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How to Determine Your Make or Break Budget Number

What’s YOUR Make or Break Budget Number?

Do you know your make or break number? That is, do you know exactly how much it costs at a bare minimum to run “YOU inc.”?  By YOU inc. I mean you and anyone you are financially responsible for; lucky for me, that’s just me.  Now if you’re married and have joint finances, it’s “US inc.”, but the same rules apply.  You MUST know your make or break number as it serves as a benchmark for the financial viability of your life, and will serve as a practical guide for what opportunities you can afford to take and which you can’t afford to pass up.

To calculate your make or break number, put together a bare bones budget.  This is the budget that only includes necessities and eliminates discretionary spending.  To help you strip it down, think of anything you can safely, smartly, and sustainably live without for a month, without completely disrupting your ability to live and work; housing, shelter, groceries, transportation, insurance, even things like basic internet and cellphone will pass for the purposes of this budget, as in today’s digital age, they function as crucial work tools.

Now, on top of this bare bones, “survival” budget, you must add three or four additional elements…

First. A buffer for your survival budget, for expenses you’ve failed to account for, let’s say an extra 10%.

Second.  A designated emergency fund savings number.

Third.  A designated retirement savings number.

And Fourth, for those in debt, a designated debt payment number.

Once you add the full cost of these essential “add-ons” to your bare necessities budget, you’ll have your make or break number.  Know what that number is annually, monthly, weekly, even daily if it helps.

I include the “add-ons” in the make or break number, because I consider them essential parts of your long-term financial viability, and in no way discretionary.  When you start prioritizing things above debt payoff, emergency fund, and retirement savings, you’ve lost your long-term perspective.  When you start prioritizing elements that make up the make or break number over any of the others, for instance, when you find yourself having to choose between food or housing or retirement contributions and insurance premiums, you’ve reached the “break” point.

To make sure you never reach that “break”point, your income and earnings need to remain above the make or break number.  It serves as a guide for the bare minimum you can afford to make (unless you have several times that sitting around in savings for a rainy day).  Any earnings above and beyond the make or break, you can allocate at your discretion, increased savings or retirement contributions, a bit of an extra indulgence in the grocery budget, full on “play” money, or a combination of all.

If your income falls short of the make or break number, you have two options.

  1. Find a way to reduce your essential expenses.  Is there anything you can do to cut back on your required living costs- housing, groceries, and other day to day essentials?  For instance, can you get a roommate, try couponing, switch to a less expensive phone plan?
  1. Earn more money, either by asking for a raise, getting a new job, or taking on additional income ventures or “side hustles”.  Not to go on a tangent, but the minimum wage puts a real damper on this effort for those really struggling.  It’s pretty hard to surpass the make or break number on $7.25/hour.  The only thing I can recommend, other than some real policy changes to increase the minimum wage, is to try developing a skill that will allow you to command a higher wage in a more specialized field.

If you’re short of the make or break number, you don’t have room in your budget for discretionary spending.  That is, until you implement one or both of the actions above to surpass your make or break number.  And once you do, you’ll know exactly how much you have to allocate.  From there, you’ll have to prioritize all your discretionary wants to fit within that surplus.

When people ask me how to afford savings or investments when they’re struggling to get by, I tell them, it all comes down to the make or break number.  Before you consider taking a job, or turning down a job for that matter, see how it aligns with your make or break number.  Before you decide whether to collect unemployment or take on alternate part time work, see how those options will work with your make or break number.  Before you make any major life changes that will significantly alter your make or break number, like having a child or pursuing a dream, calculate the difference in your make or break number and make sure you can hit that new target before making that kind of commitment.

You cannot spend money you are not committed to making.   Use the make or break number to serve as a guide and hold yourself accountable.

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62 responses to “What’s YOUR Make or Break Budget Number?

  1. Good point about including a buffer. It seems no matter what you do with budgeting, the most diligent of plans go awry and you need a bit of wiggle room. After experiencing a bit of lifestyle inflation, I plan to use September to reset my “make-or-break number”!

  2. Great post. The problem I see with a lot of people is that they have the incorrect definition of “essential” expenses. Honestly, only food, shelter, a few other things like (internet/cellphone if required for you to earn money) is truly essential…Another thing is credit is easily available and people feel that it’s the norm to just spend money they aren’t committed to making.

  3. Great post, Stefanie. I wrote a similar post to this quite some time ago, and it is SO important to know that make or break number. If you’ve got it done pat on paper, it’s a quick and easy reference if income ever falls short.

  4. Unfortunately or fortunately, our make or break number is pretty high due to our two rental properties. Yes, they are covered by the rents, but it does make me a little nervous knowing we’d be in a jam if both became vacant at the same time and we lost jobs as well. It’s not likely, but could happen. I think the worst thing people do when they get in a really bad situation is continue living the same way as they have grown accustomed to. If we lost both tenants and a job, it would be survival mode and maybe even listing one property for sale quickly, not after we burn through all of our savings and retirement accounts.

  5. Great post, Stefanie. I don’t think I’ve ever sat down and thought about my “make or break” number, but I do know that I have done everything I can to increase my income the past two years (and continue to try to increase it!). Increasing income, and then funneling that additional income into savings and investments, is the best way to make sure you will have finances if you hit a rough patch.

  6. Great post! I’ve never really had a chance to really think about it because it seems like there’s some random thing that comes flying out of nowhere every single month. Would be interesting to sit down and take a look at it though.

    1. For people who are really on the brink, I think it’s essential. Having a specific number as a target ensures clarifies the goal and makes it more tangible.

  7. When we moved, I made a bare-bones budget for myself and figured out what I needed to make in order to cover everything (and then some). Thankfully I had already been focusing on cutting my expenses, so rent was a big factor, but we had already figured out how much we were willing to pay for an apartment. It really is an important number to know!

  8. Hi Stefanie!
    I have a similar (or exactly the same) concept that I write about but I call it one’s primary wealth number. It’s a great number to know for sure. Mine is $3333. It’s good to know that in the event that Iose my job, I’d only need this amount monthly to keep living at my same level of comfort.

    1. What a great number, all 3’s! And yes, so important to know. I write a lot about the pursuit of a dreams and passion. For those who want to follow that route, knowing the make or break number is a must!

  9. Before we cut back on our spending, this number was significantly higher for us! One of the great things about getting spending and wants under control is that your make or break number lowers dramatically and anything that you earn above it goes straight to savings and growing your wealth so you can achieve financial freedom even faster. (At least this is our plan).

  10. I think it’s really important to know your make or break number. With no debt, high income and minimum mandatory expenses, we have a pretty low break number. However, since we’re DINKs, we tend to spend a lot more on spoiling ourselves. We’re always trying to find a balance and cut back our spending so we can save faster for a house.

  11. It’s so important to know this number! I have it firmly in sight at all times and it motivates me to hustle. But I am inspired to do even more, so I keep on hustling. I think this is why people stay in the paycheck-to-paycheck cycle, because they aren’t willing to look at the make or break number, and see where they can cut back and earn more.

  12. Love the buffer and the retirement being included in the costs. So essential to the budget. They should never be cut unless in extreme emergency. Need to find a way to pay yourself even in the tight times. Easier to know what to work on when you know the real numbers of your finances. Nice job!

  13. Our “make or break” number is very close to my husband’s take-home income alone – maybe a little higher. Believe me, I’ve been playing with the numbers quite a bit! I’m no longer receiving a steady paycheck after this month (and I’m not yet looking for a FT job), so I’ll either be earning some side hustle income or we’ll be dipping into savings! But that’s what it’s there for.

  14. Good points. I don’t think a lot of people really know what their number is or underestimate it and find themselves in trouble. Mine is higher than I would like but it is a work in progress.

  15. Good post Stefanie. Makes sense to set specific target goals for the various accounts. Clarity helps the saver measure their progress. It also makes sense to make the number a little higher to allow for surprises and increases on the cost of necessities. Thanks for sharing.

    1. I’ve found that when it comes to finances, it’s always better to plan on a higher number and have an excess, rather than underestimating and having too little.

  16. Great article. It’s important to know your bread-even budget, definitely.

    We’ve lived on a monthly written budget for over a decade. Intentional (as opposed to in-the-moment) spending is what got us out of debt, filled our emergency fund, and allows us to save heavily for retirement. Until we started planning the money just slipped through our fingers without supporting our goals.

  17. Thanks for this – I just ran the numbers (been meaning to for a while), and did ‘what ifs’ on the chance I might need a bare bones budget (in which case I’d sell the property I don’t live in, I rent). I kept the costs of my train to my currently well renumerated job, but one could assume I would need some transport costs! The salary I’d need, is more than half of what I earn, so that’s reassuring, and should mean I’ve saving a bucket load. For the record, it includes a ~9% contribution pre tax to my retirement.

  18. I love your add-ons. The fact that you still need to save for retirement is so true, but I really enjoyed noting the 10% buffer. No matter how you slice it, even if you cut out any sort of savings (bad idea), live still throws you curves and stuff gets forgotten. Great advice!

  19. What a great post; there is NO plan without your “number”. Going into retirement I knew it well (hence retirement). Having been forced out of retirement I’m struggling to understand my revised number and it’s driving me crazy. I need another month of driving blind before I can take the wheel again. Fingers crossed.

  20. I like this method — I think it really helps if you write your expenses down so you know which ones you can cut so you know the least amount of money you need to earn to get by. Especially important if you’re moving somewhere else and trying to figure out your budget.

  21. We have this, but we don’t include retirement and emergency savings in our make or break number – if we have to be operating on a bare bones budget, then we assume that’s an emergency so generally we wouldn’t contribute to it until we were back on our feet.

    1. The make or break number I consider slightly different from an emergency budget. It’s a number to have as a reference point for the bare minimum you can afford to make every day, not necessarily in case of emergency. And in terms of every day, I consider emergency and retirement mandatory.

  22. This is a great way for people to attempt to live below means. People will be surprised how low the make or break number will be if they track only necessary expenses. I believe anyone can live below their means, with a bit of additional will power injected in their budget.

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