What does it mean to be financially secure?

If I were to ask you, “What does it mean to be financially secure?” What would your answer be?

Would your answer be that financial security means not having to worry about money anymore? Would your answer be that it means having enough money to live out the rest of your life living at the same means as you have now?

Is it not having to work anymore? Is it a certain number?

In my humble opinion, the concept of financial security is really a philosophical question that books can be written about and still never fully answer.

I’m not here to give you the answers to the universe, but I can at least help you to look at some numbers and situations to ponder when thinking about financial security.


A friend and I were talking about the phone app Angry Birds last week and I mentioned that the creator gave up a lot of money giving it out for free on the Android platforms. He told me that it didn’t matter because the creator probably made $10 million from just iPhone sales. My friend then proceeded to tell me that he could quit work and retire right now if he had $10 million. I looked at him scrunching my eyebrows to show him that I was trying to crunch the numbers in my head. He looked at me with reaffirming eyes and said “$10 million is A LOT of money. Here, I’ll show you.”

“I’m thirty-six years old. I’ll probably die by the time I’m 76 because I’m an unhealthy SOB. $10 million would give me $250,000 per year until I die. I can easily live off $250,000 a year. I live off a lot less right now. I would pay off my house and kick all my kids out.”

Hmmm… Interesting concept. Sounds good, right? I certainly don’t make that much myself (yet!) so it would be a definite pay raise. Not wanting to get into a tiring discussion with him about spending (he was very set on his plan) I left him with his great idea and went on my merry way.

Now that we are away from the initial discussion (my friend), let’s take a closer look at those numbers.

There are a few assumptions that have to be made when someone says they can live off a certain amount for the rest of their lives.

  1. Little to no changes with their lifestyle
  2. No major healthcare costs (we’ll skip this to keep it simpler)
  3. No inflation

We’ll also assume the world doesn’t end, there are no major revolutions, etc.

So let’s start with the first assumption: Little to no changes in their lifestyle.  If he and his significant other can keep their lifestyle constant for 40 years then more power to them. I certainly could not do that and the harsh reality is that most other people could not or would not either.

Here is a nice little statistic: Average consumer debt in 2010 was a little over $10,000 per adult.

This doesn’t prove that all people are in debt, but it shows that many people spend more than they earn. I’m sure many of us could easily think of reasons why people spend more than they make:

  • Keeping up with the Jones’
  • Can’t say no
  • Instant gratification
  • Making up for lost time as a child

What cannot be denied is that for many people, when they make more money they tend to spend more money. Finally have more money? Let’s get that car we always wanted! Let’s buy a bigger house! Let’s to the more expensive restaurant! Let’s get that new smart phone! Their lifestyles change, whether they intend it to change or not. Consumer debt is across the board, not just certain income levels.

I would be lying if I said my lifestyle didn’t change between being a starving college student and a professional software engineer. If I ever claimed that, make sure I’m covering up my flat screen TV and my granite countertops.

Lifestyle changes are not necessarily bad – as long as they are within reason.

Skipping the second assumption, the third assumption is the one that most people tend to forget: inflation.

While it may seem inconsequential, the calculated increases can be exponential.

Let’s take the salary of $250,000 in 2011 and assume not taxes are being taken out. In 2012, the equivalence of $250,000 would be $253,250. (low estimate) Skip all the way to 2021, just ten years later, and the equivalent would be $293,857. Assuming low to average inflation rates of 3% or less, $10 million would run out by 2039 – 11 years early. If inflation becomes higher than that (and with the way the fed is spending it may just get higher) then it shortens even more.

So in the end, what does this all mean?

Am I trying to say that financial security is impossible to achieve, even with $10 million? I am not trying to say that at all. I would take $10 million if it were offered to me. I would just not let it stop there. I would continue to work to make it grow because I know that things can change dramatically in the future.

What I am trying to say is that it is good to have dreams and goals – just make sure they are realistic and take realistic scenarios into consideration. Keep working and don’t become complacent. The more possibilities you plan for, the more you anticipate for the future, the closer you can get to the ultimate state of financial security.

Whatever that may be.

2 Responses to “What does it mean to be financially secure?”
  1. Kendra Slate says:

    Great Blog Gian. This was easy to read, and it really broadened my perspectives on where money actually goes, and how to realistically think about my financials.

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