Financial Security

A state of financial stability and well-being has more to do with having a sense of control and flexibility around your money, rather than how much you make each month. Individuals with a higher-than-average income may still experience financial insecurity if their salary can’t quite cover their monthly expenses. Likewise, someone with a more modest income can easily cultivate financial wellness if they commit to living within their means. 

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It can be seductive to think of financial security as necessitating a hefty paycheck, plenty of stock, flush savings accounts, and sizable properties in one’s portfolio. And to be sure, all of these are factors which can help to foster monetary wellness, but they are not the only means through which financial security can be achieved.

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What is financial security?

Broadly, the state of financial stability and wellness may be defined as this: the ability to live comfortably within one’s means, with flexibility to both address the costs of day-to-day living and meet unexpected expenses as they arise. 

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The practical features of “financial security” may look different to different individuals. Usually however this looks like a monthly income which adequately covers one’s basic necessities of living, as well as enough savings to allow one to live comfortably for a period of time if that income is for whatever reason interrupted. 

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For many, the definition of financial security ends here. For others, it expands to include the means to grow one’s assets through investments and savings, to fund or save for voluntary expenses like travel or other fun things, and to build a nest-egg for post-retirement years. 

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Why is financial security important?

For individuals and their families, building financial stability is critical to allow for life to happen without the unexpected threatening their health and general stability. This also gives you the flexibility and freedom to build the life you want, both for yourself as well as those you support.

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We all face unanticipated and emergency expenditures throughout our lives. Hopefully, if we are financially secure, we will be able to meet these expenses without going into debt, sacrificing our retirement accounts, or losing assets in the effort to address them. 

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What is an example of financial security?

Here are two different takes on what financial security can look like. 

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1. A young woman is about to go on the vacation of a lifetime with her friend. The two of them will be traveling internationally for 6 weeks: it’s a trip she’s wanted to take since she was very small, and finally in her mid-twenties she has the means to do so.
   
   She works as an hourly high-school teacher during the year, and so getting time off in the summer to take this trip was not a problem. Normally she would find other work in the meantime before the start of the fall semester to supplement her income.
   
   In saving for this trip, however, the young woman also saved enough to cover all her daily expenses for the next 6 months, allowing her to comfortably take this vacation and pay all her bills once she arrived back home. 

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2. A middle-aged couple with three adult children plan to retire in their mid-sixties. They own a home with a minimal monthly mortgage, and both have significant stocks in the companies for which they work. Both also maintain 401K accounts, which their organizations will match upon withdrawal.
   
   The couple likes to travel, and is able to take two week-long vacations each year. They maintain a savings practice which allows them to do so, as well as a savings practice for emergencies: both for themselves, as well as their family’s. They are rigid in the amount they save each month, and maintain a budget that helps them live well within their means. This budgeting and saving practices allows them to funnel the surplus towards their travel funds. 

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What are steps towards achieving financial security?

While financial security may mean different things to different people depending on your life goals, income, and other factors, there are some consistent moves you can make that will help you to build it for yourself. 

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1. Set goals. Give yourself something specific and time-sensitive to work towards. This will help you to understand the daily financial steps you need to take towards reaching those goals. Plus, it will give you a metric by which you can measure your financial security, and a tangible reward once you reach it.
   
   
2. Start early. You’re likely to set lots of short-term goals on a rolling basis throughout your financial career. But long-term objectives – like building a flush retirement account or paying off debt – often yield better results the earlier you start.
   
   
3. Create a budget. It’s easy to overspend if you don’t know what the limits are. Setting a budget allows you to live comfortably within your means, whatever your goals are, while still allowing for whatever saving you decide to do each month.
   
   
4. Consolidate your income and expenses. Understanding where your money’s coming from and where it needs to go will give you a better handle on tracking and strategizing your finances.
   
   
5. Consult a financial counselor. Very few Americans today consider themselves to be financially literate. There’s no shame in this – a financial counselor can help you build financial literacy while also guiding you through financial planning and money management to cultivate financial security.

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What is the role of financial security in overall mental health?

9 out of 10 Americans have experienced financial stress, especially in the wake of the COVID-19 pandemic. Uncertain financial futures – and daily sources of income, for many – make money problems one of the primary causes of emotional pressure and tension today. 

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One study found that nearly half of people with current debt have also been diagnosed with mental health problems, and 86% of individuals with previously known issues related to emotional wellbeing say their debt and other financial concerns make it worse. 

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Another nearly-half of interviewees confessed worrying about money on sometimes an hourly basis throughout the day. But if we define financial security as a sense of comfort and flexibility regarding one’s personal finances, building it up will mitigate this worry and can alleviate other more impactful mental health concerns like financially-induced depression and anxiety. 

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How can employers help employees achieve financial security?

Organizations are in a unique position to help a number of their employees build better financial futures for themselves and their families. And the business case for doing so is palpable: financially-stressed workers take more sick time, exhibit worse performance, and leave their jobs more often than workers who are comfortable with their finances.

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Beyond offering a thriving wage and supportive, holistic benefits to your employees, your organization might consider implementing a financial wellness solution to give your workforce a better, more empowered handle on their finances.

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A big paycheck means little if you don’t know how to manage your finances. A program like Origin can help you figure it out. A comprehensive combination of tools, educational content, and access to professional financial counselors puts the reins in the hands of your employees, serving to cultivate better financial literacy as well as improved financial well-being. 

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Learn more about how Origin benefits both your workforce and your organization.

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