Does wealth build economic security?

An interesting thing happens when you ask people how much money makes someone “wealthy”. No one can agree on a number. Rather than thinking about how much we have versus other less fortunate people in the world, most of us will tend to rattle off the names of many people we think are financially better off than us. What we forget is that the people we just named are probably doing the same thing! Wealth is an opinion. People may think they want wealth because in their mind it would solve their economic needs and wants. However, there are plenty of riches to rags stories. Look at all the people who lost good jobs and investments during the Great Recession. What we are really looking for is economic security.   

What does economic security consist of?

Economic security is the ability to handle the financial challenges life will certainly throw your way without serious harm to the stability of your lifestyle. Financially traumatic events can happen to anybody at any time. How prepared you are will determine if the event ends up as a learning experience or an unwanted life altering change. Ultimately, we want to heal our financial wounds and not allow set backs to jeopardize our future economic well being. Being economically secure is a compilation of preparations you make over time. While it will not stop challenges from striking, it does help to 1) identify problems on the horizon and then 2) give you the wherewithal to handle the problems with minimal disruption to your lifestyle, household, and goals.

What are tools that make up personal economic security?

Just like an ambulance carries many medical devices on board when rushing to resolve an emergency, so should you carry a variety of tools in your repertoire in order to assure your economic security when trouble appears. Here is a partial list of some of the things that would help you through particular economic hardships:

1) Marketable work skills that will keep you more employable. (Continue your learning with non-credit, professional classes at the community college)

2) A good reputation at your workplace. (Add value at work every day in order safeguard your position.)

3) Protecting your personal identity. (Cyber crime is on the rise. Identity theft can cost you thousands. Protect yours!)

4) Proper insurances for things like natural disasters or disability. (Example: most homeowners’ insurance won’t cover sewage backup, flooding or rock slides.)

5) Appropriate recordkeeping and safety of things like taxes, paystubs, and personal identifiers. (Personal documents are essential when rebuilding after disaster – be sure yours are current, accessible, and safe.)

6) A will, living will, and revocable trust. (Speak now before you can’t speak on your own behalf.)

7) Backing up all your digital data. (For some, losing all the things on your computer is just as devastating as losing items in your house.)

8) Maintaining a clean credit report and regularly inspecting it for errors. (A good credit record is not a luxury it is a necessity today. Your good credit record will serve you well in many important situations.)

9) Keeping two budgets. (Keep a second budget that represents how you will be managing your money if you lost 50% of your income. Additionally, plan on what steps you would immediately take after the loss.)

10) Staying healthy. (Your personal health is the foundation on which all else is built in your life)

What other ones come to your mind? 

Building economic security

If you have been lucky in life thus far in avoiding financial problems don’t get too comfortable. To a degree all of us will face financial challenges sooner or later. Now is the time to start developing options and backups for yourself, rather than struggling when you need an immediate answer. Improving your economic security is up to you personally and takes focused effort. Without safeguarding your lifestyle you are flirting with ruinous disaster.  

Neglecting behaviors that build economic security reminds me of a friend who was hiking in the woods. He got lost and had no idea how to orient himself through all the trees and obstacles back to safety. What was to be a pleasant day of hiking and exploring quickly became a nightmare as hours passed by and he made no progress getting home. He had no options he could rely on to get help or get him out.  

The rescuers that eventually went looking for him had tools like a compass, walkie talkies, dogs, ATVs, orienteering experience, and proper hiking gear. Those things allowed the rescuers to quickly navigate through the woods and get my friend out. Like a sudden financial emergency the woods became a huge, unexpected problem to my friend because he was unprepared to handle it, but to the people who had been preparing for this problem it was a lot easier to resolve. The same is true with your personal finances. When you have prepared for financial challenges and have many options available to you, handling problems will be much less difficult.