What is Financial Security?
Financial security can be defined in two ways; the first is in terms of actual financial stability and the second one is concerning the security of any given financial transaction.
Although the safety and protection of your financial and transactional data is an important topic to tackle, the financial security that this article will discuss is someone’s financial forecast as it correlates to their savings, planning, investments and other long-term income.
Are You Financially Secured?
When you say that you are financially secured, this means that you are resistant to economic shocks. This also means that you are in a stable place financially to the point that your retirement or dismissal from work would not affect your financials.
Unfortunately, 35% of respondents to a decade-based age group study in Australia report that they feel insecure about their financial state.
How Do You Know If You Are Financially Secure?
Here are some signs that you are financially secure:
1. You do not have any debts.
If you do not have any debts or if your debts can be covered by your monthly income without affecting the quality of your life, then it is a sign that you are financially secured.
2. Your monthly income can cover your monthly expenses with an ample amount to spare.
If you are married, this means that you can pay for monthly expenses with just your or your spouse’s salary, then use the second income for other things such as savings or investments.
3. You can pay your bills on time.
The ability to pay your bills on time is a sign of a healthy financial situation. This means that you have enough money to cover your bills.
4. You can save some money for an emergency fund.
You are in a stable place financially if you can pay your monthly bills and still have some money to set aside for an emergency fund.
5. Your net worth is growing consistently.
Your net worth should have some positive changes annually. This would be the result of the combined effect of your savings, consistent contributions to your investment portfolio, and good investment returns.
If you do not check some or all of these boxes, then you might not be as financially secure as you want to be. Read on to see what you can do to plan for financial security and what your other options are.
How to Plan for a Financially Secure Future
There are several key factors for planning a financially secure future. These include defining long-term goals, budgeting, saving money, managing debts, creating an investment strategy, and, of course, staying on track.
1. Setting your goals.
Setting a specific goal can help you create a detailed plan. While knowing where you need to go can help you stay on track.
For instance, if you know that you want to retire by 2030 with $1 million in income-earning investments, you can make a plan based on that and remind yourself of that goal whenever you make any financial decision. If you say that you want to retire early with enough money to live on, then it is easy to stray away from the plan since you do not have a concrete goal or timeline.
2. Create a budget.
Budgeting involves weighing your income against your expenses. List your essentials down and check what expenses can you reduce or remove.
3. Saving money.
Saving money does not only involve your long-term goals—you should also consider emergencies and other unexpected expenses. You can start with having a $500 emergency fund in cash or a high yield savings account.
4. Managing your debt.
As mentioned earlier, financial security involves having little to no debts. Managing your debt is also important to improve your living conditions.
5. Planning your investments.
It is never too early or too late to get started on investing in your future. Find a personal financial management tool to monitor your spending and savings growth, establish an individual retirement account (IRA), and think about investing in regular accounts.
6. Do not stray from the plan.
You can plan all you want but your plans will not matter if you do not follow through. You need to stay patient and disciplined to stick with the financial plan over the years.
What Are Your Other Options?
Considering a Loan?
If you are not financially secured, then you may be held back from making big purchases that you may have in mind. These purchases may include a new car or owning your own house.
That is when you can consider a loan. A loan can help you afford things that you cannot afford with your current earnings. Depending on your lender, you can get a payment arrangement that you can comfortably pay with your monthly income.
What If You Have Bad Credit?
Your application process may be a bit more difficult if you have bad credit. Lenders consider borrowers with bad credit as risky clients. But do not lose hope as there are still loan options that you can consider.
What Loan Option Do You Have If You Have Bad Credit?
Having bad credit does not mean that you cannot get approved for any loan at all. Some lenders offer bad credit loans.
Having bad credit is sometimes the product of difficult situations and not a reflection of a person’s sense of responsibility and values. Some lenders understand this, which is why they offer bad credit loans to clients who need it.
You can still get the following loans if you find the right lender:
- Personal Loans
- Home Loans
- Short-term Loans
What are the Benefits of Bad Credit Loans?
Having bad credit is something that you should want to change. However, do not look at it as an entirely bad situation. Bad credit loans have perks of their own including the following:
1. They offer a higher approval rate.
2. Depending on the lender, you can borrow a huge sum of money.
3. You will have a chance to improve and restore your credit history.
4. Some lenders do not need collaterals.
You need to make smart financial decisions if you want to achieve financial stability. Some people can do it faster than others and some take more time. Remember that it is not a race, you will eventually get there if you don’t give up.
Different people have different stories to tell. If you have bad credit, keep in mind that it is not the end of your journey to a stable financial life. You have options that you can explore, so make sure to do your research and do not give up.
The opinions expressed in the Blog are for general informational and entertainment purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific investment product. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice.