those over the you know, the past year and
a half. Again, it's not ideal, maybe it's have no
entertainment funds in your normal budget, but this is again
we're we're looking to how we can pare down our
budget in the most extreme way. And let's also talk
(30:05):
about like self care. You know, I think a gym
membership is something that a lot of folks have also
learned that they can do without over the past year.
Push ups at home, baby dudes that in the kettlebell.
Folks don't want to hear me talk about that. I
talked about that enough, but a lot of folks are
working out at home. If you're having a tough time
with your money, but if you're not eliminating that like
thirty bucks up to two looking looking at you cross
(30:28):
CrossFit folks pay a lot of money for that accountability.
I mean essentially, that's what it is. It's accountability, and
I get it, But man, is there not a way
that you can get more affordable accountability? Well, I will say,
you know, if that's in your normal budget and you
love it, I don't care. That's fine. Like I don't
mind if you're spending. I think the first time I
heard a friend was joining CrossFit and they told me
(30:48):
how much it was, I almost puked, Like I was like,
that's really I guess I'm gonna open across bit Jim like,
that's definitely the business I'm getting into. But I was like,
that doesn't make any sense to me. But the more
I've heard people talk about it, it does make sense
to me. And it is kind of a community based thing.
I get it. But in your bare bones budget, sorry,
you're gonna have to hang out with those people like
on your front porch or at your house, So you're
(31:10):
not gonna work out with them at two hundred bucks
a month. Yeah, dude, hanging out outside, going hiking with friends,
like hanging out on the front porch, like playing games
that you already have. These are all great alternatives, you know,
to entertainment that's gonna cost you money, but you know
with like gym memberships, like that's something you can do
at home and even other self care, you know. Again,
Like one of the other things I feel like folks
learn from the pandemic is that like, Okay, I can
actually cut my hair at home. Maybe it's not pretty,
(31:32):
it wasn't pretty the first time, but like, I bet
you learned a lot after that first haircut. You learned
how to make it look pretty good. I've been cut
my own hair for I don't even know how long,
but it's something you you get used to in the
and dude, the money that I've saved has compounded, let
me tell you, over the years of not having to
pay for a haircut. So that's were thousands in your
roth ira and it's tens of thousands, maybe will be
a lot. All right, Well, yeah, I think to one
(31:55):
of the great things. Again, we're not telling people to
to create this bare bones budget and start living according
to it now, right. It really is this exercise that
can be a confidence builder, that can reveal some of
the spending choices that are easily changeable in your life,
that you feel like are immovable. But once you've created
this bare bones budget, once you've got it alongside the
(32:17):
budget that you're using right now every single month, you're
gonna notice there are a lot of differences. There's gonna
be one big difference, right, the number that is coming
out of your accounts every month to pay for your
monthly expenses. We'll talk more about that and how a
bare bones budget can be implemented into your life, not
just in the case of an emergency. Will hit that
right after this break, al Rachel, we are back to
(32:48):
the break and you know, we've been talking about what's
it include in your bare bones budget? What you definitely
should not include, like basically anything that we didn't mention
in that first little section as far as like the
you know, the bare essentials, like everything else you can
kind of, you know, cut from your budget. What about
my Gulf Stream matt, like my my private airplane, your
helicopter membership, Yeah, that also has to go. Did you
(33:08):
have you ever heard of those? There's these things where
you can pay to be a member and you can
kind of get airlifted from I don't know if this
is something that died out like years ago, but I
remember seeing that one time and thinking, holy crap. There
are people who you know, are essentially have like a
gym membership, but it's like Uber for helicopters. Who's got
that kind of money? Elon Musk, I'm sure, you know,
call up a helicopter whatever he wants. But uh, you know,
(33:30):
before we're gonna talk through some additional benefits of creating
one of these bare bones budgets, but I wanted to
mention some of the different tools that you can use
if you're not already budgeting, if you're want to go
more analog. You can you can be like me and
kind of copy and paste your expenses over into an
Excel sheet. I've got uh over a decade's worth of
budgets that I you know, I could go back and
(33:50):
look at my expenses, but I don't. It's not like
I reminisce, oh, you know what I spent in June
of two thousand and seven, but I could. But for
both normal folks, you can check out mints uh win
nap or you need a budget that's a totally great
app that you can use. And so once you've kind
of paired that thing back, once you know how little
it actually takes for you to survive, and you've got
(34:12):
you know, this small, hopefully smaller number than what you
normally have flowing out of your account, you might be
wondering when should I actually implement this uh And we
think that there are a couple instances where you might
put this to use. You can switch over to a
bare bones budget, maybe because of an unexpected job loss.
We kind of touch on this earlier, but that's absolutely
a case when you're gonna wanna like, you know, like
(34:32):
we said, flip the switch. It's almost like you're operating
on like safe mode when you're booting up your computer
because there's a virus or or something that's attacking it.
You know, you want to make sure that you can
do the bare essentials, but everything else kind of falls
by the wayside. That's kind of the primary reason that
you'd want to switch to a bare bones budget. But
you can also go bare bones if you're looking to
accelerate your ability to achieve a financial goal, like maybe
you're paying off a massive amount of credit card debt.
(34:54):
If that's the case, then you're gonna stick with that
bare bones budget for however long it takes too crush
that goal. Yeah, I think either you do it, like
you said, out of necessity, right, you need this. You
need to live on the bare bones budget in order
to be able to make your money stretched further until
you can get through whatever, you know, difficult circumstances have
presented themselves, or also to you kind of impose it
(35:16):
on yourself on purpose in order to achieve something in
the short term. I think you know one other way
maybe people might use it. Some people in the financial
independence community might essentially be living on a bare bones
budget because they're trying to retire in five or ten
years or something like that, and that's that's their higher
goal that they're trying trying to achieve. Right, So it's
not necessarily credit card debt, but it's a certain lifestyle
(35:37):
in their case to maybe step away from a job. True.
I think, you know, it might be demoralizing though, to
try to do a bare bones budget for five or
ten years, Like that's a really really long time to
try to adhere to that and to cut back you're
spending to that extreme, although it is possible if that
is your greater goal and if you feel like you
can actually handle it, yeah, man. And you know, the
(35:57):
additional benefit of having a barebone budget is that you
get to see that you truly have power and control
over the amount of spending in your life. You know, like,
like we might think that it takes a certain amount
of income for us to survive, but really we're just
making ourselves subservient to that assumption. Right. It's important to
know that we have control over our lives and we
(36:18):
definitely have control over the things that we we spend
our hard earned money on. It makes me think of like, like,
you know, if you're subscribed to Netflix, you know this
isn't the second time does It's come up as an
example and you're not really watching anything on Netflix, and
maybe you say to yourself, Oh, well, like I'm still subscribed.
I'm just gonna kind of let that keep billing me.
Like no, Like, why would you do that. You wouldn't
do that. You would make changes. You have control over
(36:39):
your spending. We have control over the direction of our lives,
and I think it's easier to kind of keep doing
what we've been doing rather than making those changes and
rather pivot towards something either unknown or something different, or
something that might be just a little more difficult. It's
easier for us to not ask any questions and continue
plotting on Yeah, I think to Matt, when you see
the difference in your normal budget versus the bare bones budget,
(37:03):
when you see how big of a chunk you can cut,
Just like that, you're able to visualize the changes that
you can implement in your personal finances just by doing
this exercise. And I feel like that sense of independence
that you get by doing this can weave its ways
into other parts of your life. Right now, you might
be empowered to ask for a bigger raise. It work,
then you might otherwise do because you need the job.
(37:25):
If you're like, you know what, I can cut four
out of my month tomorrow if I need to, I
feel like I can ask my boss for a raise
and not feel bad about it. That that's definitely one
of the side effects that is possible. I think when
you create a bare bones budget right also to like,
you might realize that you can invest more of your
income than you previously thought. You thought maxing out a
roth ira that's just for other people. Well, you know what,
(37:46):
maybe it's not. Maybe it's for you. Maybe creating a
bare bones budget helps you realize how much waste there
actually was in the budget you've been using, and you
can come back a few of those things. You don't
have to you have to cut everything. You don't have
to go all the way down to using that bare
bones budget. But it does help you realize that there
are things that you can cut pretty easily that don't
(38:06):
make that big of a difference, and you can start
investing more for your future. So yeah, I think the
bare bones budget exercise goes way beyond just creating this
piece of paper that you're hoping you never have to
use or implement. Putting together the bare bones budget goes
beyond just having this backup in case the worst possible
thing where to happen. Although though it is good for
(38:27):
that reason, it can be empowering in all these other
ways of your personal finances. Yeah. Yeah, and you're saving
and what you invest in, dude, Like, I feel like
the discipline that we gain by taking control of our
spending like that can apply that like that can bleed
into other areas of our life, right like. It makes
me think of just like getting fits and like controlling, um,
how much you eat, how much you exercise, Like these
(38:48):
are all things that we have control over, even like
our relationships, Like within our social circles, we can initiate
hanging out with a friend that we haven't seen in
a while. You know, these are all areas in a
life that could benefit from this crossover of of discipline
that could result from cutting back on your expenses. It
seems crazy to say that, right like that, just simply
(39:10):
by seeing that, oh, I truly could live on a
third of what my current monthly budget is, which, by
the way, dude, so I kind of crunched the numbers
and I won't give specifics, but our bare bones budget
is about a third of what we currently live on.
It's incredible and that crazy, which means that two thirds
of it is basically lifestyle clove. It's seriously and that's okay,
(39:32):
but it's just good to see that. Wow, if it
came to it, we really could cut back a lot.
And so regardless of which area in your life you're
looking at, and obviously we're focusing here primarily on finances,
but it can affect a lot of the different areas
in your life. Yeah, for sure. And I think to
a lot of people in all likelihood might decide to
use the bare bones budget to inform their current budget
(39:53):
to come up with something like and in between budget,
right like maybe maybe mad after that you say, wow,
you cut that much, Well, you know, maybe I can
have a monthly budget somewhere in between if you have
other goals that you're looking to accomplish, If you're thinking
you have to subscribe to like one or the other, like,
that's a false dichotomy, right Like, Like, there's there's plenty
of spots in the middle that you can go with exactly.
(40:13):
I feel like, yeah, seeing the difference in what you're
currently spending versus what you could get by on could
help you realize, like how big this gap is. Seeing
the difference in what you're currently spending versus what you
could get by on can help you realize how big
of a gap you can actually have between what's coming
in and what's going out. You know, you might be
able to even a chief financial independence earlier than you
(40:34):
thought by letting that bare bones budget, not not by
living on that bare bones budget for a decade, but
by letting it at least inform your normal budget to
a larger extent in the here and now. I mean
it also like when you're looking at it from an
emergency fund standpoints, when you know that you can pare
down your budget to maybe a third of of what
it currently is, that's empowering. I get a lot of
(40:56):
confidence knowing that our emergency fund, we could actually stretch
that out for much much further. And so you know,
and a fully funded emergency fund that normally would be
around three to six months worth of expenses might in
fact translate more into maybe six to twelve months worth
of expenses. And so I don't think I'm alone and
and gaining some peace of mind from that, especially, Dude,
you know, being self employed when our income varies significantly,
(41:20):
it's nice to know that we, you know, can have
enough set aside to allow us to even out those
annual expenses, those ups and downs, no doubt. So it's
a helpful exercise for everyone out there. Even if in
the end you decide I'm sticking to my normal budget
as is not changing a thing. Having that bare bones
budget is going to provide peace of mind and some empowerment,
(41:41):
I think in your corner. All right, Matt, let's get
back to the beer that we had on this episode.
We have not yet cut it out of our budget.
We're still enjoying good craft here, that is true. But yeah,
this one was called Ethereal Vibrations. It's an I p
A from two of our favorite breweries, Monday Night Brewing
and Burial Brewing. What what were your thoughts on this
delicious beer? Man, Yeah, this is a double New England
I p A uh And dude, this has all the
(42:03):
different flavors I'm looking for in a New England hazy
I p A uh. It poured a super hazy orange color.
It's got all the kind of floral notes uh as
well as all the hoppy dankness that you would come
to expect from some I p A S from both
of these breweries. Like, I don't feel like there's anything
stand out about it except that it was just flat
out delicious and amazing. Like there wasn't anything like super
(42:26):
unique about it. But when I think about a double
New England I p A, this is one, uh what
I'm picturing or what I'm imagining myself tasting. Yeah, I
feel like to make an NBA comparison, I feel like
Monday Night and Burial, you know, combining forces would be
like Lebron uh, Colin Steph curry up and being like
come over and play playing the Lakers with me? Like
can you imagine what that team would be like? Like
(42:47):
how they would demolish people. The beer was delicious. It
was just like blend, I think perfect blend of like
bitter and sweet. It was juicy and delicious. I don't
know how descriptive I can get beyond that. It was
just it was just a really good example of the style.
They crushed it on this one. Yeah, it's not one
of these I pas where there's like a bunch of adjuncts,
which means like they're adding different ingredients or just kind
(43:08):
of doing a random fruits yeah, or like a weird
process that they're participating in. This was just a really
good all Star of New England. I p A and
glad that you and I got to share this one
on the show, but me too. Man. All right, well,
that's gonna do it for this episode. For folks that
want the show notes for this episode links to anything
and everything we mentioned, we'll put those up on our
website at how to money dot com. That's right, And
(43:30):
if you've been listening to the show, and if you
have not yet left us a review over at Apple Podcasts,
we would love it if you did that. That helps
us to get the word out. It helps others to
find the show who haven't yet found it, and so
we would appreciate that over at Apple Podcasts or wherever
it is that you listen to your shows. And so Joel,
that's gonna be it, buddy for this episode. Until next time,
(43:51):
Best Friends Out, Best Friends Out. M
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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