The financial independence community introduced me to the concept of marginal gains – but they garnered the idea from cycling coach Dave Brailsford who believed that if you could improve every aspect of your cycling by just 1% over your competition, you would have a winning advantage. Translated into money-speak, we can loosely define marginal gains as a series of financial moves that, when stacked together, give you winning advantages over people not employing any or all of those same improvements. Unfortunately, this is not where my family was when we first heard about financial independence, we had a tower of marginal losses stacked against us at that time.
Examples of our marginal losses:
- Paying busting-at-the-seam cell phone bills
- Never seeking better rates/discounts on insurance products
- Shopping for groceries wherever we felt like it with no budget amount in mind (“we have to eat, I want to feed my family healthy food, and this is the best we can do” – my own justification for years of out-of-control food spending)
- Buying new/used cars every couple years, where’s the tourniquet?
- Trying to keep up with the technology whirlwind
- Trying to keep up with other people’s expectations (read: gift-giving, dinners out with groups, kid activities)
- Eating out all the time
- Never trying to fix anything that broke at our home before calling in help
- Frivolous spending (I’m looking at you craft and home decor stores, stop trying to lure me back with those 40% off coupons!!)
- Giving in to the “I worked hard/I deserve this” mentality even while we could see the underwhelming results of all of our overtime and hustle
- Not getting employer 401K match for years
- Not deriving any benefit from tax-deferred savings options
Taken as a whole, it’s no wonder we were paycheck to paycheck. We regularly compared ourselves to the older generations in our lives and were convinced we would end financially well-off because we were making “better” choices than they had made (such as buying more affordable housing, which was a good thing we’d done, but it was being negated but all the sub-optimal nonsense). In truth, we had no logical reason to believe we were going to end our years in financial security. If this is your picture right now, realize that these marginal losses are having a bigger impact than you want to admit. You might have good income, like we did, but you will never reach full (or any degree of) financial strength or gain the advantage you need to win your freedom and independence from the overtime and constant hustle if you dig in your heels and don’t change anything. Start today, turn every marginal loss in your budget into a marginal gain. To end the mild depression I’ve caused you, let’s focus on what marginal gains are and what taking back your money and time looks like (and these are almost all things we did, by the way):
Examples of Marginal Gains:
- Switch your cell phone service to the lowest service plan offered and use safety mode (call and ask your provider about this if you’ve never heard of it) to never go over your set monthly amount, or even better, try an MVNO (stands for “Mobile Virtual Network Operator” and basically these are small companies that cheaply lease cellular coverage/data from the 4 large carries)
- Switch your car insurance to the lowest rate available, don’t assume what you have is the best you can do
- Seek out lower home insurance rates
- Grocery shop at value stores like Lidl/Aldi or somewhere comparable
- Buy used cars and keep them for as long as possible, like forever
- Consider maxing out your 401K and IRAs as your “treat” to yourself, one that won’t add sneaky extra pounds like those cookies, croissants, scones… I am one of few with the super-power of not needing caffeine but the pastries still have a stronghold, sigh
- House hacking (we lived with our in-laws for over a year, we win hands down for that! And at the time I’m writing this we are renting out a room in our house.)
- Leveraging credit card rewards/travel hacking
- You-tubing/googling ways to save on your home water/electric bills
- Creating side hustle/passive income streams
- Learning more about tax laws to maximize available savings/deductions (we have worked with a great CPA in addition to reading articles, listening to podcasts, etc.)
- Contributing as much as humanly possible to a 401K match program, or open a solo 401K if you work for yourself (you can also give yourself an employer match with these!)
- Flipping expenses like clothing on their head and making them cash flow into your pocket, what most of this blog is about!
And the list keeps growing if you are willing to scout out knowledge and apply it to every line item of your budget (see BOUNTIFUL BOUNDARIES if you aren’t familiar with budgeting). Marginal gains are very motivating and exciting, they give you the ability to find financial and mental space to dream and plan your future. Please don’t relegate yourself to a lengthy list of marginal losses. None of them may seem like a big deal by themselves, but pieced together they can suck the life out of your finances and demotivate you from working any harder or smarter. Financial strength is not out of reach, it’s just a handful of purposeful changes away. Flip your list of losses upside down and build a tower of marginal gains, it is the necessary starting place in reaching financial strength.