What is Financial Security?

What is Financial Security?

Financial security means many different things to many different people.

Many of have a very beautiful and grand notion; relaxing back in our deck chairs with a cocktail and a limitless bucket of cash sitting beside us.

A beautiful notion, isn’t it.

But is that really financial security? Are the ‘financially secure’ all lounging about with buckets?

No, they are not.

Financial security is far easier to obtain.

What is financial security?

For most of us, financial security means:

  1. Having more money coming in than going out
  2. Having a buffer against shocks
  3. Having the ability to manage your money and yourself

Financial security is not the big bucket of limitless money that sits beside you. Financial security is the knowledge that whatever happens, you can cope.

How do you reach financial security?

More coming in than going out

You need to track what you spend against what you earn. From there you can cut expenses, create a realistic budget, put money away, and generate a sense of financial security.

It might be easier said than done, though. It often requires that we change our habits, and wherever you go, there you are.

If you throw your money to the wind today, it’ll keep blowing away tomorrow. If you stress about every dollar now, you will stress about every dollar tomorrow.

If you are wise and patient with your money now, you will be wise and patient with your money tomorrow.

All of these mindsets are habits. If you want to find financial security, you need to develop habits that help you achieve it.

Investopedia gives you a deeper insight by outlining 10 simple tips toward financial security you can use right now.

Buffering against shocks

Life will throw the unexpected at us; redundancies, rising interest rates, medical emergencies and environmental disasters.

To be ‘financially secure’, we need to be able to overcome these events. Getting there requires long-term budgeting and goal setting, as these allow us to:

  • Invest in other assets (shares, cash, property)
  • Provide security (health insurance, secure housing)
  • Invest in our own potential (education, health)

Confidence and skills

Developing financial security is useless if we still panic and fret about money. It is useless if we simply upgrade our house and car when the neighbours do.

Financial security is an ability to manage your money despite the environment around you. It is a confidence that you can control your own finances; that everything will work out.

This type of confidence grows from investments in yourself. It grows from the experience of effectively managing your money. It grows from the experience of setting budgets, saving and responding to what life throws at you.

 

 

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