What Is Financial Security and How Much Do You Need to Make to Achieve it?
Americans, on average, estimate that they would need to make $233,000 per year to feel "financially comfortable" or "secure with their finances." And to be rich and achieve financial freedom, they think they would need to earn about $483,000 per year. These findings come from a much-discussed survey conducted last year by the financial services firm Bankrate.1
By comparison, the average earnings of a full-time worker are around $75,000. So, if this view is true, the typical worker would need to more than triple their salary to earn enough to feel secure with their finances.
It's not surprising that the majority of respondents to the survey (72 percent) said they did not feel financially secure. This is a difficult situation to find yourself in. Money was named as the main source of stress for 44 percent of people in a survey by Northwestern Mutual.2
Before we look at the Bankrate survey's numbers a little more closely, it would be good to get a definition of what people mean when they say "financially comfortable."
Mark Hemrick, a Bankrate senior economic analyst, describes it as, "Being capable of paying for ongoing expenses, saving for retirement and emergencies, paying down debt, and having a bit more left over for an occasional splurge."
This sounds entirely reasonable.
And what do people feel are the major factors responsible for making them feel financially insecure? The biggest culprit was inflation (63 percent of respondents), followed by the economic environment (48 percent), and rising interest rates (36 percent). Respondents say these factors have kept them from saving up for an emergency fund, forced them to use revolving credit, and kept them from owning a house.
Every person's financial situation is different and each one of us faces a unique set of obligations and challenges. However, it's interesting to note that behaviors like overspending, poor money decisions, and not following an overall financial plan were not listed as major factors in feeling insecure about money. Yet these behaviors are nearly always present in the financial habits of people who are unable to live on their income.
Surveys have found that while nearly 80 percent of Americans report using a budget, the vast majority are unable to say how much money they spent last month. This seems to indicate a fuzzy idea of what a budget actually does or is supposed to do.
The good news is that you don't need to triple your income to be financially secure. In fact, simply making more money while continuing with bad financial habits will most likely result in disaster on a larger scale. When you have an overall plan for your money, you'll find that your resources can go farther, your goals become more obtainable, and your financial stress is reduced.
Sticking to a plan is not always easy. Otherwise, more people would be doing it. But when you partner with AssuredPartners Investment Advisors, you have someone to help guide you along the path toward greater financial security, clarity, and confidence.
1. http://go.pardot.com/e/91522/ial-freedom-survey--being-rich/94m3rw/2198582579/h/S33s8HpNhZ1nD0vsTkEQoIe-qHuAjy0B3iR7NFTTZHY
2. http://go.pardot.com/e/91522/ing-spending-knowledge-survey-/94m3rz/2198582579/h/S33s8HpNhZ1nD0vsTkEQoIe-qHuAjy0B3iR7NFTTZHY
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