What is Financial Security

Recent global events have made achieving financial security more challenging than ever. A study reveals that 49% of Americans feel their financial security has deteriorated since the pandemic began¹. Understanding what financial security means and how to achieve it can empower you to make better decisions and improve your financial well-being.

Defining Financial Security

Financial security is a state of confidence and control over your finances. When you’re financially secure, you handle financial challenges with ease. This means you can make mortgage payments without strain, cover monthly bills comfortably, and have extra funds for additional expenses.

Achieving financial security means you’re prepared for unexpected events. If your car breaks down, for example, you have savings set aside to cover repairs without stress. This sense of readiness and stability is why financial security is so highly valued—it simplifies life and reduces worry.

Understanding the concept of financial security is just the beginning. Here are practical steps to help you achieve and maintain it:

• Reduce Debt
  According to Shift Processing, 80% of Americans carry consumer debt², with mortgage debt being the largest burden. Reducing your debt is crucial for achieving financial security. High levels of debt create financial strain, with monthly payments eating into your budget. By focusing on paying off your debts, you can alleviate this pressure and move closer to financial stability.
• Build Savings
  An emergency savings fund is essential. Bankrate found that nearly 40% of Americans would need to borrow money for a $1,000 emergency³. Having an emergency fund means you can cover unexpected costs without going into debt. This fund can be a separate savings account or cash stored securely at home. Additionally, saving for specific goals, like a mortgage down payment or your child’s education, helps you stay motivated and financially prepared.
• Create and Stick to a Budget
  Understanding how your income compares to your expenses is vital. Track your spending and income to ensure you’re living within your means. If your expenses exceed your income, it’s time to adjust. Budgeting helps you allocate funds effectively, with many experts recommending the 50/30/20 rule: 50% of your income for essentials, 30% for personal spending, and 20% for debt repayment and savings⁴. Adjust this rule based on your personal situation to ensure it meets your needs.

Financial security is the peace of mind you gain when your income comfortably covers your expenses and unexpected events. By addressing debt, building savings, and budgeting wisely, you can achieve a state of financial stability and reduce financial stress.

Thinking about buying a home as part of your journey to financial security? MortgageQuote.com can help guide you through the process.