Military Spouses: Protect Your Family with a Margin of Safety

The unexpected is not limited to financial markets. Life is full of surprises, ranging from mildly annoying mistakes or mishaps to life-altering crises. While we can’t predict all of our life’s twists and turns, we can be proactive to shield ourselves from major fallouts. This protective buffer is better known as a margin of safety. It’s a concept that is often talked about as it relates to investing, but margin of safety can be applied all through our lives as a cushion to protect our well-being and quality of life.

In this episode, I’m sharing what a margin of safety is, why it’s essential, how to create it across different areas not just investing, and common mistakes to avoid.

What is a Margin of Safety?

A margin of safety is a buffer that protects you from the unexpected. It’s the space between you and a problem. That problem could be anything between paying your rent on time to a disaster. In investing, building a margin of safety means buying a stock at half price or well below its intrinsic value. The theory is that by buying it so low, you have a buffer in case you’ve made a mistake or something crazy happens in the market. In life, a margin of safety can be used to anticipate challenges and prepare yourself to handle the impacts from those challenges.

Margin of safety isn’t about expecting the worst. It’s about expecting the unexpected and being prepared to handle it with less stress and more resilience.

Areas Where You Can Create a Margin of Safety

The margin of safety applies to nearly every aspect of your life. Here are some key areas where you can establish your buffers:

Mishaps and Accidents

Life’s little annoyances, like booking a plane ticket for a month earlier than planned or spilling a whole bottle of water on your laptop. Both are true stories I did to myself. With mishaps and accidents, you can create a margin of safety by:

  • Investing in durable, high-quality items like a good cell phone case.
  • Setting aside emergency funds for quick replacements or additional fees.
  • Practicing mindfulness and situational awareness.
  • Leaving time so you aren’t rushing into decisions or booking your plane ticket for the wrong dates.

Health

Health challenges—whether they’re a common cold, something chronic, or unexpected—can derail your life. When it comes to your health, building a margin of safety might look like:

  • Maintaining a healthy lifestyle with balanced nutrition, exercise, and sleep instead of eating a whole bag of Chili Cheese Fritos in one sitting. Alright, that one is me.
  • Keep up with regular medical checkups and dental cleanings. It’s all fun and games until you have a trip planned and you need a root canal.
  • Having health insurance and an emergency medical fund. In the military community, many of us have medical coverage, but many veterans and divorced spouses sometimes skip on medical and dental, which is zero margin of safety.

Finances

Securing your finances is a top priority for a margin of safety. Unexpected expenses, a job loss because of a PCS, or a bad investment can leave you in an uncomfortable spot. Having cash on hand and a strategy for your money helps build a moat of protection in many areas of your life. You can build a financial margin of safety by:

  • Creating an emergency fund with six months of living expenses.
  • Diversifying military spouse income streams.
  • Avoiding high-interest debt.
  • Practicing disciplined budgeting.

Relationships

Military life can be hard on marriages. Even the most solid relationships can experience rough patches. Build an emotional well-being and relationship margin of safety by:

  • Practicing open and honest communication.
  • Setting healthy boundaries.
  • Cultivating a supportive network of friends and family.
  • Having money conversions.

Weather and Natural Disasters

With the recent devastations in western North Carolina and the fires in California, we all know that storms, floods, and extreme weather can disrupt daily life. Build a margin of safety for Mother Nature by:

  • Keeping emergency supplies like food, water, and flashlights.
  • Having a plan for emergencies so everyone knows what to do.
  • Maintaining home and renters’ insurance.
  • Keeping extra medicine or medical items family members need.

Related: How to Financially Prepare for a Divorce

Mistakes People Make

The idea of margin of safety is pretty basic. Remember, it’s about putting a layer of protection between you and a problem. It’s simple, but people often fall into traps that take away from their margins of safety.

  • Overconfidence: Believing that bad things won’t happen to them.
  • Procrastination: Delaying action until it’s too late.
  • Neglecting Balance: Being overly cautious in one area while neglecting others. You may have all the money in the world but haven’t been taking care of your health.
  • Ignoring Maintenance: Failing to review and update safety measures every once in awhile.

Wrapping Up Protect Your Family With a Margin of Safety

Building a margin of safety in life isn’t about war gaming every possible thing that can go wrong in life. It’s about acknowledging the reality of uncertainty and taking basic steps to minimize its impact. Whether it’s building up an emergency fund, maintaining your health, or preparing for natural disasters, having a margin of safety gives you space and peace of mind to handle unexpected problems.

MILMO Show Sponsor

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