The Importance of Financial Margin

Margin is one of those important things in life that we often take for granted, and that can lead to trouble. Margin basically means “something extra.” A little extra time, or even distance from the car in front of you. It’s critical, especially with your finances. We’ll talk about that on Faith and Finance. You may not always connect the word “margin” with personal finances, but you’re probably familiar with its use in the business world where the term is usually “profit margin.”When we buy an item at the store, we don’t consider how it got there. But someone had to make it — usually many people working for a company. They all need to be paid wages.Then, salespeople had to get retailers to buy the product or service, and they need to be paid a salary and often a commission on top of that. Transportation people have to get the product to retailers, and they need to be paid. Then retailers have to mark up the product because they have bills to pay and need to make a living, too.So you’ve got several business entities involved in getting that product to where you can purchase it. And at each step along the way, the manufacturer, trucker, and retailer all need to have sufficient margin (profit) to make it worthwhile for them or the product never gets to you.Now, how much is sufficient? It varies widely depending on the product and how much it costs to bring it to market. Other factors play a role: competition, market size, and volume.The more units you sell, the smaller your margin needs to be. A new automobile has thousands of dollars of margin, but a lot fewer of them are sold than, say, hamburgers at fast food joints. You know, so many billions served? If you sell a billion of something, even with only a few pennies margin, you’ll probably do all right.HAVING ENOUGH MARGIN IN YOUR LIFESo how do we apply this lesson to our lives? The same principle holds true when it comes to our margin, and not just for money, but for our time and energy as well. How much do we have left over after all of our obligations are met?You have your job, family commitments, chores around the house, and obligations to your church. You must also prepare for unexpected or irregular expenses, a broken water pipe or car repairs. All of these involve time, money, and effort on your part.Do you have time and energy left over to recharge your batteries and spend time with God? That’s another form of margin that we all need.Now, I’m not equating time with God to your other obligations. That’s not just something to check off your “to-do” list.Time with God isn’t something we have to do, it’s something we GET to do, and it’s critical for living a balanced life with our time, families, service to the Lord, and, of course, our money.MARGIN IN YOUR FINANCESNow, what does having margin with our personal finances look like? It simply means having extra for the so-called rainy days: family emergencies, medical expenses above your deductible, or helping a visiting missionary or college student if God speaks to your heart.The key to acquiring that margin is to plan your spending in advance and live on a budget to help you decide where your money will go.Did you know there are only four things you can do with money? You can live on it, give it away, owe it to someone, or grow it. Every dollar you’ve ever made or ever will make goes into one of those four buckets. A budget is just a way of deciding ahead of time what goes where.By the way, this isn’t the same as balancing your checkbook, for example. That’s just seeing where your money went, not deciding in advance where it should go.If you haven’t downloaded the FaithFi app at your app store yet, we encourage you to do so. It uses the envelope system and gives you three different ways to set up your budget— making the process easy. If you’re not making spending decisions ahead of time and giving yourself financial margin, your income won’t be able to keep up with your outgo.As you set up your spending plan, you may see that you have more month left over when the money runs out. If that happens, you’ve got to make some changes.  Find a way to increase your income or reduce your expenses.The key is learning to live on less than you make, having margin or money left over at the end of the month. Without it, you’ll slide into debt and never be able to save for the future.And here’s a bonus: when you finally get financial margin, you may find that you also have more physical and emotional margin. You’ll sleep better, feel more relaxed and be better able to use your spiritual gifts to serve God and help others.So that’s the importance of margin— financial and otherwise.On this program, Rob also answers listener questions: Are CDs or stocks wise investments for a young investor in their 20s? How do you develop the right strategy to pay down your mortgage before retirement? Is it wise to use liquid cash to pay off debt when approaching retirement? Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.   Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.