Posted on April 16, 2015 at 10:22 am by Nigel Brokenshire
Obtaining Financial Security
Being financially secure is one of life’s goals. It is having the means to live the lifestyle you so desire and being in a position to address any of life’s unexpected situations. However, financial security is not just a monetary figure, but something more. My own approach to this is something I review, refine and adjust constantly. Read on.
What does being financially secure mean?
Ask 10 people and you will get 10 different answers. How much money from a lottery win would it take you to throw in your current job and retire? £1m, £10m or maybe just £50k. It depends on a number of factors like your age, your current commitments, the lifestyle you want to live etc. It’s a nice thing to dream about, but some do win large amounts and then find themselves broke in a couple of years.
What if I asked, how long could you survive if you were made redundant tomorrow? 3 years, 1 year, 6 months, 3 months, 2 weeks…
See, being financially secure is something each and every one of us can achieve (to some level), but it’s so specific it cannot be generalised.
For me it’s about the idea of being debt-free, in control of my expenses, in-turn being able to increase my net worth and ultimately not having to work to pay the bills. All in which allows me to live the life I so desire.
How to become financially secure?
Taking what I’ve written above, are you able to define what level of financial securely would make you happy and provide you the resources to do what you want? If not, then give it some thought, as some disciplines put in place now could help you achieve them – sooner rather than later.
There is no magic wand to make this happen overnight, but here are some points that you can adopt on the path to financial security:
1 – Be different
I remember someone saying, “‘to be successful in work, know something no-one else does”. Being the go-to person can be rewarding, so make the time and invest in making yourself a better person. Adopt a pattern of ongoing self-development in yourself and in your field(s) of expertise and people/firms will want to invest/pay you more. Stand out and be extraordinary!
2 – Don’t put it off!
Make it a habit of making regular savings payments as soon as you can. Lay the ground work to determine where you are now and where you want to be, then plan on how to save to achieve your goals. When I left university and started work I put money into a pension scheme. It was not deemed ‘cool’ by my mates, but now it’s a habit that I’ve never stopped. So think about what you can do now, even as simple as opening an ISA account (tax-free) and making contributions. Treat your savings plan as an expense – it needs to be paid!
3- Don’t be tempted!
We all want the best in life, but don’t be drawn towards spending on luxury or unnecessary belongings. Of course live the lifestyle you need, but delaying indulgence now will lead to a more comfortable life in the future. Tightening our purse-strings allows for longer goals, like education for your children, maybe a second/holiday home, early retirement or the ability to travel the world to become reality. Understand your level of indulgence!
4- Protection is the best policy
When life throws an unexpected ‘curveball’ make sure you have adequate protection so your plans for financial wellbeing are not all undone. Many people are underinsured in the case of serious illness, disability or early death. I’ve paid annual premiums to cover such circumstances and I don’t view it as a waste of money. For me, my biggest asset is my income, and if God forbid I have a stroke, or knocked off my bike and can’t work again I need the confidence that the mortgage can be paid and I have some future earnings. Do you want to be open to this unnecessary risk?
5 – Eggs in many baskets
As you build your savings make sure that you have not placed them all into one investment scheme. Your age, your tolerance to risk (and losses), your family responsibilities, your earnings all determine where and how much to save. All forms of asset groups go up and come down, whether it’s the share market, real estate, bonds, currency, metals, cash etc. So it’s best to have a ‘mix’ to minimise any losses, but also to provide that retirement nest egg or the income generation you so desire.
6 – Reassess you, your spending and make changes
As we grow older our circumstances change, so do our financial requirements and so there is a need to make changes. Check your financial position, your ‘view’ on spending and saving, and make the necessary adjustments to help ensure your goals are to be met. These could be on a yearly basis or when a specific milestone has been reached, for example paying off your mortgage. Myself, I carry out an annual ‘health check’ to review my pension performance, changes in my financial obligations, salary, future plans and then decide whether I need to save more or less, and where this saving should be made. I also do this in close discussions with my wife!
7 – You can’t do it alone
Let’s face it getting some independent, experienced advice is well worth it. You think you can beat the system? Know what the next big thing is? Savvy in your saving and disciplined in spending? Think again. Financial advisors have the tools, techniques and knowledge of markets to enable the achievement of your plans. Whether it’s managing your pension (hot topic for those 55 and over), finding a mortgage, seeking adequate family protection cover, or getting the right insurance, they provide a regulated service, which in the long-term pays off.
If you would like to speak to an FCA independent advisor then please contact us at email@example.com. Free consultation and no obligations.
BeeMyMinder for financial security
I use BeeMyMinder to support greater financial security by:
- Storing policies that have to be paid and cannot be side-stepped, including mortgages, insurances, utilities, water rates, council tax etc. This directly allows me to know my mandatory expenses.
- Uploading other expenses that pertain to my lifestyle and indulgence spending, for example, mobile phone contracts, gym memberships, hire purchase on gadgets. Allows me to understand why I’m not saving as much as I had hoped.
- Adding life and family protection polices for critical illness, income protection and (dare I say it) death. This provides an excellent way to review my cover if personal circumstances change.
- Sharing this with my wife. So we are both financially aware of our commitments and able to have informed discussions if things need ‘tweaking’.
- Informing my regular ‘health checks’ with my financial advisor. Even though I’ve not added my pension scheme, having all other financial commitments has proved invaluable to discussions (and not lost in a paper-folder somewhere).
In summary, financial security is obtainable for those with a desire to improve their financial situation. It can be achieved by adopting some discipline and putting into place some back-stops for the unexpected.
I hope you have found this article thought-provoking. I am sure everyone has their own views on financial security and if willing to share, please leave a comment.