Financial security looks different to everyone. But in broad strokes, it comes with the peace of mind that you and your finances are ready to take on anything that comes your way.
So, what does the average person need to feel secure? Below, let’s define financial security and find out how you can achieve it for yourself.
What is Financial Security?
Financial security means you have enough money to cover these basics:
- Paying your bills
- Splurging on wants
- Recovering from unexpected expenses
- Saving for your future
That’s it. Financial security doesn’t hinge on the house you own, the car you drive, or the brand name of your clothes. When you get to the heart of the matter, it doesn’t get any more complicated than the above four goals.
Paying Your Bills
Feeling secure starts at home; you need to know you can easily cover your typical bills and expenses required to run your household.
Timing here is important, too. You can feel far from secure if you have to put spending on hold until payday, even if you eventually pay your bills by the due date. Security gives a feeling of confidence that your budget works. Check out these budgeting tips to help you get started.
Splurging on Wants
A collection agency suggests that paying your essential bills shouldn’t stretch you too thin. You should also be able to splurge on the fun things that make life worth living. Whether fun to you is a globetrotting vacation or a new entertainment system, you should be able to splurge on these wants without worrying about how you’ll pay rent.
Recovering from the Unexpected
Having to replace your brakes or take your cat to the vet ahead of schedule can come with a steep price tag that you may not be able to cover out of pocket with your paycheque alone. Financial security gives you the tools to recover from these unexpected setbacks without feeling stressed.
Most people combine an emergency fund with a line of credit to bounce back from the unexpected.
An emergency fund is essential — you have to earmark some money each month to go towards savings. As for a line of credit, you can find out more about how this account pairs with an emergency fund by visiting a site like Fora. A Fora Credit line of credit provides a safety net for your emergency fund, giving you extra security in case your savings fall short after one too many emergencies.
Saving for the Future
Financial security ensures stability years from now. It gives you the freedom and flexibility to look beyond your everyday needs to focus on long-term goals. You should have enough money in your budget to set aside for your future, saving up for a down payment or retirement. More still, you should have access to tax-advantaged funds and high interest accounts that optimize these savings goals.
The Takeaway:
Financial security is more than your salary. While a six-figure income can make gaining financial security easier, it isn’t necessary. Anyone can feel secure provided they meet certain financial needs. You need to feel comfortable that your income can provide the life you want.
Financial security is all about living within your means, so your budget can focus on the basic goals outlined above.
How you get there may differ from your friends or neighbours. But no matter the journey, the destination always comes with confidence and a sense of well-being about your future.
