What is financial security? Financial Security is having sufficient resources to support a standard of living now or in the future. What does this mean to the average person? A good working definition may be having enough money to cover your current and future expenses. Everyone has a different definition of what is financial security because our expenses change. What do you need to know?
Do you ever think about financial security? Are you under the age of thirty? Most young people do not think about their future very much. They may have started their career and even started saving for retirement, but they also realize they have thirty or forty years until retirement and just focus on the here and now. You may have just graduated college and have some student debt or more concerned about getting a new car or home to think about your future.
I understand because once upon a time, I was young too. The difference was I had no debt and some savings. I bought my first home when I was twenty-seven (27) years old. The real difference was I always considered savings a priority and lived on what was leftover. Yes, living within your means is important! Instead of going out and spending a lot of money, we would get together with friends and family. Everyone pitched in with some food which kept expenses low.
What can you do?
- Lifestyle – You can have fun and not break your budget! It is all about choices separating needs and wants. Keep a spending diary so you know what you are spending your money. Make up a budget to help you achieve your financial goals. There are a lot of free, almost free and fun things to do.
- Career vs. job – A job is something you do to earn money. A career is a profession that you have training, skills and perform for a long time. You want a career to have financial security.
- Goal setting – This is not just a sometimes activity! You want to incorporate goal setting in your career and every important goal you set. Achieving goals adds to your financial confidence and security. Short and long term goals should something you routinely do.
- Retirement – It may be thirty or forty years away, but start early. A delay of just ten years will cut your retirement savings more than a third! Much better to start small and add as you receive raises and promotions. As little as two thousand ($2,000) dollars a year in your early twenties can grow into a big number.
- Knowledge – We use money every day and you need to learn about it. You should be saving for retirement, buying a home, buying a car, getting married, having children or just investing. You should know what you are doing! Start reading and learn how to use your money better. In the meantime, start saving!
- Value shopper – First and foremost, do not spend more than earn. Buy based on what you need versus what you may want. I love electronic gadgets, but I do not succumb to everything that comes along. I just wait until I can buy it at a more reasonable cost. It is called a value conscious shopper.
- Don’t borrow – You only want to borrow money to purchase assets such as a home or investments. I am not giving you permission to go into debt, but used prudently can yield a good return. Interest rates for home mortgages are very low and you are buying an asset that appreciates or increases over time.
- Small steps – In your twenties, everything is a big deal! By starting early, you can achieve much more than waiting until you have more money. This is true for investing and spending. Spend less and put that money to work for the future. Buying a small home or condominium in your twenties puts you on the road to accumulating more later.
- Start businesses – a business does not have to be big to help you get to your goal. Reinvest your profits to increase the business and your future. I started with an investment in income property and turned it into a business that helped me achieve financial independence in my thirties.
- Risk taker – Too many people are afraid to invest in the stock market. Partly because of lack of knowledge and partly because of insecurity. You want a decent return on your investments and you want your money working for you. Investing in the stock market offers a more diverse allocation than other investments. Be a risk taker in your twenties! Just make good decisions.
If you follow these steps, you will achieve financial security! Notice, I did not specify an age because just getting on the right track provides security. Shouldn’t financial security or independence be a goal for most people? You don’t have to wait very long to have that feeling, just take action! Planning your finances, making good decisions and acting financially responsibly are just some of the things you can do to achieve financial security.
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