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Financial security is a major stepping stone to financial independence, and much more attainable
My focus is on financial security rather than financial independence, because of my daughter’s special needs. It’s expensive to have a child who required surgery 20 hours after birth, 2100 miles from home. A child who needs multiple, repeated therapies to teach her activities of daily life is a constant financial concern. It’s a lot of pressure to know she may never be able to support herself financially or live independently.
In other situations, financial security is still a good first goal. The thought of having SO MUCH MONEY that you don’t need to work can feel far-fetched, or even impossible.
What is financial independence?
Financial independence is generally considered having enough income to live off of for the rest of your life without needing to work. Many people reach this state by having no debt and saving large enough sums to generate enough interest to live off. This can require millions in investments. Compound interest helps grown initial investments, but you still have to find the funds to invest.
The Financial Independence Retire Early (FIRE) community tends to skew towards those with higher household incomes or uniquely advantageous situations. That’s great for those people. Honestly, I admire the focus and dedication so many of them display.
If my family were typical (if my daughter had no delays), I think we could eventually reach financial independence. It would take a long time, but we could get there and retire comfortably. Since that is not our situation, I focus on financial security instead.
What is financial security?
Yahoo! Finance defines financial security as “having enough money to fund your lifestyle, as well as work toward your financial goals.” I think that’s a great definition. It’s pretty open, making it accessible to more (i.e. lower-income) people.
For the purposes of this blog, financial security means:
- having no debt other than a mortgage
- savings to cover six months of expenses
- retirement investments sufficient to cover a typical retirement (more on this later)
If you have a child with special needs, also consider adding in:
- having health insurance
- paying off the mortgage
- saving an additional six months’ of expenses (for a total of 1 year’s expenses)
Anyone can be secure
Anyone can achieve financial security, given enough time, dedication and disposable income. Disposable income is the amount left over after your basics are paid (housing, transportation, utilities, food). Increasing your disposable income can be the hard part.
The easiest way to increase disposable income is to cut expenses. It’s usually simple, especially at the beginning of your financial journey, to find things to cut out of your budget. Being intentional with your spending can help find the areas where you are accidentally overspending.
When you’re in a state of overwhelm, it’s so easy to order take-out for dinner or hit the coffee stand drive-through on your way to work, rather than meal planning and preparing (cheaper) home cooked meals. It’s quicker to stop at Target and buy new socks when you have 15 loads of laundry to fold. Focusing on your goals, getting your life under control with routines, and being intentional with your spending will help cut expenses.
A more long-term method of increasing disposable income is to increase your income in general. This could mean getting a new higher paying job, working overtime, finding a second job or picking up a side hustle. When you have children, this can be a delicate balancing act. As a parent, you want to spend all the time with your kids but when you have these bigger goals, it’s not always possible.
For my family, we’re focusing on both sides of the coin. We’ve reduced our restaurant spending significantly, while still cutting groceries expenses, just by meal planning and staying focused. My husband earned money working odd jobs over the summer, and I have been able to work more hours for my bookkeeping business. I’m primarily a stay at home mom, so my work hours are limited to naptime and after bedtime. Luckily, my husband is working until 11 pm most nights, so he isn’t home to distract me. Now I’m working during the evenings rather than watching Netflix or doing household chores. Big goals require big sacrifice.