A business owner asked me recently, what my definition of financial security was. I started by asking him what HIS definition was. He said that if he had a million in the bank, that would give him enough to be financially secure for life. I disagreed.
Financial security isn’t a number
Financial security is more than just an amount of money. This is why we see so many lottery winners going broke, even after winning 10 or 20 million! Equally, there are many, many shocking stories of good, honest people, who have worked hard all their lives to save some money for their retirement, only to be conned out of it by crooks; promising them riches if they just sign some forms.
In such cases, simply owning a large sum of money did not make the people financially secure. If financial security had been about having a certain amount of money, those people wouldn’t be broke right now.
Financial security: My definition
For me, financial security is about having the ability to make as much money as you need, plus more on top – AND the ability to use money correctly. When I was a kid, the local window cleaner once told me that as long as he could get a bucket of water and a cloth, he would never be broke. What the window cleaner forgot to mention was that when he was ill, his income stopped. He forgot to say that when he got too old to climb a ladder, his income would stop.
One of my first employers gave me some better advice on earning money. He told me that success came when you started getting paid for what you created, from the neck up, not the neck down. He suggested I should feed my mind with valuable information and put it to work, because that would increase my income. He was 100% correct.
It’s been said many times that if all the money in your country was evenly distributed among the people, that it would eventually all end up back in the same pockets again. I don’t think this is completely true, but I do believe that those who don’t understand how to make or retain money correctly, would lose theirs to the people who understand the process.
Financial security and the ability to create massive value
I wrote yesterday about residual income and the value of developing an income that didn’t require you exchanging your time for payment. It’s a useful way to make money, but there are many others.
For example, if Pete Cashmore the twenty-something founder of mashable.com decided to sell his business, he would make many, many millions. Yes, Pete has worked hard (and smart) to build such a wonderful business, but he could sell-up and go and sit on a beach all day. That example is not a residual income, but it’s a GREAT example of creating something that’s brilliant, which has enormous market value. Many residual income gurus suggest anything other than a residual income is a waste of time – I think they are wrong.
Financial security: What is your definition?
That’s just my definition, there are many others. How would you define it?
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