Make Marginal Savings your New Year's Resolution
What is the one thing that I could wish for all of my family and friends in 2026? The answer is simple, more marginal savings. Margin is the difference between what you have and what you need. This is true in money, time and many other areas of our lives.
For me, the accumulation of money has never been my goal. Instead, it is the accumulation of peace. Peace from worry about bills, debt and financial emergencies. In addition, having margin in your life allows you to have choices. If you have committed every dollar of your paycheck, you will find yourself in a position where you worry about keeping the job you have or worse, unemployed and desperate to find a new job with an equivalent salary. This is no way to live your life. The way to peace is through margin. It will be a shift in priorities to start working towards in the new decade. It will be hard and might take some time, but the change in mindset will benefit your life and will set an example for your children to follow.
The First Step in Creating Marginal Savings
The first step in creating financial marginal savings in your life is to quantify what you have and what you need in the form of a budget. Quantifying what you have is pretty easy, where the struggle comes is identifying what you need. To determine what you need you should look at all your obligations, these are the fixed commitments that you are not able to easily break. Once you have those defined, you should look at your other expenses as optional and subject to reduction.
In setting up a budget, you should aim to spend between 80-90% of your net income. This will give you up to 20% margin to save for an emergency fund (which should be at least 3 months of your spending) and after that, retirement and other savings goals. If you do not have an emergency fund in place and your savings is locked away in a retirement fund, in the event of an unplanned expense you are at risk of carrying a balance on your credit card which is the surest way to stress.
The Division of Expenses
If you find that your fixed expenses take up more of your resources than they should (generally more than 60%), this is a sure sign that you need to make some tough choices. It will be hard to sell your house or downgrade your car or get a second job to pay down the debt, but the peace that these decisions bring will free you for a life of abundance in other areas. Don't let your things own you, you were made for more.
A life of peace is the path less traveled, but the benefits go beyond personal finance. Read the article from Inc. Magazine on how and why Warren Buffet lives in the same 5 bedroom house he bought in 1958.
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