What Is Financial Security?

Michael Mihalik:

Ask ten people to define how much money it takes to attain financial security and you will probably get ten different answers. For some people, financial security is having $10 million in the bank. For others, it’s $50 million.

The problem with defining financial security in these terms is that having $10 million, $50 million or even $1 million is a pie-in-the-sky dream for most Americans. We’d all like to have millions of dollars, and it’s not bad to aspire to that goal. The problem is, if we define financial security by such large amounts of money, most of us will believe that it’s out of our grasp. Instead, we should use a realistic definition of financial security that can be achieved whether somebody makes $10,000 a year or $1,000,000.

To me, financial security consists of four things:

1. Being debt-free
2. Being in control of your expenses
3. Consistently increasing your savings/assets/net worth on a monthly basis
4. Not being forced to work at a job you dislike just to pay the bills

Looks like a great definition to me. As a grad student, I've been able to keep up with numbers 1,2, and 4 so far. When I quit my job as an engineer, I swapped number 3 for number 4. It was a good move.

See my previous post on Michael Mihalik's book, Debt Is Slavery. Michael just sent me a copy and I should have a review coming soon.