Being a financial success is everyone’s dream. We all want to have that big house, six figure income and the luxury car. We all want to send our kids to a good school and retire at the right age with the lifestyle that befits kings and queens.
We all have different definitions of financial success but all of them can only be maintained if you have financial security. If you think about it, we all have the wrong impression of being successful financially. It is not about how much money you make or how many possessions you have. The truth is, you can only say that you are a real financial success if you can maintain all of it despite an economic crash. In the end, that is the real measure of your financial success. If a crisis happens, whether it is a global event or it is only in your household, you want to make sure that you have what it takes to survive it. That is how you really become a financial success.
But how can you be this resilient?
Three conditions that you have meet to be financially stable
This is where financial security comes into play. Also known as financial stability, this is when your finances are built up to withstand the unexpected events that can happen in the future. It is all about being prepared for the what ifs in life so you can keep on living the lifestyle you choose for yourself – even when everything around you is in chaos. Of course, money management is key to make it all work. But you have to set up things so that the money you will manage will sustain you no matter what.
There are three important conditions that has to be met in order for you to consider yourself financially secure.
Condition 1: You can easily supply all of your needs and chosen wants.
The first condition is financial independence. You are capable of paying for the things that you need at the moment and any wants that you may have. This implies that you are not relying on anyone to give you the finances to support the lifestyle you want to live. You get to make your own decisions about how your money is to be spent and what expenses will benefit from it.
Condition 2: Your income comes from various sources.
The second condition that has to be met to have financial security is having a lot of sources of income. You want to make sure that you money is coming from different sources: your day job, passive income business and other investments. Not only will you be setting up a back up plan for your cash inflow, you are also giving yourself more room to grow your personal wealth. The more sources you have, the more secure you will be.
Condition 3: You are prepared for the future.
The last condition that you have to meet is to make sure that your future is secure. The whole goal of financial security is actually to secure your finances for the future. The present is easy to manage. It is the future that you really have to prepare for because the income that you have right now is not guaranteed. It can be taken from you anytime. Because of that, you want to build up your savings and emergency fund so you can live well even when that happens.
You need to fulfill all three conditions if you want to proclaim yourself as a financial success. You lose one of these and you cannot say that you have financial security.
Tips to make your finances more secure
The thing about financial security is even when you have achieved it , you need to work continuously to make sure that you can maintain it. Here are some tips on how you can do that.
Live below your means. It is important that you try to live below your means. Not only should you aim to avoid overspending, you should also make sure that you have enough money to put aside for your savings.
Budget your money. To help you reach your goals of living below your means, you need a budget. It will help you identify your income and the plan your expenses so it stays below that amount.
Think before you spend. When you have your budget, you will be more cautious about how you will spend your money. You will be more encouraged to think before you make a purchase and everything will be planned before every expense.
Keep credit to a minimum. Financial security does not necessarily mean you do not have debt. Some people can be financially secure but still have debt. You just have to make sure any credit that you will make is budgeted and will be paid as soon as possible.
Grow your savings. The savings that you will grow plays an important part in establishing your financial security. If you are living below your means, this is something that can be easily accomplished. Your savings can include a lot of things like your emergency fund, retirement and even your child’s college fund.
Get insurance for you and your family. It is important that you insure yourself so you get aid in times of an emergency situation. This is still different from your emergency fund.
Continue to find other means to grow your income. As your money grows in the present investments that you have, continue to invest further. That will help diversify your sources of income and it will make you even more financially stable. There are various online tools that you can use to help you monitor all your investments. Money.CNN.com and Google.com has some tools that you can really benefit from.
You will notice that a lot of these are related to each other. Sometimes, you cannot be successful at one task if you fail at the other. So try to do as much of them as you possibly can to ensure that you will solidify your financial security.
To help you with more tips, here is a video from Kiplinger that discusses 8 keys to make financial security a reality in your life.