How to Achieve Financial Security: A Roadmap to Financial Freedom

how to achieve financial security

Everyone wants financial security, but getting to that point is not something everyone can easily achieve. Money is one of the biggest concerns among Americans today, and knowing you have more than enough can alleviate a lot of stress. 

The good news is that even after making mistakes or getting into debt, there is always a way to achieve this seemingly impossible task. 

No matter where you are in life, there is still a path open to gain more over your finances.

What is Financial Security?

Financial security is a state where you feel you don’t have to worry about money anymore. While achieving that may seem broad, there are usually common factors that go into it:

  • Having enough income to cover expenses
  • Having enough savings for emergencies
  • Being Free of Debt
  • Have Control over Your Money

The common idea is that you need to be a millionaire to get to this point, but even the richest have made poor financial decisions. We’ve all heard of stories of celebrities who lost it all even after acquiring great fortunes. 

The truth is, even if you don’t have that much money, there is a way to gain control over your circumstances. No matter what, you’re still paying the bills and have enough for a rainy day.

 

The Benefits of Financial Security

The benefit of financial security is an improved mental and emotional state. With fewer money problems, you’ll have fewer things to worry and stress about. 

That means reduced anxiety and more peace in your life.

Even though we don’t want to admit it, much of our happiness comes from having a good financial situation. It doesn’t mean being a millionaire, but having enough money to care for your wants and needs can be fulfilling. 

Prioritizing your security can bring you more happiness than spending the money.

 

Is It The Same As Financial Freedom and Financial Stability?

Freedom and stability in financial terms are different from security. Security is all about preparing yourself in case of the unexpected. 

Financial stability is about having enough income to cover all your needs with extra left behind. People often reach a stable standpoint when they have little-to-no debt.

Financial freedom is all about having enough to live life on your terms. You do what you want and still have the finances to cover everything you need. Common examples of these include:

  1. Early retirement
  2. Purchasing luxury items consistently
  3. The ability to pick and choose jobs
  4. Traveling and staying in different locations for extended periods

 

10 Steps to achieve Financial Security

Before you reach any point of stability and freedom, you need security. How do we achieve this financial security? 

It usually comes by planning and taking steps to help you reach that point. Here are some of the things you can do:

 

1. Start Saving Now

“Time is key in building your financial security.” - Suze Orman

Many of us don't have the luxury to save very early. Even then, it isn’t too late to start saving. Even small amounts can add up given enough time.

 

It’s all about how much you want to save and how fast you desire to reach your goals.

 

You can contribute more to achieve your goals faster. It’s a way to offset some of the time you missed saving money. 

Even little things you save can become ways for you to achieve retirement or buy that big-ticket item you’ve always wanted.

A lot of this also goes into where you put your money. You may want high yield savings to grow the money and keep it accessible. 

If you’re thinking longer, then you may want to place it in assets that have steady long-term growth. The longer you hold these items, the more you profit over time.

 

2. Avoid Unnecessary Credit Card Debt

Credit cards are one of the factors contributing to debt in today’s society. It’s easy to buy items if you know you can pay for them later. 

However, you may not be aware that every payment with the card comes with an interest rate and fees. You’re paying more for that purchase than you would if you had the money.

 

Patience is crucial if you want to have more control over your finances.

 

Of course, you may want to increase your credit score and get access to rewards cards. However, these only come if you’ve been good with payments over the long term. 

One strategy you can employ is to use the card when you have the money to pay for it right away. Set aside the money, then use the card, and it’s like you’re paying for it but getting rewards at the same time.

Some other debts are necessary. Very few people can afford to pay for higher education or buy a house upfront. 

You don’t have to make the situation even harder when all you need to do is wait before buying what you want.

 

3. Learn to Budget

If you haven’t budgeted before, you may be spending more than you realize. 

Even a seemingly minor purchase can take up most of the money in your year when you do it multiple times. If you’re spending more than your monthly income, then you’re only getting deeper into debt.

A budget is what you need so you know your spending limitations. It also helps you understand where your money is going. 

Understanding its movements can help you gain control over it. If you’re saving money before your next paycheck with a budget, then you’re on your way to achieving security with your finances.

 

4. Don’t Neglect Your Emergency Fund

An emergency fund acts as a buffer that you can use if something unexpected occurs. You can have money for expenses if you suddenly lose your job. It can be for:

  • Medical bills
  • Home repairs
  • Accidents
  • And many more

It can be tempting to spend money when it's gathering in high amounts in your account. One way to stay safe is to separate your emergency account to keep it out of mind. 

That way, you’ll only access it when you need it.

You may also want to consider getting insurance as added protection. It’s a small investment compared to the money you’ll save if something financially distressing occurs.

 

5. Stay Consistent with Your Financial Obligations

The right path to financial security can be very mundane, but it is also an assurance. Make sure that you are fulfilling each payment you need each month. 

Then, you can put money which can help improve your financial status. An example would be:

  1. Pay the required amount for a mortgage, student loans, and other debts
  2. Put money into investments or retirement accounts
  3. Save money for your emergency fund

After you’ve fulfilled those three, the money left with you will be free to use. You can also accelerate these three by adding more than required. 

Paying more on your debts will ensure you get the loan off your back faster and reduce your monthly payments. Saving and investing more assures you have more liquidity in the long run.

 

6. Use a Tax-Deferred Retirement Account

One way to keep you from spending money is using a tax-deferred account. These accounts have a set time for withdrawal, meaning that getting the money earlier than intended will incur a penalty. 

There will be consequences that will reflect on your tax for the year.

Alternatively, you can have two accounts if you have enough income to do it. Aside from your regular contributions through an employer, you can also set up a Roth IRA, which can grow tax-free. 

You’re multiplying your income sources in the future if you do this.

 

7. Pay Off Your Debts

Debt is one of the biggest things that’s holding back your financial power and freedom. Removing it can be liberating and accelerates your ability to build wealth. 

People often commit a significant portion of their income to pay these off. By removing them one by one, you are slowly freeing up your money to improve your financial security.

The best approach is to take these debts one by one. After fulfilling your monthly payments, allot extra to one of these liabilities. 

List down your debt from largest to smallest. Then you can rank them based on how much you owe and their interest rates. 

You have two options from here:

  1. Tackle The Lowest Debts First - Removing the smallest debts helps you focus on the larger ones and prevents you from missing out on payments.
  2. Tackle The Highest Interest Rates First - Paying off debts with high-interest rates will lower the money you need each month. If you hit the principal of these loans, you’ll also affect how much they charge in interest. 

As long as you focus on one debt at a time, you can move forward until you are debt-free. Discipline is key to paying it off. 

Each one you remove will motivate you to do the next. Then, you can invest the money you free up into your financial security.

 

8. Live Within Your Means

Your income is one of your most powerful tools for building financial security. That means you need to have enough of it leftover each month to act as a reinforcement. 

When it comes to paying debt, building funds, or investing, you’ll have a job that will supply most of the cash.

The simplest way you can improve your situation is to spend less. Cut some of your expenses without sacrificing much of your lifestyle. 

It can be as simple as eating out less, buying more affordable brands, or removing unnecessary monthly subscriptions.

 

The most challenging part of this is the adjustment. If you’ve built a habit, it may be challenging to try to remove it. 

 

You’ll have to learn to say no if you want to reach a better financial place.

Also, consider that most overspending comes with the use of the money you don’t have. Credit cards are not cash payments, but they are IOUs. 

Another person pays for your purchase with the expectation that you’ll repay them with interest. They’re only costing you more in the long run. 

Credit is vital, but there is a way to use cards that don’t get you into debt.

Adjusting your lifestyle to fit with what you have and improving how much you save can change your life. It’s a small sacrifice to make if it means you don’t have to stress about money or emergencies in the future.

 

9. List Down Assets and Liabilities

There are two main factors within your financial situation: assets and liabilities. If you want to improve your circumstances, you need to understand where your money comes from and where it goes. 

Subsequently, you’ll understand what you can do to improve your money situation. If you add more assets, you gain more money to use for security.

Let’s say you have a job. Your work towards your 9-5 is your biggest asset right now as it provides you with your primary source of income. 

What if you had a side hustle or a self-sustaining business? Then you multiply your assets.

In the same scenario, all your liabilities take away your financial power. Each debt you have and every monthly expense reduces your ability to have money for other things like security. 

Take away one, and you have more money to spare.

The most important thing here is that you list these down. You’ll better understand your budget by knowing where the money comes and goes. 

You’ll also get an idea of what to do given your current situation.

 

10. Invest

One way to help improve your financial situation without grinding at work is through investments. In simple terms, by investing, you send your money to work for you. 

While they may not provide any returns in the short term, most investments can be beneficial over time. We’ve all heard about how stocks or real estate tend to increase in value.

Do your research and find what investments suit your risk appetite. Do you like to play it safe, or are you more of a high-risk, high-reward person? 

All of these boil down to preference. Just make sure that you don’t put up money you aren’t willing to lose.

Even low-risk investments still have some risks. You need to know what you’re getting. 

Take note of the best and worst-case scenarios, and don’t put all your eggs in one basket.

 

Financial Security Is Possible

With some actions and discipline, you can achieve financial security. It also pays to have professional help from people who care about your well-being.

121 Financial Credit Union has always prioritized the financial betterment of its members.

Contact us, and see how we can set you on the path to financial security.

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