Finding Margin

What would it take to make you feel like you were accomplishing your goals with your money? What would it take to check all the important boxes and ensure that throughout your life, you were making the right financial steps? What does that look like for you?

I guess the worst part would be getting to the end of our long careers and having nothing to show for it. Or would the worst part actually be getting to the end of our lives and realizing that we never lived the way we dreamed of living? 

Money is woven into the fabric of our lives. It’s in our identities, intertwined with our work, dictates what we do in our free time, and is a constant presence in our relationships. 

So it’s probably pretty safe to say that it’s important we get this right. But how do we do that? What does getting it right look like? Since unfortunately we won’t have the luxury of  20/20 vision until later, we’re left with the task of doing the best we can with the knowledge that we have right now. 

So what will we decide matters the most at the end of our lives? And how do we make sure that we’re using our money to support that vision?

I have a four part framework that I call Finding Margin, and this post will take you  through those four parts to help you master your finances. We start with crafting a lifestyle that actually matters to you.

Craft Your Lifestyle

The reason you hear so much about why money can’t buy happiness is because money can’t build a life that will create fulfillment. Fulfillment goes deeper than happiness. I’d say that money probably can buy happiness, but it’s not built of the deeper life satisfaction stuff that fulfillment is. It doesn’t last. 

So ultimately, it’s up to you to craft a lifestyle that fulfills you. It’s the baseline for managing our money and it’s the most important step. 

Who you’re married to, how you work on that relationship to stay married, how you spend your free time, and what you do for work are all elements of a life well lived. It’s the day in, day out that only you can get right for you. If it’s off, it’s miserable. If it’s on, you’ll live a truly fulfilling life. 

Your money plan is all about supporting that kind of life. It’s likely that you’re here because you want to master your finances and have the richest life possible. Just know that it won’t matter how much money you amass if you aren’t crafting a life you deem worth living. 

After that, it’s all about creating a money plan that supports your ideal life. 

So how should we go about doing this? 

Controlling Expenses

The first step will be learning how to control your current expenses. For this, you’ll want to revisit the money equation:

income-expenses=margin

Where margin is the money that’s left over to spend each month. It’s the money you use to save, reach your goals, and pay down debt.

The tricky part is controlling our expenses enough to widen that margin as much as we can.

You should certainly work to increase your income over your career. Everyone should work to earn more through a career they love, but if you never learn to control your expenses first, an increase in your income will wash away and you’ll never get to see it as an increase in your margin. 

So how do we control our expenses each month? 

We’ll need to plan how we spend our money using a budget. Budgets can be simple, and they can be complex. But having some sort of a system where you’re keeping your money inside the guardrails you’ve decided each month will be essential.

My tool of choice is YNAB, and it’s the best thing out there for keeping track of your money. 

Using a budget like YNAB helps you direct your margin to the places where it matters. 

Remember, you’re responsible for building a life that’s important to you. Your budget just helps you spend in ways that matter to you and that support that vision. 

Where do we go from here? In addition to spending your money in ways that matter to you now, you’ll want to ensure that you have money throughout the rest of your life to keep living that vision. To do that, you’ll need to save.

Saving For The Future

Everyone will eventually decide they’ve reached the point to slow down on their work and start spending time on other things. So when the time comes to retire, you want to know that you can make the move with your finances confidently. 

That’s why it’s important to start saving for retirement now. The process is much easier than it used to be. Investing in a Target Date Fund means that your fund automatically handles the diversification for you and it’s a smart, cheap way to invest for retirement yourself, while still getting great returns.

You’ll want to start investing today. It’s easy to spend time waiting for the timing to be right, for your emergency fund to be big enough, or for the house to be bought, but you’d be better off just starting today. Get used to that money not being in your life now, and you’ll never miss it. 

The one exception here is credit card debt. Credit card debt carries such a high-interest rate that you’ll want to eliminate it as quickly as possible before investing.

Then, over the course of your career, investing in your retirement can mean that you keep living in ways that matter to you even after your working years. 

So if you’re living a fulfilling life now, you spend within your means so that your financial situation can support the way you want to live, and you’ve been saving each month for the future income that you’ll give yourself in retirement, what’s left to do?

The answer is to extinguish the cycle of debt.

Extinguish the Cycle of Debt

I likely don’t need to tell you how much debt can choke away at your income and erode the margin you’d like to have for living today. 

That’s the problem with debt. You made a purchase for yourself in the past, yet here you are stuck holding the bill, and it’s likely harder to be able to spend according to your values now. 

Then we keep repeating the process over and over again where debt just becomes an inevitable part of our lives. 

We want to work to extinguish the cycles of debt you have in your life. 

How much of your paycheck goes to debt of any sort each month? What if you completely eradicated it all and had access to that whole paycheck and could spend in the moment in cash? Then, you simply keep saving up for the next thing you want. 

Not only will you be making a purchase with your present self instead of sticking it to your future self, but you’ll be saving money on interest. It’s just slightly tilting the way you pay for things towards cash instead of debt. 

Like I said in the previous section, credit cards are the exception to the rule. Don’t try to extinguish them, place a full-out assault on them. That’s because the interest rates they come with are so crushing, and you really will see the benefit of getting rid of them as quickly as possible. 

Why do I place extinguishing other debts last? 

Because taking out a loan to purchase a vehicle isn’t likely to affect your long term financial goals. Sure, you could save that $500 car payment and turn it into a million dollars if it’s invested over your working career, but then what are you going to drive? 

It’s reasonable to expect that you will want to move up in vehicle periodically and that it will take saving to be able to pay cash for it. Instead, hold on to your car for much longer than average, get it paid off, and then save your payment to move on to your next car in cash. Then, you’ve extinguished the debt cycle for vehicles and have tilted your spending towards cash.

For all of your debt besides credit cards, work to extinguish the cycle and not hop back on. Doing this allows you to save for your retirement which actually matters while allowing you to spend the rest of your margin in ways that matter to you. 

Then, as you extinguish the cycle of debt, you tilt your paycheck away from debt payments to saving ahead of major purchases. 

This ensures that you’ll always be spending cash in ways that align with your present wishes.