Financial security and the simple steps to get there

One of the most common goals we all share is to achieve financial security. Recently I wrote about the different major levels of financial freedom and how we can define each stage. If you missed that article, you might want to take a look here before reading on. The first of those was financial security.

Financial security

The first major milestone on the way to complete financial freedom is financial security. This is where you have enough passive income streams, usually from assets such as property, to cover all your essential living expenses each month. This would be all the non-negotiable bills such as mortgage and bills, plus basic food costs. It’s basically just enough income to live and get by if you couldn’t work.

The peace of mind that reaching this stage provides is huge. People feel a greater sense of benefit to their lives and general increase in happiness. Often more than those achieving complete financial freedom where they don’t need to work at all.

Despite being the first stage people think of it can still feel unachievable when you first start out. However, it can be broken down into other smaller milestones to make it more attainable. Each step is guaranteed to improve your feeling of financial security and happiness, allowing you to sleep better at night.

Small Steps

When you purely focus on the end goal it can seem like a huge unachievable task. That’s why many people never even start. This makes sense – if it seems unlikely, why waste time trying? However, by breaking any goal down into smaller steps, suddenly financial security becomes a lot more realistic than you might think.

That should always be your first step when planning how to reach any goal. Break down your goal into smaller goals, each one getting you a step closer to where you want to be.

Step One – build an emergency fund

If you are spending everything you earn each month and find yourself counting down to payday, you’re in a very risky situation if something goes wrong. One unexpected bill and you may need to borrow money, putting yourself into debt.

That’s why step one is to ensure that you are putting money into savings each month and building an emergency fund. Ensure that you always spend less than you earn. Having some cash at hand just for emergencies means those unexpected costs don’t throw your plans off course.

I recommend making sure that you pay money into a savings account at the start of each month as soon as you get paid. Treat it as an essential payment just like any regular household bills, that way it will remain a priority.

Step Two – pay off (bad) debt

Good debt is money borrowed to buy an asset that will go up in value over time. The main example of this is a mortgage used to buy property. Bad debt is everything else; its money borrowed to spend on anything that loses value over time.

Having a small emergency fund of cash savings avoids needing to get into more debt when emergencies arise. Then it’s time to focus on paying down all existing debts. It’s usually best to focus on the debt that bears the largest interest rate to pay down first. In the meantime, make minimum payments on the rest.

Being debt free (other than a mortgage) is another hugely freeing stage to reach for most people. You will also start to accelerate even faster towards your goal, as without the monthly debt repayments you have more money to save and invest.

Step Three – save enough to leave your job (temporarily)

Getting to the stage where you never need to work again is going to be a long process. However, reaching the point where you have enough cash saved to take a sabbatical, a long holiday, extended paternity leave, or a career break is much more achievable.

You might never decide to leave your job if you’re happy in what you do. But it can provide the flexibility to apply for your dream job that you may find more fulfilling. Or take time off to care for a sick relative when needed most. For most people, not working at all is never the goal. But knowing you have the option is what gives you the feeling of freedom.

Step Four – be happy and continue to save

Once you have achieved the earlier steps, you have cleared your debts and have a decent pot of savings in the bank. You are less tied to your job (at least short term) so you can seek a job that you enjoy and hopefully pays more. You’ll still need to work and earn money, but you can live a life where you feel fulfilled in the work you do.

At this point you can live a happy comfortable lifestyle, and still afford to build your savings each month. This stage is very realistic to achieve, especially here in the UK, but would make you better off than 99% of the global population.

Step Five – build passive income streams

Once you have mastered saving, cleared your debts, and built up a good pot of cash, you should already feel financially secure. However, the only way to achieve complete financial security is to have an income that doesn’t rely on you needing to work. That’s why the next step is to start investing some of your savings to make your money work harder for you.

Having a decent sum of cash easily accessible in the bank provides great security and peace of mind, but with interest rates at near zero and inflation climbing higher, the spending power of your cash is decreasing over time. By investing into assets, you can grow your capital long term and generate additional income.

One of the most effective ways to invest is with property investment. This is because you can use mortgages to purchase the assets, which means you don’t need as much cash as some other asset classes to produce the same overall return.

In a future article I will explain more detail around how to use property investment to achieve financial security.

Summary

When a goal feels more attainable you are more likely to start. By working towards these smaller stages in turn, you should see financial security as an achievable goal. I hope that inspires you to act and get started today!

At Fintentional we specialise in helping you to achieve your financial freedom goals with property investment. Our services help with building your investment portfolio every step of the way from start to finish.

• Free strategy consultations
• Property sourcing
• One-to-one coaching and mentorship
• Mortgage broker, solicitors, tax specialist recommendations
• Ongoing advice, support, and accountability

If you would like to chat with me about your own situation and how financial freedom can be achievable for you then simply click the contact button, send me a message, and I’ll be in touch soon.