3 Steps to Financial Security

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Posted October 29, 2012 by Kelley Long in Life After Five

It’s near the top of just about every Career Girl’s list of goals: I want to be financially secure. But what does that really mean? It seems like the needle is always moving on how much or what conditions. I like to say that the true meaning of financial security means having choices in life, but even that’s a little ambiguous – doesn’t a legit goal have to be specific and measurable?

Well then, let’s lay down the law on that, because there is a technical definition of financial security that includes three non-negotiable guidelines. Use this checklist to see if you’re there yet:

  1. You are free of high-interest consumer debt. If you use credit cards, this means you’re paying them off each month and you’re not carrying a balance. Ever. Not even for vacation or a couple months after Christmas. Student loan debt, a mortgage or a car loan don’t count, but those cards – you gotta pay them off to get there.
  2. You have at least three months of expenses in a separate savings account. Six months would be ideal, but as long as you’re secure in your job and healthy, three months is a good place to start. How do you figure out how much this is? Add up all the bills that wouldn’t go away if you lost your job: rent/mortgage, utilities, basic food, insurance, etc. Multiply times three. That’s how much you should have set aside. Keep this money separate from your other savings – this is only to be used for its specific purpose: paying your bills in case of an emergency.
  3. You are saving at least 10% of your gross income toward retirement. This is the toughest one if you’re not already putting money aside. The good news here is that if your employer matches any portion of what you put into a retirement account, that counts toward the ten percent! If you’re not there yet, start increasing your savings by 1% every six months until you reach 10%.

Once you have these three objectives in place, you can start thinking about what other goals you have and plan for how money will get you there. And you will be much freer to make different choices in your life if you feel the need to make a change.

 


About the Author

Kelley Long

Kelley Long is a CPA/PFS and CFP® who believes that the true meaning of financial security means having choices in life. Formerly the head of her own practice, KCL Financial Coaching, Kelley parlayed the knowledge and experience gained from starting her own business into her dream job as the Director of Communications and Marketing for the Chicago-based CPA firm Shepard Schwartz & Harris. She’s also a volunteer and media ambassador for Feed the Pig and 360 Degrees of Financial Literacy. In Kelley’s perfect world, everyone would feel great talking about their money concerns, fears, questions and problems, because then everyone would see that we ALL have those concerns, fears, questions and problems. Kelley lives in Chicago where she also teaches BODYPUMP group fitness classes at the Chicago Athletic Clubs.

4 Comments


  1.  

    I loved #3 as a reminder. My uncle started lecturing me about retirement funds YEARS ago probably before I even have a job. It’s sometimes hard to think THAT far in the future but I know how important it is. Thanks for the reminder and I love that focusing on those is a great foundation.





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