Minimum basic lifestyle (MBL) is the amount of financial capital on a quarterly basis that is required to live as frugally as you are comfortable living. Your MBL is based on where you live, what your doing and what you consider absolutely necessary (Ex: Cell phone, internet, a car, once a week surfing habit)
There is 3 methods for calculating your Minimum basic lifestyle
- Calculate your score based on your own personal financial history
- Calculate your score based on what you think you’ll need
- A combination of 1 & 2
1) Calculate your score based on your own personal financial history
If you have been meticulously keeping track of your financial data for the 10 years, 3 years, 12 months on even 3 months, congratulations, you’re in luck!
Take a look at what you’ve spent your money on last year, a year works best for me as an average because my spending habits vary throughout the year. Subtract everything from the total that is not absolutely necessary for your minimum basic lifestyle and you’ll have your MBL.
Jill spent $30,000 last year. $12,000 of the $30,000 Jill spent last year was spent on lattes, tequila shots, pedicures and other things her frugal self doesn’t need. Jill’s MBL is $18,000 a year or $4,500 a quarter.
MBL / quarter = (Year Spending – Year frivolous things) / 4
= ($30,000 – $12,000) / 4
= 18,000 / 4
2) Calculate your score based on what you think you’ll need
So, you’ve never tracked a credit card bill or looked at your bank statement on a month by month basis.
No worries, you can calculate you MLB based on numbers entirely made up. Expect this score to take some monitoring and tweaking before it becomes accurate but it’s good enough to get started. Start by trying to figure out how much money you will need to eat per week and then calculate things like rent, utilities, car payments, ect. Be conservative with your dollars and allow yourself to go out and blow off some steam at least once a month or you will go crazy.
3) A combination of 1 & 2
Use this method if your planning on living somewhere different than where you’ve been recording your finances or you will like recreating your frugal lifestyle