How to Make a Bare-Bones Budget When Money Is Tight

When money runs short, it is easy to freeze up and avoid looking at the numbers. That’s normal. But a simple plan, even a rough one on the back of an envelope, can take a lot of the panic out of the month. A bare-bones budget is that plan: just the essentials, written down, so you know what gets paid first.

You can build one tonight with a pen, your bank statements and about an hour.

Step 1: Write down what’s coming in

List the money you can count on over the next month: paychecks after taxes, benefits, child support and any regular side income. If your hours change from week to week, use the lowest recent amount. It’s better to be pleasantly surprised than short.

Step 2: List what’s going out

Go through the last one or two months of bank and card statements. Write down every bill and regular expense. Don’t judge anything yet. Just get it on paper.

Step 3: Sort needs from everything else

The CFPB suggests putting bills in this order when you can’t pay them all:

1. Protect your income. Keep up with costs you need to keep working, like your car payment, car insurance, gas or transit fare.
2. Protect your home. Rent or mortgage comes next, along with utilities, since reconnection can be expensive.
3. Protect your health and assets. Don’t let essential insurance lapse: health, auto, renter’s or homeowner’s.
4. Pay your other obligations, such as child support and taxes.
5. Then everything else, including credit cards and other unsecured debts.

Food belongs in your needs list too. Plan for basic groceries, not takeout.

Step 4: Cut back, for now

Look at everything that isn’t a need and ask, “Can this pause for a month or two?” Common places to cut:

• Streaming and app subscriptions.
• Eating out and delivery.
• Phone and internet plans. Ask your provider about cheaper plans.
• Memberships you don’t use often.

This isn’t forever. A bare-bones budget is for getting through a hard stretch.

Step 5: Call your creditors early

If you can’t make a payment, call the company before the due date. Ask whether it has a hardship program, a lower payment or a delayed due date. Many lenders and utilities would rather work something out than send an account to collections. Take notes on who you spoke with and what they agreed to, and ask for it in writing.

If an account has already gone to collections, read your rights when a debt collector calls.

Step 6: Look for help you may qualify for

• Call or text 211, or visit 211.org, to find local help with rent, utilities, food and other needs.
• Ask your utility company about payment plans or bill assistance programs.
• Talk to a nonprofit credit counselor through the NFCC. They can review your budget for free or a small fee.

What to avoid

• High-cost quick loans, like payday loans, that can make next month even harder.
• Anyone who asks for money upfront to “fix” your debt or your credit. The FTC warns that only scammers collect fees before they’ve settled any of your debts.
• Ignoring the mail. Late notices and court papers have deadlines.

When things settle down

Once you have a little room, put any extra money toward one debt at a time. Our guide to the debt avalanche and debt snowball shows how. If your debts still feel too big to manage, compare your options in debt settlement vs. debt consolidation.

Sources: CFPB: prioritizing bills (Your Money, Your Goals) · FTC: how to get out of debt · 211.org · NFCC