Week 1: How Being Comfortable Means Security and Options
The following post is Powell’s contribution to Financial Literacy Month, offering our best advice to help people take action to fix debt issues and the problems they create. Find out more. #FLM2017
When you ask most people anywhere in the world what is their main focus when it comes to money they will tell you a variation of this: “to acquire more of it”. That vague, ubiquitous sentiment is impossibly stumped by the logical next question: how?
Instead, we’ve all heard that we should work toward financial well-being. That sounds awesome! Count me in! but wait…what exactly does that mean? Well-being can be categorized into four different elements –
- security now,
- security for the future,
- freedom of choice now, and
- freedom of choice in the future.
On a more practical level, it means something a little bit different for everyone. I like to summarize it as ‘being comfortable’.
Security now means that you are in control of your day-to-day or month-to-month finances. Security for the future means being able to absorb shocks that may come in the future. Freedom of choice today means being able to make choices today that allow you to enjoy life. Freedom of choice for the future means that you are on track to meet your medium- to long-term goals.
There are a number of factors that play into achieving financial well-being. Some are within our control, and unfortunately, some are not. Like most things in life, we should focus our attention on the things that are in our control.
Security and freedom of choice in the short term comes from having more money than we need. This provides some discretion and allows flexibility surrounding how we spend our money.
For example, if the car that you need to get back and forth to work with breaks down (security), you have what you need in the bank to fix it. Alternatively, if you have an opportunity to go on that once-in-a-lifetime trip (freedom of choice), you can take it because you’ve saved diligently for such an occasion. Both security and freedom of choice on a longer timeline are no different, but we are just talking about bigger numbers and a longer timeline.
Being able to weather the loss of a job or sickness (security) or working until YOU choose when you want to retire (freedom of choice) are examples of longer-term financial well-being.
Financial well-being starts with you and it begins with small steps to spend less than you earn so you can stress less than you are. More on that next week…