“It’s easy to endure adversity if it happens to someone else.” ~ Mark Twain
We’d all like to have financial security or the assurance that we’ll have enough money tomorrow and the day after that.
Many think that financial security can be found in a fat 401k account, investment real estate, or a stash of gold and silver coins. While those things may help keep you financially secure, they can disappear quickly. Witness what happened to the markets in 2008 and 2009.
There are some things that you can do to protect yourself and your dependents. You’re probably already taking the first step, which is getting out of debt.
Debt can cause trouble under the best of circumstances. It certainly takes away financial security. Creditors can demand repayment even if that means that you cannot feed or shelter your family, which can cause instant insecurity!
Your second step is to create an emergency fund. No one gets through life without some unexpected events that affect their finances. Having an emergency fund takes the sting out of life’s surprises. If the car needs repairs or you need to buy a new fridge, the money is there. You won’t stress figuring out how to pay the bills.
Step three requires you to prepare for life’s big events. Most often, you’ll use insurance to cover these big ticket expenses like auto accidents, health problems, house fire, etc. Knowing that these events can’t swamp your finances provides needed security.
The next step involves saving for the time in your life when you no longer have an income. For most of us, it’ll be at retirement, but for others, it could be as a stay-at-home parent or due to a disability. In any case, gradually accumulating savings for the time that you no longer have an income builds financial security.
The fifth step calls for you to acquire skills that can either make or save you money. Gardening and the ability to do minor household repairs are just two skills that can reduce your expenses or even bring in some extra income. Look to develop similar skills that you can use to help build financial security.
Building a strong social network is the sixth step. No, I don’t mean one based on Facebook or Pinterest. While that might make great entertainment, you probably can’t count on those people if you get into a financial jam. Our ancestors knew the value of community. Whether you lived in town or in the country, you knew your neighbors and helped them when there was a need. Make the effort to build that type of relationship with a few close family members and/or friends. Not only can they help with physical needs, but also having someone beside you in a crisis can provide an emotional uplift.
Finally, live within your means. If you always look for ways to spend more than you make, you are assured of never achieving financial security. You’ll always be focused on the short-term and will be a long-term loser. On the other hand, living within your means brings with it serenity.
There you have it. In an uncertain world, here are 7 steps to financial security. How are you progressing on the journey?