What Is Financial Security, and How Do You Get It?
Financial security means different things to different people. To some, it may mean having enough money to cover all your bills, save for retirement and then have some left over. To others, it may mean earning a six- or seven-figure income, maintaining a robust investment portfolio and owning several real estate properties. Regardless of your interpretation of what it means to be financially secure, it’s likely on your long-term list of financial goals to achieve financial security.
What Is Financial Security?
To put it simply, financial security means having enough money to fund your lifestyle, as well as work toward your financial goals.
While financial security can be very tied to the numbers – how much you earn, how much you spend and how much you have saved – it also takes into account how you feel about your financial situation. Do you feel secure in your earning power and confident that you’ll be able to cover any unexpected expenses? Would your emergency fund float you for six months to a year should you lose your job or become too ill to work?
Common Obstacles to Becoming Financially Secure
According to the Federal Reserve Bank of New York, household debt in America totaled $13.54 trillion in the fourth quarter of 2018. While debt may be the new “normal,” it’s a major obstacle in achieving financial security.
Here’s why: If you have debt, especially high-interest credit card debt, you’re likely paying upwards of 16% APR each month. A few exceptions to the no-debt rule can include mortgages, which experts generally agree to be a good investment, and student loans. While ballooning student loan debt is another financial concern, investing in your education can actually have the opposite effect, since it can boost your earning power in the future.
How to Get Financial Security: Make an Emergency Fund
To achieve financial security, start by setting up an emergency fund. Experts suggest tucking away at least enough cash to cover all your bills, living expenses and debt payments for at least six months, or even up to a year. Not quite there yet? Start with three months’ living expenses and go from there.