When it comes to thinking about and planning for the future, Financial Security is arguably the most important goal to strive for.
Financial Security is essentially all about freedom; the choice to do what you want in life, and make decisions with the confidence of knowing that your affairs are completely under control.
As a result, if you’ve never really thought about Financial Security before, taking your first steps towards security could be beneficial on a number of levels.
Of course, the above does raise a simple question: how can you achieve Financial Security?
It’s one thing to see the benefits of such a state, but quite another to be able to figure out how to reach that point – until now, that is. Below, we’ve detailed four goals to aim for when seeking financial security, as well as a few tips that can make those goals more attainable…
#1 – Build an emergency fund
Almost all financial experts agree that building an emergency fund is the most important first step towards Financial Security.
Unlike “standard” savings, which are often saved for no specific purpose, an emergency fund is designed to be used – for example, if you receive an unexpected bill, or suddenly need to replace a household appliance. Rather than having to deplete your usual monthly budget to meet these unexpected costs, you can turn to your emergency fund.
There’s no perfect amount for an emergency fund, though it is important to set a target to aim for and make this target your main financial focus until you reach that point.
When you have decided on the amount, reduce your outgoings and devote as much of your disposable income to the purpose of building your fund.
When you have reached your goal, it’s important to transfer the funds to a savings account that offers immediate access. When you do need to use the fund, you can then top it back up when you can until it returns to the original amount.
#2 – Start budgeting for future expenses
In its simplest form, budgeting is simply a question of looking at how much you have available and then deducting regular payments from that amount in order to determine your disposable income.
However, if financial security is your goal, taking your budgeting up a gear can allow you to really take control of your outgoings across each year.
One of the most effective ways of budgeting is to set money aside for future expenses, rather than focusing on expenses you are likely to incur in one particular month.
For example, it’s reasonable to expect that you will need to buy birthday gifts at some point in the future. It’s therefore worth subtracting a small amount from your income every month for this purpose, even if there is no immediate need to buy a gift.
Instead, you can build a “birthday fund” that you can turn to whenever required – similar to an emergency fund in a way, only for a very specific purpose. You can then use the same tactic to build funds for almost all of your sporadic expenses, such as vacations, haircuts, clothing, and so on and so forth.
#3 – Buying your own home
There are numerous reasons that home ownership is a crucial goal for anyone focused on achieving financial security.
For one thing, owning your own home tends to be more affordable than renting, especially if you live in an area that is known for extremely high rental prices.
Secondly, owning a property also gives you an asset, which means that financial products such as long term secured loans will be available to you if required in the future.
Finally, home ownership offers a sense of stability to your outgoings; there’s no risk of a sudden rent rise, for example, which can allow you to effectively plan your finances years into the future.
However, while home ownership in and of itself is obviously a good choice in terms of financial security, actually getting to the point of being ready to buy your own home is more challenging – especially in the modern world.
The first step will usually be to save for a deposit, which usually involves setting aside a portion of your monthly income for this specific purpose.
You may find that cutting your existing outgoings can greatly improve the amount you are able to save, so moving to a more affordable area or even moving back in with your parents can also be helpful in this regard.
When you have your deposit saved, you can look forward to owning your own home and greatly increasing your financial security as a result.
#5 – Increasing your income for the future
Financial security is all about planning for the future, so it naturally follows that taking the time to consider your future income is also an important goal – particularly in regards to how your income can be increased in the years to come.
There are a variety of different ideas to explore when thinking about how your income can increase in the years to come.
The first option is starting a side hustle. Side hustles are often seen as a way of increasing your income in the present – and they can, of course, work well for this purpose – but working on a reliable side hustle can also increase the amount you earn in the future.
Secondly, looking to improve your earning potential in your everyday career is always a good choice – vocational courses, for example, or simply increasing your experience and expertise in your field can be conducive to increasing your future salary.
Last but not least, consider investments that may offer you a continual, passive income. From savings accounts to stocks and shares, there are plenty of choices available, so explore your options with a financial advisor to ensure the money you save is working hard to deliver returns that can help solidify your long-term Financial Security.
Setting your mind on achieving the above five goals is a great way of ensuring your long-term financial security, so you can enjoy greater freedom and peace of mind for many years to come.