Financial Security is Not a Number; It is a Feeling
Financial worry is not about money; it's worry about the future. Money is not the solution. It is just an amplifier. Thoughts, insights and MoneyTalk-questions.
Financial security, when viewed through a rational lens, is about having control of your month-to-month finances and having the capacity to absorb a financial shock in the future1. However, finances are more than numbers for many of us. They evoke emotions, especially when we occasionally grapple with financial worry.
As a student living on financial aid many years ago, I thought that $2,000 was enormous. At the time, it equaled two to three months of living expenses. I remember thinking I could handle anything if I had $2,000 in my account, so it became one of my first savings goals.
A while later, I read a book recommending that everyone have at least USD 5,000 in an emergency fund for rainy days. I was sure that anyone with such a large sum would feel financially secure, so I moved the goalpost.
I diligently saved until I was closing in on $5,000. However, I kept moving the goalpost to $10,000 and then to $25,000. The numbers kept increasing, but my sense of security did not keep pace. That's when I realized that financial security is not defined by a number but by a feeling.
Financial worry isn't about money; it's a concern about the future. My mind will always conjure up new scenarios to worry about. One of my therapists even referred to it as a creative misuse of my imagination.
1. Acceptance of the “worry-card”
If you, like me, have also received the "worry card" in your life, congratulations! The advantage of having a “financial worry card” is that it ensures that you always will have your financial fort in order (even if it may not feel like it).
I bet there is an emergency fund, sometimes even an emergency fund-on-the-emergency fund, probably even a bit too much insurance. Objectively, you will be safer than most. It will never go really wrong financially. And I know it doesn't help me writing it at all. 🙈
People like us will consistently build a financial fort as a bulwark against the unknown. With each new upgrade, outer perimeter, and defensive work, we will always imagine new threats. The fort that started with a wooden palisade eventually has triple walls and lasers against unlikely events like alien invasions. 😉
The flip side of the worry card is that it always has a downside cost in the feeling of being alive and living a rich and fulfilling life. The downside is the loss of aliveness. Worry takes away life's energy and joy. Worry forces us to constantly fix perceived weaknesses in the fort instead of leaving it for a while, taking a seat in the clearing in the sun, and enjoying ourselves (and at the same time trusting that the fort can do without us for a while).
Because you can't train “not to play the card,” just as you can't train not to fall off a horse. The only thing we can improve is to get back up on the horse more quickly. To observe and identify when our brain has played the “worry card” behind our back more quickly. We can then decide whether to let it lie or consciously play another card.
2. The principle of “most dangerous right now”
Another — more rational approach — is the principle of "most dangerous right now." It is about distinguishing between danger and fear. Fear might be false evidence appearing real, whereas danger is having your head in the tiger’s mouth.
It is about identifying the most dangerous thing—the most serious consequences—and the likelihood of that happening. We must differentiate between fantasy, reality, and probability to prioritize available resources.
It’s okay to go crazy and try to come up with likely and unlikely scenarios for what can happen to your financial fort. But the thing is to do it in a controlled way, e.g., with a timebox of 20 minutes. Good starting questions are:
What is most dangerous if it were to occur?
What is most likely to occur?
How can I prioritize available resources?
What resources would I need for a good enough solution?
Consider combining insurance with an emergency fund. It's generally recommended to have 3 months' worth of expenses in an emergency fund, along with relevant insurance. However, that number might change based on your situation.
3. Financial security need not be money
It is not wise to put your security in a resource like money. If the money disappears, then the security often disappears with them. But since most of us were not born with the money but have made them, then why wouldn't you be able to save them together again? We tend to forget that income is not a thing we do but a skill we have. Hence, there are perhaps other things to have as a basis for your security.
Maybe it is wiser to put the financial security in the trust in your own ability rather than in the money themselves. In the same way, security can also be other things than money. It can be good relationships. That we have friends and parents to turn to. That we have actually solved most of the important problems in life. That we can ask others for help, something most of us can practice much more.
What if it is about is to giving oneself permission to enjoy life a little more?
Otherwise, the risk is that, like Sisyphus, we will always chase a number we cannot reach. Every time you approach the target flag, you grab it and move it forward. You will never have enough, you will never allow yourself to enjoy life, and you will spend time - our most valuable resource - building defenses and improving the financial fort against something that never happens.
Maybe it's time to stop trying to solve a problem that doesn't exist in a way that doesn't work and instead practice sitting in the clearing and letting life feel as good as it is. 🤗
Ideas and comments from the community
Ove comments:
The concern is also related to age. When you're younger, your money needs to last indefinitely, but once you pass 60, that's no longer the case, and the worry fades. Instead, the focus shifts from capital to time.
Skogen adds:
I read a while ago about an American Tibetan nun, Pema Chödrön, who shared one of here greatest insights, which particularly resonated with me: “You don't find security by striving for control, but by relaxing into uncertainty”.
AnthonB writes:
From being overly controlling with my money, with a tendency to accumulate amounts in bank accounts without interest, I now have a more balanced financial strategy. I have an emergency fund that covers one month's expenses, which gives me financial security. Additionally, my savings in a global index fund now generate the equivalent of an extra month's salary per year, which means that I effectively earn 13 months' wages annually.
Five thoughts and insights to ponder
Financial security is about having control over your day-to-day and month-to-month finances in the present and the capacity to absorb a financial shock in the future. Financial freedom of choice is about being able to make choices to enjoy life in the present and stay on track to meet your financial goals in the future. Together, they form the four elements of financial well-being.
Financial worry is not about money; it's a worry about the future. It is most often caused by a lack of financial control in the present and direction for the future. In most cases, believing that money can solve the problem alone is a fallacy.
Consider the possibility that no number will make you feel financially secure. No amount will ever convince you if you cannot find the feeling of security within you. Money is not a solution. It is just an amplifier. Money will leverage most of our feelings, especially those of insecurity, fear, and worry. (Most often it’s easier, better and cheaper to mitigate them early in one’s career. 🙈)
Consider the possibility of changing the goal-setting question from “How much money do you want?” to “How do you want to feel in life and various situations?”
A common fallacy is to believe that when I reach amount X of money, I will feel secure, work less, be happy, be a better parent, improve my health, go after my dream, start my own business or something else. It is a common excuse to use money as a reason for not living the life we truly desire.
Five MoneyTalk questions
Some questions to discuss with a friend or partner of yours:
When do you feel financially secure (or not)?
If you wouldn't rely solely on the amount in the bank for your financial security, what alternative could provide a similar sense of assurance?
If you look at your life, what situations are most dangerous right now?
How do you relate to the concept of the worry card? What cards have you been dealt in your life? What are the upsides, and do they also elicit a cost in aliveness?
How do you want to feel in life?
What are your thoughts?
It would be exciting to read what you think. Do you agree? Or, rather, do you disagree? Do you recognize yourself? Or have you tried other strategies? Do you put financial security in something else?
Thanks for reading; please like, follow, or share if you like it! ❤️
Consumer Financial Protection Bureau: “Getting started with measuring financial well-being”, January 2019