How Financial Security Breeds Financial Freedom

How Financial Security Breeds Financial Freedom

Photo courtesy of Dotty Finlow

When I lost my job back in November, I was scared. I had a wife, a 1-year-old son, and another boy due in just over a month. I was the primary breadwinner, and all of a sudden I didn’t have an income.

But here’s the funny thing: it wasn’t the money side of things that scared me. I wasn’t worried about paying the rent for our apartment. I wasn’t worried about putting food on the table or having the lights cut out. I didn’t actually feel any real urgency to replace the income I had been making.

Instead, I was scared of the one big question I was being forced to ask myself: what did I want to do with my life?

Why were we lucky?

Many people facing a job loss don’t have the luxury of asking themselves that question. Instead, the primary focus has to be on replacing their income as soon as possible. Otherwise, bills start getting missed and maybe even some debt starts piling up.

I was lucky. Instead of having to think short-term, I was in a position where I could think long-term about what I wanted for myself and my family. More than anything, my job loss presented us with an opportunity to define our financial freedom and start forging the path towards it.

Why did we have that opportunity? The answer is simple: we had spent years building our financial security to the point that even big negative events like this didn’t phase us.

In fact, that financial security gave us the flexibility to pursue our financial freedom without worrying about the short-term consequences.

We had slowly been building up our emergency fund and other savings to the point that it could not only help us pay our bills, but could actually provide the cash to help start up my business.

We had the right insurance in place (life, disability, health, liability) to cover us in the worst-case scenarios.

And we had been saving for retirement for years, to the point that it wasn’t that big of a deal if we had to stop contributing for a little while.

With those things in place, the worst-case scenario of this job loss really wasn’t all that bad. Maybe we would have to live off some of our savings for a little while (which we’ve done), and maybe if things got really bad we would have to move in with family for a little bit. None of those things were ideal, but they were certainly doable.

That security gave us a ton of freedom. And that freedom allowed us to choose a path forward that we hope will maximize our long-term happiness.

Making risks less risky

Building your financial security can be boring, and even a little morbid. It involves things like building up an emergency fund, putting the right insurance in place, and handling your estate planning. These are the things that allow you to weather even the biggest obstacles that life throws your way.

Building your financial freedom is a lot more fun and exciting. It involves thinks like investing, travel hacking to take your family on cool trips, and maybe even starting a small business on the side. These are the things that bring happiness, passion and fun into your life.

All of which can make it tempting to skip over the fundamentals of financial security in order to pursue those more exciting things first.

But here’s the thing: if you want to make good things happen in your life, you have to be willing to take some risks.

It might be something small like taking your family on an impromptu pizza and a movie night out and running the risk of going over your monthly budget.

Or it might be something bigger, like taking your dream job at a pay cut from your previous one.

Both are examples of financial freedom. And both are risks. Those choices are being made in the pursuit of happiness, but the risk of financial loss hangs in the background.

But with the right financial security in place, that risk is actually a lot less risky.

Taking that night out and blowing your budget for the month isn’t such a big deal when you have some extra savings in place.

Taking a temporary pay cut to pursue your dream job isn’t all that risky when your emergency fund could handle any shortfall while you make adjustments.

All of which leaves you with a lot more flexibility to make the choices that make you happiest.

What’s the worst that could happen?

When you’re facing a big life decision, one of those decisions that scares and excites you at the same time, it’s helpful to ask yourself a simple question:

What’s the worst that could happen?

Asking that question helps you figure out just how big of a risk you’re actually taking. If the worst-case scenario isn’t something you could handle, maybe that’s not a risk you should take.

But if you can imagine the worst-case scenario and it seems manageable, well then what’s stopping you?

Taking the time to build your financial security makes the worst-case scenario a lot more manageable. It makes your risks less risky, which means you have more freedom to pursue the things you really want out of life.

So go! Build up that emergency fund! Buy that insurance! Get those wills handled!

And then, chase your freedom with the comfort of knowing that everything will be okay.

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8 Comments... Read them below or add one of your own
  • Even Steven September 25, 2014

    Like you said if you keep putting yourself in the position to win over and over, eventually you will Win, having “safety nets” in place allows you to bounce right back in difficult situations.

    • Matt Becker September 27, 2014

      Yep. To me, the biggest advantage of having those safety nets in place is that you almost always have options. Instead of needing to react quickly to everything that happens, you can take the time to consider what you really want and respond thoughtfully and purposefully.

  • Myles Money September 25, 2014

    This is surely the perfect example of why everyone should have an emergency fund. Nothing lasts for ever and sometimes we’re all hit by some tragedy or other, whether it be lost income or a health problem: having a cushion to weather the storm allows you to sleep at nights and gives you the freedom when something DOES go wrong to take stock of the situation and CHOOSE what to do next instead of panicking and jumping at the first opportunity which comes along.

    • Matt Becker September 27, 2014

      Well said! It’s that word “choose” that’s the big one to me. Having the freedom to make a choice is a great place to be.

  • Syed September 25, 2014

    I like the idea of asking yourself what’s the worst that could happen because it can help guide certain financial decisions. I know people that get insurance on their cell phones but don’t care about health insurance. What’s the worst that could happen if you lose your cell phone? You can buy a cheap one online to replace it for a bit. What’s the worst that could happen without health insurance? You could get in an accident and end up paying thousands of dollars in bills for the rest of your life. Looking at it that way, it makes the decision a no-brainer.

    • Matt Becker September 27, 2014

      Great example! And I couldn’t agree more. Insurance is best used to protect yourself against the really big potential losses, not the small ones.

  • Jon @ Money Smart Guides October 1, 2014

    Sounds a lot like our situation. When I was laid off last September, I had the chance to blog full-time and really make a business out of it. This was possible because we had busted our butts to save as much as we could while we both had jobs.

    I think this is the greatest lesson as to why you should make saving a priority – it gives you options for when life happens.

    • Matt Becker October 2, 2014

      Totally agree. It’s all about having options. I’m glad you were able to make the best of a tough situation!

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