How do you feel about your finances right now?
You probably have a gut reaction to that question. You might feel like you’re in good shape but it’s possible that question left a pit in your stomach.
It’s tough when you feel like you just can’t make any headway with your finances. It’s tough to feel stuck. In fact, Katie and I are dealing with the topic of this post head on currently in our lives.
You might have some big financial goals that you’re tackling or maybe you just know you should buckle down and get serious about your finances.
What probably makes that hard is that there just isn’t enough money to achieve those goals.
Anybody relate?
What you’re looking for is Margin. Margin is that money that’s left over after all of your obligations have been met.
It’s the money that you spend with, save with, and let’s be honest, give with(even though giving should be at the top).
No matter who you might have followed for finance advice, they’re all trying to get you to the same spot, to have margin in your life.
We have to have margin in our lives. When we work, if we’re working all the time and busy with our families and don’t have any time to pursue activities that make us happy, we get burned out.
If you don’t have any space if front of you on the highway and the car in front of you slams on their brakes, you don’t have time to hit the brakes and have a car accident. You have to have margin on the road.
It’s the same with your finances. If your finances are so tight that you have no margin, you aren’t going to make any progress and it’s going to feel very frustrating.
So take a look at how much room you have today.
Do you have a big house payment?
Do you have two $500 car payments every month?
Here’s one that we’re really having to swallow right now: Daycare for two kids. If you don’t have kids, trust me, it’s super expensive. It’s like having another mortgage.
What about a bunch of debt that keeps piling up more and more? Those payments that you’re responsible for can eat up margin fast. The worse part is, is that you can temporarily create more margin by only paying the minimum payment on credit card debt-but in the process, you’re creating a nightmare with how much you’re going to owe on those cards.
It can reach the point where all of your obligations can start to feel like they’re choking you.
You have no room to have a little money to spend each month, much less meet your financial goals. Since you don’t really know what to do about it, you just keep going month after month not really solving the issue.
The truth is, since you aren’t really doing anything about it, there’s a good chance that your credit card debt raises a little higher each month.
What we’re looking for is margin. You’ve got to look at your finances and figure out how to increase that margin to really make some headway.
Margin is the money you use to pay down your debt.
Margin is how you save for retirement.
Margin is how you enjoy your retirement. You don’t want those years to be restricted because you didn’t take care of your finances when you were younger. You have to have money after your working years to enjoy some.
Margin is how you meet your savings goals now. It’s no fun to feel like you can’t make any progress towards your goals.
Margin, is of course, the money that you have to spend today. It’s a good thing to have a little money to spend on things you enjoy. Money should be enjoyed a little bit. If you’re so tight that you never get a chance to do some spending, then you’re going to either burn yourself out or burn someone else out in your family.
So if you don’t have margin, you need to create it. That’s essentially what all of the financial advice out there is trying to get you to do-either by creating margin to live a better life now or by making your retirement years better by teaching you to save for margin later.
So as you’re looking at your finances-you’ve got your immediate obligations, things that you’ve committed to spending for the month, and then everything left over.
You need to look for the margin. If you don’t have enough, you need to do some cutting in your spending. Remember, we need to be focusing on our biggest priorities with our spending and if your money is going to things that don’t matter, you need to cut them.
It may be a permanent cut-something that is not a priority for you and is not worthy of your dollars anyway. Do you have stuff in your budget that you aren’t using anyway?
Or it may be temporary-making a big sacrifice to cut down on all of your spending so that you can quickly reach your financial goals.
But at a certain point, you can only cut so far.
The other side of that equation is earning more. It may be that you focus on the skills that you need to acquire to get that promotion. If you focus on your career and get a 15k pay raise, that’s huge. What could you do with that kind of cash?
You could also do something on the side to earn more money. I know of several people now who are using skills that they’re good at and taking something that’s fun for them anyway, and making some side cash from it. If you’d do something on the weekends anyway, why not create a side income using those skills?
The point being here-is that it’s easier than you think to earn more. With earning more being 50% of the equation, it’s worth looking at.
So, to review. We feel like our finances are super complicated, but the concepts are simple:
To make progress on any goal with our finances, we need to create margin. If you are so tight that your budget doesn’t have margin, something needs to change, and you’ll have to work to create that change.
You have two choices: you can cut spending, which is where most financial advice is going to center on, or you can also look at earning more, which is an easier solution than you’d think.
One quick note on choosing the path of earning more. If you are looking to earn more, that’s great! But your budget always has to reflect your current reality now. So if earning more in your career is a big focus for you, that’s really awesome, but you need to be budgeting the dollars that you have now. Don’t let things get worse just because you assume you’ll earn more. Work to earn more, but your budget always has to stay firmly grounded in the present.
So which part of the equation have you found yourself focusing on? Cutting or earning? Do you think there is one that is better than the other?
Let me know what you think.
Leave a Reply