Money doesn’t buy happiness, but living a happy life is nearly impossible when you’re constantly stressed about money.
You need financial security to truly be happy. It provides a safety net, allowing you to focus on health, wellness, and enjoying life.
What is Financial Security?
Financial Security is having enough money to fund your life while feeling secure in the knowledge that you won’t become destitute.
There’s no set number for financial security, as it’s more related to your safety net than the number in your bank account.
People making less than 40K per year can feel financially secure, while people making over 100K per year might feel like they’re teetering on the brink of disaster.
Financial security is feeling good about your financial situation. It’s knowing that you will be okay, that you will have a home to live in, and food to eat.
Why is Financial Security Important?
Financial security is crucial for happiness.
It makes us comfortable with our lives, giving us the breathing room we need to expand our horizons, seek out challenges, and explore life’s bounty.
Psychologically, it’s vital because it relates to a basic component of Maslow’s hierarchy.
Maslow’s Hierarchy of Needs
Maslow’s hierarchy illustrates our fundamental needs in pyramid form. Think of the pyramid as building blocks, where you have to build the layers in order. You can’t reach the third step if steps one and two aren’t in place.
The bottom of the pyramid contains our basic needs—food, shelter, etc. We literally need these essentials on a daily basis to survive.
Level two is safety and security. After your basic needs are met, you want to ensure they will continue to be met.
Financial security lives at step two. Nothing that comes after – family, relationships, status, or self-actualization, is possible if you don’t have security.
That’s why it’s crucial to a happy, healthy life.
How to Achieve Financial Security
The easiest way to achieve financial security is to be born with wealthy parents.
That’s unrealistic for most of us. We have to achieve it on our own.
To become financially secure, we must trade the best years of our lives to companies that don’t care about us. We must scrimp and save, battle horrendous managers, job hop, and work our way to the top of the ladder to earn enough money to thrive.
It’s a challenge, but one you can overcome.
These 16 tips will help you.
Understand the World We Live In
Things were far easier in the past. People could get a job, work for that same company their entire careers, and then retire around age 60 with a fat pension and a little social security.
Companies did away with pensions a long time ago. They no longer value loyalty.
You can’t rely on a company for your financial security. You’ll harm your long-term financial health by hoping to earn their loyalty.
Job Security
Job security helps with financial security. It’s easier to build wealth when you have a stable job.
The old advice of doing the best you can at work to make yourself indispensable is still true to a point. Showing up and doing the job you’re paid to do better than anyone else can decrease your chances of getting laid off and help you build a solid reputation.
However, you also must remember that companies don’t care about you. Don’t let yourself get taken advantage of by coming in early and doing unpaid grunt work.
Build Skills
Building a wide range of valuable skills will help you grow your career. The more skills you have in a variety of topics, the more employable you will be. It’s vital to maintain a diverse set of skills in case an entire industry gets taken over by AI – you always will have something to fall back on.
Volunteer to help with projects in areas you’re unfamiliar with to get experience. Take online courses in different specializations to earn certifications. Learn as much as you can whenever you have the opportunity.
Always Look for Opportunities
Opportunities abound, but we’re not always looking.
You should be.
Your company won’t be loyal to you, so why should you bother staying faithful to them? Keep your resume up-to-date. Apply for other jobs. Build your network.
Say yes to opportunities to learn and grow.
You never know when your company will announce layoffs or when that new person you meet happens to be the CEO of a competitor.
Make a Plan
“Those who fail to plan, plan to fail.”
Making a financial plan is essential to achieving financial security.
Take time to consider how much money you need—for emergencies, retirement, and a comfortable life. Write out your short and long-term financial goals. Look at your income and expenses and decide whether you need to cut back or earn more.
How will you do that?
Developing a financial plan takes time and effort. It will likely change year to year as your circumstances change, but that’s okay.
Having a plan in place will help you make minor adjustments and ensure you stay on track to meet your goals.
Spend Less than You Earn
While making your plan, you may have found discrepancies between your spending and income.
You will never achieve financial security if you spend all your money.
It’s time to examine your budget and cut unnecessary expenses. Do you need to eat out three times a week? Can you downsize your car? Are you overspending online?
Spending less than you earn will ensure you have the money you need to fund your financial security.
Create Multiple Income Streams
The old way of relying on one job to support you throughout your life is over. In today’s world, companies are constantly downsizing and laying off workers. Entire industries are getting replaced by AI and cheap overseas labor.
On the plus side, there’s far more opportunity for creating your own income than ever before. Start a business, house hack, pick up a side hustle, or invest in a brokerage account to give yourself additional income streams should something happen with your primary job.
The gig economy isn’t ideal for long-term stability, but having something as a backup will definitely help you maintain your financial security regardless of what happens in your labor market.
Avoid Debt
“I gotta go work for a man, who doesn’t know my name, makes me wear a uniform so everybody looks the same, but I can’t be late I got these credit card bills I gotta pay” – Plain White T’s
As Tom Higgenson from the Plain White T’s sings, debt keeps us trapped in an endless cycle of work and repayment.
Although it’s nearly impossible to live without a little debt, like mortgages and car notes, you’ll achieve financial security faster if you avoid debt as much as possible.
Pay off your credit cards and stop using them. Don’t get any more. Save up as much money as possible for a new car and home downpayment before buying.
The less debt you have, the easier it will be to achieve financial security.
Save for Retirement
In an ideal world, you would have started saving for retirement with your very first paycheck.
If you didn’t, start now.
Retirement is one of the biggest expenses most of us will face, and far too many Americans fall woefully short.
If they offer one, contribute to your company’s 401K – and get the employer match. That’s like free money. If you quit that job, roll the 401K into an IRA rather than cashing out.
If your company doesn’t offer a 401K, open your own IRA and funnel as much money as possible into it.
You may think you want to work forever now, but your tune may change when you hit 65 and can no longer work.
Invest in Yourself
The best way to achieve financial security is to invest in yourself. When you invest in yourself, you don’t have to worry about the job market or what your company wants.
It’s about building the life and skills you want.
Take classes, read books, meet people, travel the world, try things, overcome challenges, and become the best version of yourself.
Opportunities will come when you’re confident, skilled, and happy, and financial security follows.
Maintain an Emergency Fund
Financial emergencies can destroy the best-laid plans. Your best defense against an unexpected expense is an emergency fund.
Unfortunately, the old advice of maintaining a $1000 emergency fund no longer works. Nowadays, car repairs, new appliances, and vet bills rarely cost less than $1000.
Aim to save $5000 in an emergency fund so when the unexpected pops up, you can pay for it.
Manage Expected Expenses
Far too many people forget about regularly occurring expenses and then act surprised when they pop up.
Christmas comes in December every year. Birthdays and anniversaries occur on the same day every year. Taxes are paid in April.
Prepare for these annual expenses throughout the year so you’re not blindsided when they arise.
Buy Proper Insurance
Insurance can save you from the worst financial emergencies. Check your coverages to ensure you’re getting the best price on the services you need.
Most people already have car and health insurance, but consider also purchasing pet insurance to help with vet bills and a home warranty to cover repairs that homeowners insurance doesn’t cover.
Marry Well
The person you marry will have significant impacts on your financial security. They could contribute to your financial plan, boost your joint savings rate, and improve your quality of life, or they could derail everything you’ve built.
Get to know someone before you marry them. Have the difficult money conversations before saying “I do” so you know what you’re getting into. Don’t risk your financial future for someone who doesn’t care about theirs.
Protect Yourself
If you do get married, get a prenup to protect your assets and your contributions to the partnership.
Prenups are even more important if one person becomes a stay-at-home parent. That person is sacrificing their financial security to raise children. The prenup must account for the sacrifice, protecting the partner that doesn’t work.
If your future spouse refuses to protect you if you stay home and raise the kids, you might want to rethink the relationship.
Vote
Most websites avoid the hard truth that policy affects financial security, but we don’t.
The best thing you can do to ensure financial security for yourself and your community is to vote.
Research the policies that parties promote. Vote for those who will help real people and improve your overall financial well-being.
Personal finance is far more political than most people realize. Our policies dictate which programs get funding and which don’t. Politicians decide whether businesses can poison our food and how much taxes everyone pays.
When you cast your ballot, learn exactly what you’re voting for. Support policies that will ensure your financial security throughout your life.
Financial Security Matters
Most of us sell the best years of our lives for financial security – and it’s worth it. We need to survive, and we must do our best in the world we live in.
Working towards financial security will enable you to survive while striving to live the life you want.
I am curious, what is your sister doing to be “off the grid”? I like that you included voting in your post, I feel it is very relevant to finances. I get pretty edgy about voting, my philosophy is: vote for what you want and then your justified to complain. No voting, no complaining! Apparently, I am feeling a little soap boxy today….
She bought land and is building a house on it. She’s collecting rainwater and using a generator for power. She doesn’t even have access to the internet at home right now! She’s not totally off grid yet, but she’s working on it, and I’m proud of her for that.
Haha love this post – and totally true. We do sell our souls at our jobs every day. Or at least that’s how it feels sometimes. I wouldn’t even mind if work were more sporadic. Like two long hard days and then the rest of the time to do what I need to, that’s something I could handle I think. I probably wouldn’t even be working toward FI then.