Achieving Financial Security Is Possible
It’s important to note that financial security isn’t some sort of threshold. It also isn’t a number. Financial security relates to your income.
UBS, a wealth management firm, has conducted research that proves this. In fact, their research had taken a look at millionaires, and sixty percent of those with more than $5 million considered themselves wealthy. That’s compared to 28% of those who are worth between a million and five million dollars. Furthermore, only 10% considered the meaning of wealthy as not having to work, with 16% saying that when you surpass a certain asset threshold, then you are considered wealthy.
Two-thirds of the participants said the point of building wealth was to create financial security, where just one setback wouldn’t cause them to not be rich. Half of the participants who were worth one million to five million dollars believed that their lifestyle could be impacted in a major way if they lost their job or if the market crashed. About 34% of those with more than $5 million felt the same way. However, you don’t need rich lifestyle to protect, but the middle class can achieve financial security the same way the ultra-wealthy achieve it.
Steps To Reaching Financial Security
You have a surplus when you spend less than the money you are bringing in. This is a step in the right direction, but you may still be at the edge of a cliff that could send you right back down the ladder. As time goes on, and the more money you save, then you will be protecting yourself in the event something unexpected pops up and you have to spend a lot of money. With that said, how exactly do you achieve financial security?
There’s a few things you can do. In fact, we will provide you with some steps. Below are a number of steps you can take:
1. Create an emergency fund, but you don’t need a whole lot of cash. Set aside $500 to cover various expenses that may come from out of nowhere, such a an insurance deductible or a car repair. If you have to dip into the emergency fun, then build it back up to the set amount ($500) as soon as you can. The key to building security is to have a way to deal with events that can wipe out your savings.
2. Toxic debt should be paid off as quick as possible, and this includes payday loans, credit card debt and things of that nature. Have a look at your debt and figure out if it can be paid off within at least five years. If it can’t, then consider filing for bankruptcy or speak with a credit counselor.
3. Keep your overhead low and keep expenses you must have, such as food, shelter, insurance and minimum payments to loan companies. Try to keep your expenses at 50% of your income. This should help ease the burden in the event you cannot work or if you lose your job.
4. Investing in your future is important, so take advantage of a workplace retirement plan if it’s offered, and do this even if you are paying off your debts. If there’s no workplace plan in place, then open an IRA, but use a retirement calculator because this will give you an idea of how much you should contribute. If you cannot contribute the recommended amount, then use whatever money you can for now.
5. Get health insurance and any other insurance to help protect yourself in the event of an emergency. For example, disability insurance comes in handy if you can’t work, while liability insurance can help if you get sued. If you become wealthier, then you should increase the liability limits on your car and home because you will want the added protection that comes along with having more insurance.
6. Your emergency fund should be built up once your debt has been paid. Boosting your funds will come in handy. Just make sure you have planned for your retirement too.
7. If possible, retire your mortgage. When you don’t have mortgage payments to make, you can save even more money. If you have to, consider downsizing or get a reverse mortgage.
8. Create streams of income that are guaranteed because social security will only help you so much. Getting an immediate annuity is worth considering. This allows you to get money in return, after you have given the insurance company a sum of cash.
When you have financial security, then you’ll have peace of mind. Sometimes achieving financial security is easier said than done. However, the above tips should help you out.