I have been a long-time student of budgeting gurus like Dave Ramsey, so when an opportunity came up to take a budgeting class in the Planners Gone Wild Group I was all over it. Not only has this class been a good kick in the pants for me, it has broken down the baby steps in a way I have never heard before. One of the most mind-blowing concepts that I have learned is margin in your budget.
Now, I have been through Dave Ramsey’s Financial Peace University twice. This shouldn’t be a new concept to me, but it was! On his budget forms Dave has suggested percentages, like your rent or mortgage shouldn’t be more than 25% of your income, and food should be 5-15%. I pretty much ignored those because I wasn’t really clear on how they fit into the big picture, but those percentages are what determine your margin! If your percentages are too high in one area, that is robbing you of the margin you need to get into a better financial place.
What is financial margin? It’s extra money in your budget. This is the money we use to pay off debts, save for retirement, and save for emergencies. If you feel like you have too much month and not enough money, you desperately need to create some financial margin in your budget.
How To Create Margin In Your Budget
Make A Budget –
The first and most important step you need to take to create margin in your budget is to get on a budget! If you don’t know where your money is going, or what categories you are overspending in you can’t fix the problem. You can get a free budget sheet from Dave Ramsey that details what percentage you should be spending in each category. I recommend you start there! (If digital is more your thing you can do the same thing in the Every Dollar app for free).
Cut Your Expenses –
If you have no financial margin, you either need to increase your income, or decrease your spending. Typically there are several categories in your budget you can pretty easily shrink. A few years ago we shopped around on car insurance and were able to cut our premium in more than half. This month we have decided to cancel our unlimited cell phone plan and switch to a cheaper pay-as-you-go service. We also decided to pay the early termination fee and cancel our DirecTV in favor of a much cheaper streaming service. This will save us $200 a month with minimal discomfort.
Meal Plan –
Meal planning is one of the easiest ways you can save the most money in your budget. Do you really know what you spend on food each month? I have budgeted a set amount every month for years, but when I went back through our 2017 bank statements and added up all those extra trips to the grocery store, and all the times we ate out we easily doubled our grocery budget some months. I have some meal planning tips here
Get Real About Needs And Wants –
A lot of people say that they have already cut their budget to the bone. 99% of the time that’s not true, they are just confusing their wants and needs. If you are in debt, you need to keep cutting til it hurts. I could very easily justify our expensive cell phone plan. After all several of my businesses and side hustles rely on my access to the internet! But if I want to get real, I’m not bringing in enough income to justify an expensive plan and with some minor discomfort I can make a much smaller data plan work. 20 years most of us didn’t even HAVE cell phones and somehow we survived. Buying organic veggies is not a necessity.
When I was a single mom digging my way out of debt my dryer died. That’s a necessity, right? Nope. I went without for MONTHS and just hung my clothes to air dry. Was it a pain in the butt? Absolutely! But I had a higher net worth then than I do now! When you get serious about getting out of debt your needs and wants will change dramatically.
You Are Who You Hang Out With –
When you are serious about changing your habits, it is critical that you surround yourself with people who will support you. One of the most self-sabotaging things I have ever done is continue to allow someone with low self-esteem and a shopping problem in my inner circle. She was constantly comparing herself to me and trying to make me feel like me and the things I owned were inferior. She had major insecurity issues that she tried to fill with shopping and always buying something bigger and better. In the end she was not only miserable, she was broke and living a lie. The moment I released myself from that toxic situation I started gaining traction in my own debt-free journey. Whether it is people who are local to you or a Facebook group, seek out like-minded friends on the same path.
Now that you know what margin in and why you need it, take another look at your monthly budget!