Do you have sufficient margin?
Remember how good it felt to finish a term paper before it was due? Ever had the satisfaction of helping someone financially because you had money in the bank? “Margin” is the difference between the resources or time is required and the resources or time we have. Margin can be positive (money in the bank) or negative (scheduling 28 hours of activities in a 24 hour day).
Positive margin is our leverage and produces contentment - it allows us to accomplish our long term goals and purchase the things we enjoy most, Yet most of us don't spend much time thinking about how to increase our margin.
With finances, margin is what we are able to save or, better yet, what we need to be saving. The formula for determining financial margin is simple: Income - expenses (debt, taxes, giving, living) = MARGIN
For many, having margin is not an option since there is often not enough money left at the end of the day (or month) even when drastic saving measures are taken. But for others the quantity or amount of money is not the issue, but funds just seem to “seep away” before they can be “put away”.
The following suggestions can help increase margin:
- Have your paycheck deposited into multiple bank accounts - one for spending and one for saving.
- Take advantage of automatic investments from your paycheck (401k, stock purchase plan, etc.) or automatic debits from your checking account shortly after your check comes, to a savings or investment account.
- Build a "no brainer budget" - Take your monthly income after taxes and subtract your giving funds, debt payments, savings (for retirement, education, etc.) and live on what remains.
- “Fast” from a few unnecessary monthly expenses (eating out, clothes, etc.) and save the funds to see how much you accumulate by the end of the month.
Developing margin is not easy, but you might be surprised at how much you save by implementing a few of the above steps or by simply imposing discipline in your spending habits.
Next month we will look more specifically at developing a profitable spending plan - a.k.a. budgeting.
Earn some margin! If you have had some success in budgeting, let us know what has worked for you. Write a brief summary of your situation and what you have done and submit it to us. We will post these anonymously on our website for others to reference. The first four that we use will receive a $25 Amazon.com gift certificate. All remaining ones that we use will receive $10 gift certificates. Send your submission to clientservices@ronblue.com .
Planning Tips
Do you have E or EE savings bonds that are mature or close to maturing? Read this article to find out how you might save some taxes.
Saving the 'Bond' Between Grandparents and Grandkids: What to do if you are a grandparent and you have savings bonds that you want to use for a grandchild's education and you want to avoid tax on redemption.
Generating margin through extra income – For many individuals and families, having an additional source of income can be helpful in making ends meet or accelerating savings to achieve financial goals sooner. In our last newsletter we provided a number of questions for those who were interested in pursuing a Multilevel Marketing Opportunity (MLM). In doing so we did not intend to put MLM in a bad light but rather provide questions that can be a helpful tool in evaluating an MLM opportunity. As with any business or investment opportunity due diligence is required to avoid non-legitimate situations, select beneficial opportunities, and to ensure all financial and operational aspects are understood.
One of the positive things about MLM opportunities is the chance to be self employed. Self employment can allow for flexible scheduling as well as certain tax advantages. This site lists some low cost ideas and this Money Magazine article has some additional work-at-home ideas.
Relevant
Articles/Information
Many negative financial habits/predicaments stem from never having discussed money in our homes growing up. This fascinating memo written by John D Rockefeller, Jr. to his son regarding his allowance gives an example of how to talk about responsible stewardship in your home.
Click here for interesting statistics.
In
the News
Should I buy Microsoft stock since it is going to pay a one time $3.00 per share dividend? Intuitively it would seem to make sense to buy stock in any company that is paying a dividend, but as this article points out the dividend payout just reduces the stock price so you are no better off owning the stock than you were before. If you do own the stock and get the dividend, the article gives some tips on what you might want to do.
