7 ways to restore financial margin in your life

Financial margin is not a reality for many people.  Many people see no way out.  They have been treading water so long that they can’t remember what it was like to have money left at the end of the month.  Each month they continue to come up short.

For all such weary debtors, take hope.  A solution for our many economic burdens is possible.

7 ways to restore financial margin in your life:

(taken from chapter 10 “Margin in finances” in Richard Swenson’s book “Margin”.  The chapter shares 16 ways but I am only sharing 7 of them.)

1. “Live within your harvest.”

As the proverb suggest, make do with what you have … Living within your harvest is possible – it just isn’t popular.  It conveys that we have boundaries that we are willing to confine ourselves within the scope of these boundaries rather than pine for the putative greener grass on the other side of the fence.

2. Discipline desires and redefine needs.

There is a great confusion as to how we distinguish needs from desires.  The list of what we call “needs” today is certainly much longer than the list was in 1900 .. “The cultivation and expansion of needs is … the antithesis of freedom,” teaches economist E. F. Schumacher. “Every increase of needs tends to increase one’s dependence on outside forces over which one cannot have control.”

3. Decrease spending.

It sounds easy, but as we all know, in practice it’s hard to sustain.  The context of our culture screams against restraint, and every message we receive – from the ads on televisions to the specials in the newspaper to our neighbours new van – all urge us to cave in …

There are two facets of decreased spending: short-term and long-term.  Even a short-term spending freeze – a day, a week, a month – is helpful in establishing financial margin.  In contrast, the long-term approach requires a vastly different level of commitment and is better thought of as a lifestyle change.

Short-term resolves are considerable in number by limited in effect.  For example, a moratorium on eating out for a month is sustainable and would improve the average family’s financial margin by $100-200. But a decade-long moratorium on eating out would be very difficult for most families, even though it would improve their financial margin by $10,000-20,000.

4. Increase income.

Increasing income by increasing work hours is a common approach used to solve financial problems.  In some instances, this is appropriate.  In other situations, however, it only compounds marginless living … Most of us already have a shortage of discretionary time and are not looking to increase work house.  Yet desperation and a perceived need to consume more cause people to do strange things …

Here we need to reconsider the issue of needs versus desires.  Many people work extra and then four months later buy a new car .. Others have indeed trimmed both needs and desires to bare bones.  For them, increasing incomes seems the only option left.

The tendency of choosing more work hours in order to increase financial margin has a significantly negative effect on our time margin.  On occasion, we observe that our quest for margin collides with itself, one need against the other.

5. Increase savings.

If you currently have no savings and pay expenses from a checking account that is monthly drained dry, what happens if there are emergency medical expenses?  You would need to take out a loan and enter into debt.  But if you sustained a savings, you would have margin against such emergencies.

Unscheduled and unpredictable breakdowns will happen, and we should consider having some margin for them to happen in.  Appliances, automobiles, lawn mowers – all wear out, usually on their own timetable.  Sickness, unemployment, and sudden travel expenses are other unanticipated events.  With budgets stretched to their limits, such emergencies often result in a fiscal crisis.

Most financial counsellors recommend a regular savings program: for children’s college education, for exceptional medical expenses, for housing costs, for retirement.  In addition, some advisors recommend setting aside a contingency fund equal to three to six months of your usual spending for unexpected emergencies.

6. Make a budget.

Making a budget has the distinction of enjoying the most universal recommendation of all financial counsellors.  There are many resources out that teach the specifics of how to make a budget.  If you are have trouble in the areas of financial margin, the first thing you should do is to set up a budget.

7. Resist impulses.

A large percentage of purchases are made on sheer impulse, which is hwy stores stack impulse items near the cash register.  These are the things you didn’t go to the store to buy but bought anyway.  If you want financial margin, don’t buy on impulse.  Buy only those things you know you need and can use.  If you have difficulty in this areas, make a list of needed items before going back to the store and don’t deviate from it.

How are you restoring financial margin in your life?

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