How can you make yourself more secure?

A Different Kind of Financial Security

by Rachel Muller


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There are very few absolutely "safe" investments out there. Stocks can plummet, real estate markets can crash, and sudden spikes in inflation can erode the value of savings deposits in even the safest bank account. So how do you make yourself secure? To a financial planner, the answer lies in diversification. Simply put, don't put all your eggs, or your money, in one basket. Barring a major catastrophe, a diversified investment portfolio should be able to ride out even the steepest economic peaks and valleys. While I have no problem with this advice, I would argue that the "diversification" most financial planners are talking about just scratches the surface. I'm personally working towards a different, and much deeper, financial security.

Conventional wisdom offers three general steps towards ensuring both short-term and long-term financial health. Step one: get out of debt and stay out of debt. Step two: start an emergency fund and make sure you have adequate insurance (health, disability, life, home, vehicle etc.) to protect yourself and your dependents. Step three: invest a reasonable amount of your income towards the day you no longer have an income. Entire books have been written about each one of these steps, and most of which are available for free at your local library. But there are three more strategies that can increase your financial security even further. These are the strategies that many of our grandparents practiced during the Depression, and during other periods when money was tight.

Strategy 1 - Learn practical skills that you can use either to save money or to barter for other resources or skills. I'm a writer by profession, but I can also cut hair, tutor English, sew, cook, bake, garden, paint, and even perform light carpentry. My husband is a teacher, but his list of practical skills would fill a page. These skills add significantly to our financial security. By saving us money, they allow us to live comfortably on less income than many of our friends require. They are also useful as potential sources of secondary income.

Related: Creating multiple income streams

Strategy 2 - Build a strong social and/or family network. Our grandparents understood the importance of community, the original all-purpose insurance policy. When someone in our own community or network of friends is in need, we offer what help we can. It's a way to repay the people that have helped us in the past, and a kind of investment should we need a hand ourselves in the future.

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Strategy 3 - Live modestly. Conventional wisdom says you should live in the biggest house, drive the most expensive car, and have the most expansive lifestyle you can afford. But living more modestly offers far more security and serenity in my experience. Even if you pay off the mortgage on that big house, you'll still have higher utility and maintenance bills to deal with, not to mention insurance premiums and property taxes. The same goes for the insurance and gas bills for the luxury car. Live simply and within your means, and you'll be in a much better position if your investments sour or your financial situation changes suddenly.

Protecting yourself financially is a multi-step process. It's impossible to predict every scenario you or your family could face in the future. There are, however, some steps you can take to influence a more favorable outcome, no matter what happens. I know these strategies help me sleep more peacefully at night.


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