What Does It Mean to Be Financially Secure?

father reviewing banking statements with small child on his lap

We can all more or less agree that “success” is subjective. Your personal vision of success may be similar to your partner’s or your neighbor’s, but ultimately it’s quite unique. It’s like a fingerprint. The closer you examine it, the more those differences reveal themselves.

But what about financial security? Is there something universal about being secure with your money? Or is security also entirely subjective?

The importance of safety and security

Maslow’s Hierarchy of Needs is a theory that essentially states that there are five basic human needs, and that they must be met in a certain order. The needs are:

  1. Physiological
  2. Safety
  3. Belonging
  4. Esteem
  5. Self-actualization

The hierarchy is basically a pyramid, with physiological needs at the bottom and self-actualization at the top. The idea is that our most important needs as human beings are physiological – having food to eat, water to drink, air to breathe, etc. Once we’ve sorted these needs out, we can concern ourselves with safety. Once we feel “safe” we can address our need to feel like we belong, and so on.

As the second level of the hierarchy, safety and security are incredibly important. Humans need to feel secure before they’re able to address their “higher-level” needs.

So what does it take to feel secure?

As security expert Bruce Schneier states, “Security is both a feeling and a reality.” But feeling and reality are quite different. “The reality of security is mathematical,” says Schneier. It’s all about the probability of risks and the effectiveness of corresponding countermeasures.

Most of us try to achieve financial security mathematically. We consider all the potential financial risks we face – unemployment, illness, unexpected costs, etc. – and try to determine reasonable countermeasures for each of those risks. So, as an example, you might not consider yourself financially secure until you have enough saved up to survive being unemployed for six months.

But, as Schneier notes, “Security is also a feeling, based not on probabilities and mathematical calculations, but on your psychological reactions to both risks and countermeasures.”

And that’s the trouble. You can create a reality of security and still not feel secure. Similarly, you can feel secure and yet not really be secure in your current position.

When it comes to finances, you can work for a solid company, be in great health, and have a huge amount of money saved up – and still not feel secure with your money.

Finding a Secure Mindset

Technically, to be “secure” is to be free from danger or harm. The trick though, is that no one is ever completely free from danger or the potential to be harmed. Security, therefore, is ultimately a mindset. It’s utterly dependent on how you view the risks and countermeasures in your life.

Motivational speaker Steve Pavlina has an interesting theory regarding security, which is that we tend to define our personal security by either internal or external factors.

External factors include money in the bank, a house that’s been paid for, and a steady job. If certain external factors are threatened or in poor shape, we don’t feel secure. And when we don’t feel secure, per Maslow’s hierarchy, it’s difficult (or impossible) to address our higher-level needs.

Pavlina’s point is that relying on external factors to feel secure can potentially prevent us for achieving certain goals. It’s difficult to take risks when we don’t feel secure, and when we define our security externally it’s very easy to not feel secure.

Conversely, internal security comes from self-belief. If you simply believe in your ability to adapt and react to whatever risks may pop up, you will always feel secure, no matter what’s going on around you. Living with debt or a poor working situation won’t prevent you from going after bigger dreams, because no matter what, you still feel secure in yourself and your ability to cope with whatever may come.

What does this mean for you?

The important thing in all of this is that you – and you alone – define what it means to be financially secure. But keep in mind that even if you create a rational, mathematical formula for yourself, and hit all the marks, you still may not feel secure in the end. If you define your financial security by the amount of money you have in the bank, you may not feel truly secure, even if you hit and exceed that number.

So it might not be a bad idea to look inward. Financial goals are great and can help provide direction and set priorities, but if your fears and worries about money are holding you back, there’s a lot to be said for simply trusting in yourself and your abilities. Build your savings. Find the perfect job. But also give yourself the proper credit for being able to make due when the unexpected happens.

After all, you've made it this far. And chances are good, it wasn't always easy. So be confident and secure in yourself. You’re the most valuable asset you have.

Need a little help making progress on your financial goals? Connect with a credit counselor to discuss your challenges and find real solutions. Counseling is free and has helped millions of people!

Article updated November 2020

Tagged in Psychology and money, Retirement, Advice for families, Savings accounts

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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