Financial security is an age old concept, and while a lot of people are aware of it, achieving it is another thing. In these days of economic turbulence worldwide, is it still possible to achieve financial security? I believe so. If you can amass enough “wealth” and live within your means, then you might just be secure enough. Do take note, however, that being financially secure does not necessarily mean that you have to be rich. It simply means that you have enough money to get you through life, come what may. So anyway, here are some keywords which you should bear in mind as you embark on your journey to achieve financial security.

Cash
Here’s the deal: you need cash in order to get on with your life. You may have credit cards, you may have assets. But at the end of the day, you have to have cash at some point in order to pay for your transactions. The suggestion of experts is that you should have at least 6 months’ worth of cash in the bank in case of an emergency. This means that your mortgage, food, bills, and transportation expenses should be covered. Keep this is the bank for easy access. Never mind that your money will not be earning more than a meager amount of interest. The point here is that you have enough to live on in case something does happen, like losing your job.

Borrowing
Some people have an aversion to borrowing money, and rightly so. However, we have to recognise the fact that in order to build up your wealth, there might be some amount of borrowing involved. In some cases, there is no going around it. The idea then, if you want to engage in activities to build up wealth and gain financial security in the long run, is to borrow cautiously. You might even have to borrow because of other things, not necessarily for business. Say you need to send your son to uni, you might need to borrow for that. Borrow if you need to, but remember, you always have to pay this back, and you have to borrow wisely.

Home ownership
It used to be that people saw their houses as a way to amass wealth. Buy a house, pretty it up, sell it, and go through the process again. These days, this is not a very solid proposition. Experts say that home ownership should not be seen as your ticket to wealth but instead, use it as a savings tool, making reasonable mortgage payments, and using it as collateral only when absolutely necessary. At the end of the day, owning a home is still better than renting. Furthermore, if you think about it, having a home can be your last resort to run to. Say you lose your job, at least you have a home, and won’t have to worry about that (if you have paid your mortgage…).

The bottom line? Earn as much as much as you can, set aside savings, and live modestly.

This entry was posted on Tuesday, April 14th, 2009 at 3:11 am and is filed under Debt, Banking, Saving, Mortgage, Loans, Personal Finance, Investing, Advice . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.