What does security mean to you? Is it feeling financially stable? Is it knowing that you have a certain number saved up for a rainy day? Is it being able to cover your bills each month without worry? There is no one correct answer when it comes to defining security. For some, security may be having $10,000 in the bank. For others, it might be being debt-free. And for still others, security might mean having a few months of living expenses saved up in case of an emergency. It is important to find what works for you and strive to achieve and maintain it.
Security is a feeling, not a number
In our lives, we are surrounded by numbers. Your paycheck is a number, your bank account is a number, and every item you purchase is a number. There is one area of our life where numbers do not tell the whole story: security. Security is a feeling, not a number. Numbers can help you get to a place of feeling secure, but that number is unique to you. What does this mean for personal finance? A common goal for people in their personal finances is to build a 3-6 month emergency savings. Emergency savings are only used to cover your living expenses if you are without income or have an unforeseen major expense. A doctor may earn $500,000 a year. Their lifestyle and expenses for 3-6 months may require them to keep $100,000 in emergency savings. A teacher may earn $50,000 a year. Their lifestyle and expenses for 3-6 months may require them to keep $10,000 in emergency savings. There is a $90,000 numerical difference between the two, but both of these people can feel financial security in being prepared.
Security is not perfection
Achieving financial security in life is not about achieving perfection. It is more about leaving room for the unknown. There will always be risks and uncertainties, and things can always go wrong; life happens. Maybe you had an unexpected expense on your home or car, overspent on a family vacation, or didn’t get the raise you wanted. That is ok! Allow flexibility in your finances and budgeting to account for these unexpected items to maintain your financial security. The discipline of budgeting and tracking where your money is going is a great way to maintain financial security. It can also help you have an action plan when unexpected things happen. Financial security is a great goal, and if you have achieved it, you want to ensure it stays that way.
Practicing positive financial habits can lead to a feeling of financial security. Budgeting, knowing your net worth, and educating yourself on subjects that relate to you are all great ways to start. That is exactly what we provide at My Financial Snapshot! Sign up here and get started budgeting today!