We all want financial security. It gives you the feeling that you do not have to be afraid of the unexpected events that life can throw your way. While some of these can be nerve-racking, you will feel a bit more complacent because you know that you have the finances to help you turn your situation around.
You see, life is unpredictable. No matter how hard you plan or prepare, something can always go wrong. You cannot do something about it. However, you are not really as powerless as you think. Although you cannot stop bad things from happening, you can prepare for it financially.
The truth is, financial security is something that we all try to achieve but it takes a lot of focus, self-discipline, and self-control to do it. Take retirement savings for instance. We all know that when it comes to securing our finances, the best way to do it is by saving for retirement. However, a study reveals that 55 million Americans do not have a way to save for retirement. Their employers do not offer a retirement plan. The same study also observed that 9 out of 10 American workers said that they will be eager to take advantage of any opportunity to save for retirement.
This scenario reveals a sad reality about the state of financial security in our country. We all want it but most of us fail to have it. There are those of us who do not get the opportunity to save up for a more secure financial future. While we have the freedom to save on our own, we still don’t. We lack the discipline, motivation, and self-control to initiate saving for a stronger financial situation.
How a habit leads to a secure financial position
Saving for a financially secure future is easier said than done. This is the reason why you need to develop the right habits that will help you meet your goal.
When you do something out of habit, it does not take a lot of effort to do it. You will feel less resistant and more motivated to overcome any challenges that will keep you from doing that habit. That is because your habit is something that comes naturally to you.
Developing the habits that will lead you towards a secure financial position is the easiest way to do it. If you are not aware, it is possible to develop a habit. You just have to make an effort to do it consistently for at least a month. After that, you will get used to doing it and it will no longer be hard to stick to your goal.
Ideally, you want to develop these habits while you are still young – preferably when you are fresh out of college. This is the time when you will start to earn your own money. If you develop the habit now, you wouldn’t know how to handle it any other way. You can head off the bad habits that could threaten your financial security.
5 habits that will help you feel financially secure
Now that you understand how your habits play a role in a secure financial future, it is time to discuss what these are. Here are the 5 financial habits that will bring you closer to being financially secure.
Keep living like a student
What does living like a student mean? It means living with the same budget as a student would. We all know that students usually live on a tight budget. Unless of course, you come from a rich family getting all the support from your parents. But if you are like the millions of college students who were not so lucky, then you know what it’s like to live on a student’s budget.
It is small but enough to pay for your basic necessities. As a student, you cannot rely on a big income to pay for luxurious items. You can only get part-time jobs that pay a small income. This is what you have to live with.
Even if you are now a graduate and you have a career that allows you to live a more expensive lifestyle – do not go there. Hold off that expensive lifestyle for now and keep spending only on the basic necessities. You can pay for a few entertainment expenses every now and then. After all, you deserve it. But do not go overboard and use the extra money to do the next few habits that will be discussed.
Pay off your debts
Since your lifestyle is not expensive, you should put all the extra money that you have to good use. Among all your financial obligations, your debt payment should come first. If you are like the majority of the new graduates, you probably have student loan debts.
Having too much debt is a sign that you are financially unstable. Even if you are perfectly able to pay for your lifestyle and debt payments right now, having a lot of debt still puts you at a disadvantage. This is why you should make an effort to get rid of it as soon as possible. Regardless if you have credit card debts on top of your student loans, you should prioritize paying it off so it will not compromise your financial future.
Start saving for retirement
This is the most proactive of all the habits that you need to develop to have financial security. The rule when it comes to saving for your retirement is that the earlier you save, the lower the monthly payment will be and the bigger gains you will get in the future.
According to an article published on CNN, you should start by investing 10% of your annual income and then slowly grow it to 15%. This will easily grow that money to become a six-figure retirement fund. It might even end up becoming a seven-figure amount if you start early in your 20s.
But even if you can only save a smaller amount, it does not matter. What is important is you start saving now. That small amount will grow over time – don’t worry.
Build your credit score
If you are paying off your debt properly, this should be easy for you to do. Your credit score is a reflection of your behavior when it comes to your personal finances. If you pay your debts regularly and without fail, that will end up giving you a good credit score.
Most experts would say that you should stay away from debt if you want to achieve financial security. The truth is, debt is okay. You can continue using credit so you can keep it low and manageable. For instance, you can use your credit card to buy your groceries each week. Once the bill arrives, you should pay the balance in full. This habit will help you build a good credit score. And once you have a good credit reputation, you can enjoy low-interest loans (e.g. home loans, car loans, etc).
Grow your income
Finally, you need to focus on growing your income right now. Most of you will assume that this involves doing a good job at work so you can get a raise each year. That is true, but you should probably do something else too.
If you can, try to get a side job. This can be something borne out of a hobby or a skill that you have. It can be an online job that you can do during your free time. Just make sure that it will not be something that will add stress to your life.
Once you have that other source of income, try to sustain it without letting yourself be burnt out. Any amount that you earn should go to your savings or your debt payments.
Why financial security should start early
You might be wondering, why do you have to do all of this in your 20s? It is simply because the earlier you start, the more you can save. This will help you achieve financial security earlier too.
The truth is, this should not be a problem for Millennials. In fact, more than half are not willing to give up their secure financial position just to have a smartphone, go on a vacation or have a new car. Once you have achieved this level of security in your finances, you will experience these two things.
A financially secure individual do not have to worry about any unexpected event. You know you can afford to survive it. If you lose a job or get sick, you know you can pay it off because you made sure your financial position is secure. You have savings, an emergency fund, and you have been saving for your retirement. While the stress will not be eliminated, it will be greatly reduced.
This freedom is not just about a debt-free lifestyle. It also means having the freedom to choose your career. When you feel financially secure, you do not have to stick to your crappy job just because it pays well. You can choose a low-paying job because you are more secure about your financial position. You do not have much debt. You are saving for retirement. Not only that, you have different sources of income. You have the freedom to choose a career for yourself. In case your finances get tight, you can borrow money and be given a low-interest rate for it. Not only that, this freedom also means you do not have to hesitate about going to the doctor or getting a needed medical treatment. You are free to get it because you are financially secure.