Can You Touch Your Financial Toes?

Neil trying to touch his toes (for real).

Don’t let this happen to your money!

During my years as a gymnastics coach, I learned two principles about physical flexibility: some people are much more naturally flexible than others. But anyone can increase their flexibility through regular stretching. The same truths about physical flexibility apply to fiscal flexibility, but with even more capacity to increase your financial stretchiness. Because your money habits are easier to change then your DNA!

Financial flexibility is an accounting term that describes “a company’s ability to react to unexpected expenses and investment opportunities.” We find this concept useful for personal finance as well. What options would open up if you could live on half your current income? How easily could you weather a job loss or unexpected illness?

Whether you are counting down to financial independence or just starting to get out of debt, focusing on financial flexibility allows you to enjoy the journey and live for your values, not just your job. So let’s break down the definition and consider how flexible your finances are by considering how poised you are to respond to unexpected expenses and opportunities.

Responding to Unexpected Expenses

Do you have an emergency fund? Perhaps the worst financial advice I’ve heard is that you should have a credit card for emergencies. No, you should have an emergency fund for emergencies! Everyone should have an emergency fund of at least $1,000, but preferably enough to cover six months’ expenses.

We all know that “life happens.” You may get in a car accident. You or your child could get sick and rack up medical bills. Sometimes people get laid off. Bad things happen to good people, but smart people are prepared for inevitable bumps in the road of life.

Do you have any debt? In our view, personal debt makes you inherently less flexible. It limits your options because it increases your expenses and the amount of income you must make to survive. It means your money is spoken for before you even earn it, because it actually belongs to someone else. The proverb “The borrower is slave to the lender” expresses the emotional impact of debt well.

Carrying consumer debt is a highly inflexible position. You are effectively paying extra for your expenses since you are charged interest. It’s also a difficult trap to escape since accumulating interest makes repayment progressively harder over time.

There are times when debt is an appropriate financial decision. Neil took $25,000 in student loans to complete a five-year engineering program. Considering his earnings since graduation, he’s enjoyed a good return on this investment. But we also decided to reduce the amount of interest owed by paying them off early.

Carrying student debt makes it harder to take risks required to grow your career. Having no student loans made it easier for Neil to leave a good job at a Fortune 500 company and change industries into a more rewarding job. It also helps allow me to stay home with our young children. And we’ve been freed to focus on other goals, like saving for our children’s education.

Mortgage debt may also be reasonable, but keeping it in proportion with your income is key. Common advice is to limit mortgage payments (PITI) to no more than 25% of your monthly income. Pre-paying the mortgage makes sense to us as we wish to gain the flexibility that comes with lowered expenses, while others prefer to direct those funds to increasing investments.

Responding to Opportunities

The second side of touching your financial toes is responding to opportunities. Have you ever said “no” to a great opportunity because of money? Do you limit your travel, volunteering, giving, or fun because of money?

Unless you’ve already achieved financial independence, you probably answered yes. While we can’t do whatever we want without any concern for money, the lens of flexibility allows us to make values-based spending a reality. On the one hand, we are not constricted by the burdens of excessive debt and over-spending. At the same time, we refuse to pursue financial independence at the expense of our big-picture purposes.

Try to get a vision for how your options would increase along with greater financial flexibility. Maybe you want to focus on family, pursue a different career, or become self-employed. Pursuing financial flexibility should make you more available to spend time in ways that are rewarding and meaningful.

For us, financial flexibility allows us to travel on several family vacations and church retreats each year. It allows us to forgo side hustling in favor of spending time with family, friends, and our volunteering commitments. Flexibility encourages us to be generous, even if it means saving less, because we know we have ample resources to share.

As flexibility increases, saying “no” to opportunities should come from your values rather than your bank balance. We say “no” to over-spending on what we don’t value, like frequent dining out, overpriced children’s activities, or driving new cars. But we also feel free to say yes to pricey opportunities like short-term mission trips, having children, or sponsoring children in poverty. These endeavors are well-worth their cost, but if we were bogged down with debt or lacked sufficient savings, we would miss out or end up in debt.

How close are you to touching your financial toes? If you have emergency savings and little to no debt, you pass the stretch test! If not, remember that flexibility is a trait anyone can work to increase. Dream about the opportunities flexibility would open for you, and then make a plan for progress. Focusing on flexibility celebrates that every step is an inch closer to touching your toes.

Have you ever said “yes” to an expensive opportunity? What was invaluable about it? What is your next step toward touching your financial toes?


14 Responses to “Can You Touch Your Financial Toes?”

  1. Emily says :

    Great post! You summed up your mission so well! It’s inspiring since Josh and I are on a similar journey to financial flexibility, not financial independence, as well! Generous giving and early mortgage payoff are our current goals – without sacrificing the work / family balance or being stressed about jobs.

  2. DC YAM says :

    Wonderful message, but I’m stuck on the whole flexibility note at the beginning of the post. It reminded me of 8th grade where we did fitness testing which was horrible for those who weren’t athletic! Don’t get me wrong, I was “fit” and could participate in sports and do decent, but I will never forget that dang stretch test where they measure how far you could reach. I am not flexible at all so it was depressing how I couldn’t stretch that far!

    • Kalie says :

      Sorry to have brought back bad gym class memories! Neil was the same way–very athletic but not at all flexible. It was nice for me who was off the charts on the stretch test, but awful at all gym class sports!

  3. Tonya says :

    Financial flexibility is a great position to be in, even if you are not financially independent. There is just something very comforting about knowing you have options at any given time.

    • Kalie says :

      Yes, it it all about having options. And I think this is something anyone can work toward, whether or not they are interested in or able to pursue FIRE.

  4. Ernie says :

    I’m in the middle of one of those financially flexible times right now. My goal this year is to pay off this huge debt I have, but my family got hit with a ton of medical expenses in February. I had to hit pause on my debt payoff plan while I paid the med bills. It was super frustrating to take my focus away from my goal, but at the same time I’m super thankful that I had the flexibility to pay for these med bills. I should be able to get back on the debt payoff horse in April.

    • Kalie says :

      I’m sorry that you had to deal with medical expenses, but glad you could do so without going into further debt. That is the power of flexibility!

  5. Our Next Life says :

    Love this concept. Here’s something interesting we’ve noticed: As we get more financially flexible, we sometimes get less *mentally* flexible. We’re so close to our early retirement goals at this point, and technically financially independent (though on a thiiiiiiinnn margin), which is all great. But we’re SO focused on reaching that FIRE goal that I’m sure we’ve passed up opportunities in service of the big goal. Your post is a good reminder that we need the financial flexibility and mental flexibility to move forward together, not veer off in different directions. 🙂

    • Kalie says :

      We like to remind ourselves that “financial flexibility shouldn’t make us inflexible.” However, there is something to pressing toward an approaching goal with a single-minded purpose. I think it’s a problem when 10-20 years of one’s life become inflexible because of a financial goal (whether FIRE or an affluent lifestyle or whatever else) that could disappoint without a bigger purpose.

  6. Brian says :

    Awesome that you guys paid off your student loans. Student loan debt has become a crisis and the epitome of the twenty or thirty-something; a problem which our parents and grand parents weren’t burdened with, which in a way, makes it unfair for us. Something needs to be done but until then, either paying them off early or negotiating a lower rate (like I did) can help.

    • Kalie says :

      That’s great you were able to negotiate a better rate. And yes, we are grateful to be done with our student loans. It is a relatively new and pervasive problem for our generation.

  7. Amy says :

    While I can easily touch my physical toes, my current financial flexibility level only allows me to reach my knees. You make great points in this post, and we’re going to keep working on our stretching. 🙂

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