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Conquering the first step toward financial freedom involves maintaining control over expenses. Identifying the basic living expenses provides you with the full knowledge of how much surplus is possible in your current situation. From this foundational understanding, it’s a matter of deciding the proper balance between spending in the present and investing for the future.

The surplus provides the seed with which you can organize your finances into a larger growth system. This leads to scaling your value to include more than just an exchange of time for money.

Knowing the basic living expenses that are required for continued subsistence is important, not because that is all you will ever spend, but because it gives you a clear idea of how much you need to earn as a minimum.

This is helpful to know when you are just starting on the road to riches, but also helpful for when you decide to leave the rat race and either retire or redirect your energies to something you consider more in line with your passions.

When this time comes, knowing your basic expense needs will help you know when your passive income has reached the point where you are able to free up time to pursue other interests.

In 1943, American psychologist Abraham Maslow released a paper entitled A Theory of Human Motivation. Within it, he included the now famous hierarchy of needs. The hierarchy consists of a pyramid, ranging from the absolute physical needs at the foundation to the emotional, or even spiritual, needs at the very top. Because the physical needs are the ones which cost money, we will focus on the first two levels.

Level 1 consists of the biological and physiological needs. These include such things as food, drink, shelter, warmth, sleep, and overall health.

Level 2 consists of the needs for safety. This includes protection from danger such as the weather, wild animals, and malicious individuals. It also includes a general freedom from fear due to the order and stability of an environment, usually that of a society. This often exists in the form of law and order.

Expenses of the First and Second Level

The expenses which cover the first level of needs are often paid directly by an individual. It is this level which must be entirely covered by the income earned. To this might also be added certain forms of communication, research and transportation which afford an individual a higher chance of success in earnings potential.

A fuller expansion of this list of absolute basic necessities is considered below:

• Food
• Clothes
• Toiletries
• Mortgage / rent
• Utilities
• Phone
• Internet
• Gas
• Insurance (health, home, auto, life, disability)
• Medications (if applicable)

Of course, depending on a person’s situation, additional items may apply. For example, if someone has children, then daycare may be essential in order for them to continue working. Being honest about the true necessities, and finding better deals on the existing necessary expenses, is the key to creating your bare bones budget.

For level 2 of the pyramid, safety is partially payable directly by the individual, but law and order is provided by the government which is taxpayer funded. Since taxes are not optional, these might be considered as one more essential expense.

Remembering the Other Levels

While the first two levels are of foundational importance, it is also crucial to keep in mind that the rest of Maslow’s pyramid deserves equal attention. Depending on one’s perception of value, some might advocate that the pyramid should be flipped on its head. After all, what is the advantage of simply existing without the additional emotional and spiritual needs being met? A rock, after all, can exist at no expense; but we are human beings.

A bare minimum budget is not a long-term strategy. In fact, if there is any possibility of adding one more category, I would call it “fun money.” This category allows you to reward yourself from time to time with something more. Simply paying for essentials for too long risks leading to one of two extremes: becoming a miser or losing the motivation to enjoy the work of one’s hands.

The famous preacher of the book of Ecclesiastes, which most attribute to King Solomon, makes an insightful statement: “Everyone also to whom God has given wealth and possessions and power to enjoy them, and to accept his lot and rejoice in his toil—this is the gift of God.” Let me highlight that key phrase: “the power to enjoy them.”

Regardless of what you do or don’t have, the power to enjoy what is presently with you is a gift. While money cannot buy happiness, nor can it buy self-realization or spiritual experience, it is a foundation which can lead to opportunities that provide new avenues for your life to take.

Regardless of how much freedom you have at present, take pride and fulfillment in whatever honest work that you do, with the understanding that you are making the world a better place. In allowing yourself to be rewarded within a structured and sustainable budget, you reinforce in your own psyche that you can do this, and that your present is just as important as your future. You reinforce the confidence that you are making progress, and will continue to become a better version of yourself as you take disciplined action on a daily basis for the greater freedom which is on the horizon.

Conclusion

The bare bones budget is a temporary bridge. If needed, temporarily scaling back to only your basic living expenses can be used as a means to:

• Pay off a debt quickly.
• Maintain the basics during a job loss.
• Adapt to a cut in household income.
• Build up the profit of a new business.
• Achieve a financial goal quickly (such as paying for a big vacation or purchasing a new vehicle).

If you find yourself in a situation where there seems to be no end in sight, let this period be a time of motivation to focus on improving your education in ways that minimize expenses through online courses or certification programs, by going above and beyond at your workplace, and by updating your resume and feeling out the opportunities around you.

It is easy to feel stuck. But once you emerge from this present situation, it is likely you will look back and realize how far you’ve come as an individual, how it shaped you and strengthened you, and how it brought you to a higher state of understanding and perspective. You’ll be amazed at how you’ve grown in strength and the ability to achieve greater things for your future.

Let the focus on covering basic expenses produce both humility and resolve which launch you into a life far above and beyond your present circumstances, and you will be well on your way to accumulating the wealth of which you’ve only ever dreamed.