Financial Security Vs Financial Freedom, you may be wondering if they are really different. Everybody wants to reach that level where they can meet their needs and still have enough to acquire other secondary needs.
It doesn’t matter whether your goal is financial freedom or security, you need to set out plans to achieve it. Although these terms are used interchangeably, they are not the same and you will learn more about them as you read on.
Financial Security Vs Financial Freedom
In the process of attaining financial freedom, you need to be financially secure. Financial security is that feeling of safety you have when you can pay your bills on time, increase your savings, budget, invest, and lots more.
You need to achieve financial security before you can achieve financial freedom. To get a clear understanding of these separate terms, you should know their separate definitions.
What is Financial Security?
Financial security is a condition where you can meet all your basic needs. The basic needs of everybody are food, shelter, and other living expenses. When you are able to meet these needs yourself, you are said to be financially secure. It also means you are able to foot any emergency that comes your way.
Simply put, financial security means that you are in control of your money. It doesn’t matter what your current situation may be, you may have a stable income job or a fixed income stream. Whatever your case may be, you are financially secure if you are able to pay your bills in the case of a serious emergency.
What is Financial Freedom?
Everybody wants to be financially free and it takes a lot to achieve it. So, what is financial freedom? This is a situation where you have enough savings, financial investments, and cash to afford the lifestyle you and your family desire.
When you have enough savings that can afford your desired lifestyle, you can retire at any point and pursue what you want without thinking about a fixed salary each year. This is what financial freedom is all about. With this, your money works for you and not the other way round.
Why is Financial Security Important?
Financial security is one of the most important types of security you should have. Right from the time an individual begins to take responsibility financially, he or she desires to feel secure.
Being financially secure is important because it gives you peace. You don’t have to worry about your bills or how you will cope in case of financial security. It is also important because you have enough income to cover your expenses and you are totally free from debt.
How to Achieve Financial Security
Having what the term “Financial security” is all about, you should work towards it. It will also help you achieve that freedom you want. For many, this might be unattainable but that’s not true. In this section of the article, you will get a guide on how to become financially secure. If you want money to work for you, below are some tips to help you achieve this dream.
Know Your Current Financial Security
Before you start your journey, you should know where you are in your finances. Evaluate your situation by reviewing how much you make. Also, take inventory of how much you have in savings and investments.
You also need to take a record of your debts and interest rates and your monthly expenses. Write everything down as this will give you a breakdown of your financial situation. When you know your current situation, you will know how to improve it.
Track Your Spending
You may be living above your income without even knowing it. It is important you track your spending to know what is taking most of your money. You may be surprised to find out that most of your money goes to the food you order or even streaming services.
After you do this, learn to live within your income. If you live within your income, you will get more cash outflow which you can use to save towards your financial goal and emergency.
Set Financial Goals
When you want to set a goal, ask yourself where you want to be in the next ten or fifteen years. Whatever dreams you have, write them down and set plans to achieve them.
Also, write these goals in the order of priority and create a budget to help you save towards these goals. It’s not enough to have goals, you should have set plans to achieve these goals.
Cut Down on Your Expenses
After you have created a plan to attain financial security, the next step is to reduce your expenses. When your expenses are reduced, you will have more money to save toward your goal. It doesn’t matter how much you need to save to meet your goals, cutting down on your expenses can help you.
Pay off Your Existing Debts
You feel insecure when you have outstanding debts. You must clear your debt to be financially secure. If you have so many existing debts, start with the smaller ones first and then work your way by paying off the larger ones. Also, you can choose to pay off the debts with a larger interest first. Whatever way you choose, ensure you pay off your debt.
You feel secure when you know you have funds to cover any emergency situation that may arise in the future. You can devote a percentage of your monthly income to your savings. Save what you can for your retirement. The small amounts you save consistently can make a big difference in the future. You can try contributing consistently toward an employer-sponsored plan.
Invest in Yourself
When you are more valuable, you attract more money. You need to improve your skills and acquire new ones. Also, you need to invest in knowledge and gain experience. You are one of your biggest assets. Invest in the right knowledge and you will be surprised at the opportunities you will be opened up to.
Lastly, you should strike a balance between your current and future life. While you set long-term goals, you also need to have short-term goals. You can set a goal to save towards a vacation and instead of using a credit card to finance it, you can save towards it.
How Do I know am Financially Free?
When you are financially free, you have enough income to pay for your expenses and fund the lifestyle you want. You are said to be financially free when you can go on a fancy holiday, get a second house, etc with your own income.
How Long Does it Take to Attain Financial Security?
The time it will take for you to attain financial security depends on the rate at which you save. You can simply calculate your savings rate by dividing how much you save monthly by your total income. The higher your savings rate, the shorter time it will take you to reach financial security.
How do I Attain Financial Freedom?
To attain financial freedom, you need to track your spending and cut down on unnecessary expenses. Save and invest wisely and also do it consistently. You can also choose to get other streams of income.
Do I Need to Have to Earn a Huge Salary to be Financially Independent?
No, you don’t need a huge salary to become financially independent. The most important factor that determines if you will be independent, is your savings rate.
Is financial Secure the Same as Financial Freedom?
No, these two terms are different. When you are financially secure, you have some money set aside in case of adverse situations. When you are financially free, you have enough to cover your expenses, emergencies and also fund your desired lifestyle.
- University of Calgary International Entrance Scholarship 2023 for International Undergraduate Students – How to…
- The Eiffel Scholarship Program 2023 for Foreign Students – How to Apply
- Highest Paying Jobs with a Public Relations Degree
- 2022 CAEL Conference – Who Can Attend the 2022 CAEL Conference?
- What is an Accidental Death Benefit – What is Standard Life Insurance?
- Coinbase IRA – How to Invest in Crypto Via Your Retirement Account