I’m not a huge numbers person–math was never my thing in school and I don’t enjoy crunching numbers and cranking formulas all day long.

But I do enjoy budgeting and finding ways to cut costs. It’s always been like a game to me; figure out how to live on the least amount possible while still enjoying myself. If you’re into FIRE (Financial Independence/Early Retirement) at all, you probably get a rush from penny-pinching as well.

Taylor and I became very interested in FI about four years ago, and as part of that process we started talking about the idea of a monthly bare minimum (I’ll call it MBM)–the least amount of money we could live on each month. We built a monthly spreadsheet to track our income and expenses and went through a bunch of hypothetical scenarios to figure out our MBM. How would our spending change in the event of a job loss? What if our passive income dried up? What if we got rid of unused subscriptions?

Note that we were trying to determine the absolute bare minimum–I’d differentiate this from the comfortable bare minimum, which would be our bare minimum + a bit of discretionary spending money. It was interesting and insightful to go through various life-altering scenarios and relieving to discover that we could live on quite little and still be fine.

How to Figure Out your MBM

In order to figure out your MBM, you need a budget. And then you need to track your spending religiously to see if you’re actually sticking to that budget. It’s not fun and it won’t always result in the rosiest picture, but you can’t get a handle on your spending if your inflows and outflows are all over the place.

There are a plethora of apps and programs to choose from for tracking your monthly spending. I prefer a good ol’ fashioned Excel spreadsheet. Find what works for you–it’s important that you like the tool you choose since you won’t build a habit out of tracking by dealing with clunky software or crappy apps.

After you have a month of two of data, cull through your expenditures and cut out everything that isn’t an absolute necessity. Once you’re finished with this exercise you ought to be left with costs like:

• Rent/mortgage
• Food
• Transportation (gas, car payment, car insurance, bus pass, etc)
• Insurance
• Debt expenses (medical, school, etc)

As part of this exercise I also set aside a monthly amount for emergencies–the amount you choose will vary. If you’re having trouble pinning this down, keep tracking your spending until you have some historical data to look at, and try to make an estimate based on the unexpected costs you incur each month.

Once you’ve got all your necessities accounted for, total them up to reveal your MBM!

I Know my MBM…Now What?

Now that you know your MBM, you can start planning for the future. What expenses could you cut to reach your MBM if needed? How much income would you need to generate to cover your MBM? Can any of that income come from passive sources? More on that later…

Even if you aren’t a big numbers or budget person, knowing your MBM can bring you peace of mind and help you plan for your future!