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.