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Without adequate insurance or savings, living paycheck to paycheck will inevitably impair financial security and emotional health.
FREMONT, CA: For many people, financial stability appears to be an unreachable goal. A staggering 29 percent of Americans have no savings at all to put things in perspective. Financial security is a relative concept, which indicates that everyone can achieve it. Further, financial security implies different things to different people. So, to help one define what financial security means, below are three categories of financial security.
When one has a lot of debt, it is difficult to feel financially secure. Some sorts of debt are now required. Few people, for example, have the financial means to pay cash for a home or a college degree. Spending on credit for everyday products, clothing, technology, or vacations, on the other hand, is unlikely to help you reach financial security—mainly if the debt is on credit cards. Credit cards need monthly payments and are notorious for having extremely high-interest rates—some have interest rates as high as 29.99 percent annual percentage rate, making it very simple to get further into debt.
In the end, if one does not repay the money they borrowed on time, they risk being sued, having the house foreclosed, and having the automobile confiscated. These possibilities are unlikely to leave people feeling financially secure. Being debt-free might create a strong sense of financial security.
Being Prepared for Emergencies
Many people lack the financial means to pay for health, house, or renters insurance. According to a poll, nearly four out of ten Americans (41 percent) would borrow 1,000 dollars to handle an emergency. Without adequate insurance or savings, living paycheck to paycheck will inevitably impair financial security and emotional health. To feel financially secure, one should have adequate insurance and an emergency fund in the bank.
Taking Charge of the Money
Is someone financially stable if they earn 100,000 dollars per year but spend 110,000 dollars? Nope. This person is deeply in debt and will have difficulty paying their debts. So, to become financially secure, one must first learn to budget. Budgeting is a method of controlling money by telling it where to go rather than wondering where it went. One is significantly more likely to feel financially comfortable if they have control over the money. One is well on their way to financial stability if they consistently have money left over at the end of each month.