Most people in America, spend more than they make each month, are in debt, and have little or no savings. This is parallel to a time of high unemployment, increased cost of education, and little or no pay increases. This combination leaves absolutely no financial margin.
Once we get into a hole it makes it more difficult to get out, but it can be done!
So What Would Financial Margin Look Like?
Financial margin is living within our means. It is making more money each month than we spend. It is having savings for emergencies.
I am not saying we should hoard our money. Most of America is not in danger of that.
I advocate having choices. Sometimes they aren’t good ones.
We have made a few poor financial decisions in the past 10 years. Yes, buying land to become a horse ranch when you can’t even fix a lawn mower tire, can be a poor financial decision. We bought 22 very expensive acres.
Fortunately, we had some margin at that time. It hurt!!! But it didn’t destroy. Honestly, we are still recovering from that.
We need margin for our mistakes.
Two years ago after Gustav my parents fell ill. My Mom came to live with us for a few months so we could help nurse her back to health. I was fortunate to have an office a mile away and my own practice. I let my practice reduce significantly in order to be home. If the same had happened ten years prior, I would not have had the flexibility, or MARGIN, to make that choice.
We need margin when things “just happen”.
How Do We Achieve Financial Margin?
- Live within your Means by decreasing spending.
- Live within your Means by increasing income.
- Increase savings for emergency situations.
Times are tough. Most of us think there is no way to decrease our spending….we are convinced that we just don’t make enough money. The fact is that everyone in this country, even our poor, are richer than most of the entire world.
People make choices that create a domino effect in their finances. I knew a man who was seriously contemplating bankruptcy, yet he didn’t want to sell his boat.
I have clients who will ask for a discount on counseling and then come in the next week showing me their new IPhone.
We make choices. All of us do.
Here are some tips to begin creating financial margin:
- Eliminate “low hanging fruit”. I usually start by eliminating things I signed up for but may not need or be using. Recently, I:
- discontinued all magazine subscriptions
- cut my data package on my phone in 1/2, wasn’t using it all and reduced my minutes.
- bundled my phone with my internet and cable and reduced the total by more than my phone bill.
- don’t buy things at gas stations i.e. drinks. Two cokes at $1.49 total $3.00. You can almost buy a 12 pack for that.
- carpool when possible – family rides together even if it is less convenient if it is possible. And quit driving around unnecessarily.
- reduced eating out to almost non-existent
- eliminated the health club that no one in the family has visited in over a year.
- gave away things that cost too much to maintain
- shopped car insurance and changed – saved many hundreds per year.
- quit going shopping so I won’t be tempted.
- Create a budget. It is difficult to manage our expenses and to save if we don’t have a budget. I put “eliminate low lying” fruit before the budget, because there are obvious things that need to go. Once your budget is complete, you may find some other areas you can cut down on too.
- Avoid spending on impulse. Make a list before you go to the grocery or shopping. Only buy what is on the list. Don’t buy anything stacked at the counters – that is always an impulse purchase. I was so proud of myself last week. I needed a dress for a wedding…seriously needed…since I haven’t bought a dress in years and don’t wear the same size. I tried on half of Ann Taylor Loft. The last dress was on sale plus an additional 30% off. The reason I am proud is I only left with that dress. I didn’t buy even one of the other 30 things I tried on.
- Borrow things from friends and lend back. Many things we don’t use frequently, we can borrow. If we take care of people’s things and we are generous in sharing what we have, a good interdependent relationship can be built.
- Start a savings account. It doesn’t matter how much you save, just start doing it. Pay yourself first. If it is only $10 per paycheck, that is fine. Take ten dollars when you get paid and put it in savings. Don’t wait and save only if you have any left.
I Know It Isn’t Easy – Re-establishing Margin
I know this is a difficult process. Why do I know this? Because I am working on it again myself. Financial Margin must be reviewed regularly and at times when margins are thin, they must be re-established.
We will all have changes in seasons. Our family is going through new seasons. I now have three kids driving. My twins get their permanent licenses in less than 6 months. Three sets of car insurances….ouch!
One of my children is graduating high school. Just visiting and applying to schools has been an investment.
And, of course, our 20+ year old home needs repairs.
My family calls me the budget nazi. It hurts, but someone has to do it! We have to be good stewards of the gifts God gives to us.
What About Increasing Your Income?
I do believe in increasing our income too. However, the way most of society tends to go about increasing income I am against.
I don’t think it is healthy to work more than 50 hours per week. I worked 60-70 hours per week for ten years and I was completely burned out and depleted emotionally and physically. Getting a second job is really difficult and I don’t believe can be sustained without losing our health.
Another way some people increase income short term is to job hop. Keep looking for the next job that will pay another $.25/hour. This is stressful, creates a poor message for employers, and, in the end you don’t make a meaningful impact on your income.
The best way to increase your income is to increase your VALUE to your employer. Do the absolute best job you can, with an incredibly positive attitude, and a willingness to learn and take on new responsibilities. It is the most reliable, respectful, and healthiest way I know of to increase your income.
This is an area I am very personally close to. It seems I am always re-establishing margin.
By virtue of my experience, I also know it works.
We just have to start.