Preheat medium skillet on medium heat. Place bacon in skillet and cook to desired crispness. Set aside.

Keep the bacon grease in the skillet and return to stove on medium heat.

Crack the egg into the pan and reduce heat to low. Cook for 2 minutes or until whites are set.

Carefully flip the egg and cook second side to desired doneness. Set aside.

In a small saucepan, bring the milk and water to a simmer.

Add the grits and salt and reduce heat to medium. Cook for 7 minutes stirring occasionally.

Once the grits are cooked, remove pan from heat and stir in butter and shredded cheese.

Place grits into a bowl and top with bacon and fried egg.