Financial security

Tayus

How much money do we need to be financially secure? i am only 19 but worry a lot about my cash situation i am currently 1000 overdrawn in my current account, owe 1000 on a credit card and have a loan for approx 1300. but i also have 800 in an egg savings account, 100 in a halifax websaver with cashcard and 4140 in a halifax websaver without cashcard. how much would you recommend having saved to feel financially secure??

dunstonh

about 1.4 million pounds before the age of 65.

Yorkieds

You need that amount at 65 now, when he's 65 who knows what the amount will be?

I will leave it to the mathematically minded to come up with a figure!

YDS

System

Its a personal thing really isnt it. I think i would feel financially secure when i have about £10,000 in the bank....... Unfortunately, i have a long time way to go.

Pal

To be truly financially secure you need to have an income that doesn't require you to work for it. I.e. a "passive income". For example: royalties from a bestselling financial advice manual, interest payments from the large bond portfolio, ownership of a business that other people run for you.

When the amount of passive income you receive each month is larger than your monthly outgoings, you are financially secure and it doesn't matter whether you lose your job or not. The amount of debt you have is largely irrelevant once you are in that position as long as your passive income allows you to service the debt and meet all your other outgoings.

The vast majority of people do not reach this happy position until they are retired. Their passive income is pensions from the Government and the pensions they built up while working.

Your challenge, should you choose to accept it, is to reach this happy position long before you reach retirement age! Good luck!

As for the short term, any high interest debt that you have will reduce your ability to put money into assets that will earn you an income without your having to work for it, so it is probably better paid off as quickly as possible.

DiggingOut

Pal's response assumes that your passive income is secure, that is, from sources that are guaranteed not to dry up. For instance, ownership of a business as a source of passive income is only as secure as the business itself. Bonds can default. Royalties can run out if people quit buying the manual because a free website has made it obsolete. ;D

It also assumes that your passive income will keep pace with inflation, so that it will always stay ahead of your outgoings.

It also assumes that your outgoings will not drastically increase -- such as because of a health crisis.

Very few people can really claim to be completely financially secure.

Someone once said, "Lay not up for yourselves treasure on earth, where moth and rust doth corrupt, and where theives break through and steal. But lay up for yourselves treasure in heaven...."

Pal

I agree. I was not proposing it as a complete answer to every possible scenario, simply as a basic target to aim for. If someone gets into that position they are usually more than capable of figuring out (or taking advice on) what to do next to guarantee that they stay there.

In practice, once your passive income (secure or not) exceeds your expenses, you are then free to stop working for other people if you wish to do so. You can then dedicate all of your time finding ways to increase your passive income further, until it reaches a point when you feel that your income is secure enough to allow you to stop work entirely if you wish to do so.

The number of people who make it that far before they retire is very small, mainly I think because we are all so busy working for other people and spending the money we earn.

Leia_Stephens

For me being financially secure would be having enough money in the bank in order for me to live comfortably off the interest alone, without touching the capital or having to work ;D. An easy-access savings a/c with monthly interest would be best for this .

IMO, £2m or more - in an interest-bearing a/c where the rate beats inflation - would be fine for me .

More seriously though, it is sensible to have the equivalent of at least 3 months take-home pay in an easy-access savings a/c, money which should be used only in the event of an emergency :-X. At the moment I I have 3 months take-home pay in my "emergency fund", which I am pleased with, but financial literature I have read also encourages you to keep regularly adding to savings, without withdrawing it of course .

HTH

Leia

Sarahsaver

Not having a joint account or a mortgage in joint names, and having enough coming in each month to cover your outgoings.
Thats financial security.

System

Not having a joint account or a mortgage in joint names, and having enough coming in each month to cover your outgoings.
Thats financial security.

I agree.

dunstonh

3-6 months of your total outgoings is a sensible emergency fund.