Financial Security Unlocked: A Starter Kit to Having A Better Relationship with Money
Why (and how) to start saving immediately, tackle debt and plan for your future.
العربية
.svg)
If you've been asking yourself what is financial security and how can I achieve it, you've already taken the most important step, educating yourself!
Financial stability is rarely handed to you. It often requires sacrifices and savvy financial planning over several years.
If you're looking to get started, you might be worried about facing some of the common hurdles and have questions about what to prioritize, including:
While there are many ways to approach financial stability, experts and financial advisors alike typically encourage a healthy mix of saving, investments and retirement planning to get your personal finances in order.
Table of contents
[Take action today and remove the guesswork from financial stability! Maly makes it easier to reach your goals faster and leverages AI for smarter financial planning. Download it for FREE today.]
Financial security isn't one size fits all, but it generally refers to having the means to meet all your financial obligations, take on unexpected expenses easily and reach a level of personal finance that allows you to live life relatively stress-free.
For some, their financial goals are closely linked with the FIRE movement, which refers to 'financial independence, retire early'.
The movement began with the bestselling book 'Your Money or Your Life' by Joe Dominguez and Vicki Robin.
It encourages people to grow their investment portfolios enough to the point where working becomes optional. Coupled with a substantial savings plan and strategic retirement planning, it allows people to retire as early as 30 years old.
While some within the FIRE community might be drastic in their approach to achieving financial security, others take on a more measured approach that allows them greater flexibility.
It all hinges on your personal financial goals, which is one of the first steps in starting your financial freedom journey.
To sum it up, financial security is valuable because it offers peace of mind. It can be the difference between having a safety net or living paycheck to paycheck.
It could mean having enough money to retire early or working late into your 80s. One scenario offers much more flexibility, while the other could mean financial volatility.
As Joe Dominguez, Co-Author of Your Money or Your Life, put it, “When you are financially independent, the way money functions in your life is determined by you, not by your circumstances.”
That's why achieving a level of financial security is a priority for many, and should be something you start thinking about sooner than later.
Out of 184 countries, the UAE ranks 22 on the Economic Freedom Index, which demonstrates that there is a beneficial environment to build wealth, maximize on financial freedoms and a strong economy to hitch your wagon to.
Comparison of UAE's economic freedom score against the world average
Source: Heritage.org
The UAE Ministry of Finance has also created an initiative to educate people on the importance of financial planning and building a safety net.
They encourage people to adopt the 50/30/20 approach, which divides your income and savings into 3 distinct buckets:
Naturally, these ratios can be tweaked if you wish to save more aggressively or have higher living expenses, but this rule creates a foundation for your forays into financial security.
While your path to understanding 'what financial security is' should involve a very personalized approach that weighs your incomes, debts, assets and liabilities, as a general rule of thumb, starting your FIRE journey should include the following:
There's no better time to start saving than right now! Don't dwell on the 'I wish I started sooner' mindset, and start putting whatever money you can into your savings account.
Every cent you put away can earn interest over time, making it a strong financial asset down the road. Split your savings between an emergency fund and a retirement fund.
This ensures you cover all your bases should unexpected circumstances arise, while building a nest egg for when you wish to retire.
Keep in mind, that debt can hinder your ability to save. Prioritizing repayment can give you a clean slate.
Your expenses today make a significant impact on your financial future.
Understanding your fixed income and how it is being spent every week can help you better set aside savings and gain financial security.
One of the biggest lessons to learn is how to stop spending money. Breaking this habit can bolster your emergency funds and retirement savings immediately.
Be diligent in tracking your spending to ensure you stay on your path to financial security.
Achieving financial security doesn't happen overnight, you need to keep tabs on several moving parts.
That includes having a strong understanding of your financial well-being, the markets and what approaches to take at the right moment.
Not only should you read as much as you can about the topic, but familiarize yourself with the key thought leaders on the topic, so you can be confident in tackling financial independence.
A good financial advisor can help you meet your short-term and long-term financial goals faster and with greater ease.
Whether you consult a firm or use an AI money management tool, these kinds of financial services can help you adjust your approach in real-time, and for the better.
It can also make the road to financial security feel less intimidating, allowing you to gain some knowledge before making big financial decisions.
Don't leave your money sitting in your bank account; even if it earns over time with favorable interest rates, diversifying your investments helps mitigate risk and maximize opportunities
This can be wealth put into the stock market, real estate, ETFs or in building a side business that will generate you passive income.
Harry Markowitz, American Economist and Nobel Prize Winner, famously said, ¨Diversification is the only free lunch in investing¨.
His point being a diversified portfolio leaves you less at the whims of market fluctuation, and it would be foolish not to take advantage of different opportunities.
This kind of approach is what makes the difference between the rich and the wealthy. Making your money work for you and not the other way around.
Retirement planning is often non-negotiable when answering the question 'what is financial security?'. Being able to worry less about your finances later in life, definitely has its perks.
This doesn't mean you must strive to retire by a certain age, but your retirement savings should have enough money to allow you to live comfortably in your later years.
Those who are working towards financial security, often keep a separate retirement account from their savings account, and invest the money more cautiously to avoid risk.
Spend your money wisely and think long-term. Building towards financial security can mean sacrificing things you want now for a better future.
To reach your financial goals, you may have to be more cost-effective in your day-to-day life, including:
These changes require diligence but can make a big difference in your personal finances.
By following these key philosophies, you can grow your wealth and achieve a greater level of financial security. Ensure your financial plans never remain static, they should evolve along with you, particularly:
These are not just foundational skills; they will also help you make the most of your financial assets well into the future.
[Ready to retire early and achieve financial security? Download the Maly app for FREE to manage your money and stay on top of your finances.]
Download the Maly app by clicking on one of the buttons below and get started in just a few minutes
