Did you know 71% of Americans feel financially secure today, according to a recent study? This is a huge jump from 10 years ago when only 47% of people felt secure.
We should all be celebrating, right? This statistic makes it seem like we’ve made waves in our financial security since the Great Recession.
But are we more secure than we were 10 years ago? That’s exactly what we’ll talk about today. In this article, we discuss:
- The problem with feeling financially secure,
- How financial security is an art and a science, and
- Concrete steps you can take to secure your financial future.
Are You On The Hedonic Treadmill?
Have you ever heard of the term hedonic treadmill? It’s the idea that if you rely on material things or experiences to make you happy, then you’ll never, ever have enough.
There is always another experience or thing you’ll reach for once you’ve attained the first experience or thing you wanted. There is always another person who has more, has better, has done more, and is viewed better than you’re viewed.
It’s a treadmill because you can never reach the front of the pack. Every time you attain – you see new things to attain. It’s an endless cycle.
The same goes for financial security.
Financial Security Is A Hedonic Treadmill
There is a big difference between “feels” secure and “is” secure. Despite what the study says, I don’t believe 71% of people are financially secure today (even though they feel it).
This is based on two facts:
- We’re pretty bad with financial math.
- We have a tendency to “feel” great about money at the wrong time for the wrong reasons (like after markets have gone up for 10 years).
Let’s break both of these down.
Fact #1 recognizes that financial security is a science.
Economic security comes when you’re saving more than you’re spending. But more than that, it comes when your rate of saving is rising to match your rate of spending in the future (i.e. when you’re earning real returns instead of nominal returns). The only way to consistently outpace inflation is by owning equities.
Fact #2 recognizes that financial security is an art.
It’s part feelings just as much as it’s part math. 71% of those survey respondents aren’t secure even though they feel it. And 29% of those respondents aren’t not secure just because they don’t feel it.
That’s the thing with financial security. We can feel secure when we are not; we can also not feel secure when we are. The key is to have a plan and know where you stand.
What To Do When…
You Feel Financially Secure (But You’re Actually Not)
When you feel secure, you have a tendency to not save enough or invest in enough equity to actually be secure. You’re freer with your spending today because you don’t realize your need for increased spending in the future. As a result, you set yourself on a path of running out of money and you don’t know you’re on the path.
How To Fix This Issue:
Figure out where you are on your journey to financial security. Do you need to save more? Adjust your investments? Cut down on spending?
Here are some tips to help you get started:
- Use a retirement income calculator – (find out how much you need to save every month to reach your desired retirement income goal)
- Fill out our financial planning worksheets – (create an actionable plan to reduce debt and build savings)
- Watch our exclusive webinars – (get an expert’s opinion on everything from money and divorce to Social Security and mindful investing)
When You Don’t Feel Financially Secure (But You Actually Are)
On the flip side there are those who save way more than is necessary. For them the “feels” is a different challenge – they’re very anxious about their finances.
If this is you, maybe you grew up poor and took to heart your grandparent’s stories about the Great Depression. Or maybe you don’t understand your financial plan or trust the markets, so you oversave to feel secure.
Neither of these situations are financial issues. They’re emotional issues through and through. And this is the hedonic treadmill of security.
If you have Social Security, a pension, and you max out your 401k, it may still make sense to have a Roth IRA and a taxable investment account if it aligns with your legacy goals. But… it may be overkill. What’s YOUR plan?
But some people will never feel secure no matter how much they save. I fall into this camp. If you are here with me, we have to learn a different approach.
How To Fix This Issue:
If you are secure but don’t feel it, I’d encourage you to do a basic reset:
- Take care of your body – exercise daily, eat right, sleep 8 hours / night, & drink water
- Get outside into nature– take a walk in the forest, ride a bike
- Spend time with family – play board games, have a movie night, cook dinner together
- Take care of your mind – Learn to meditate and start a gratitude journal
These are all things that research has shown to build physical and emotional resilience. These things, done together, can support you in aligning your ‘feels’ with reality.
The Bottom Line
We’ve all met with failure at some point. Success in life comes from overcoming failure. Security comes from knowing you will overcome more of it if you have to. (This is coming from a guy who’s gone through divorce, lost jobs, failed in business, gained – then lost – 90 pounds, fought with his spouse and kids, and still came out on the other side.)
How To Realign Your Financial Security
Which side of financial security do you live on? Have you told yourself you’re secure when you’re not? Or are you convinced you’ll never be secure despite the fact that you are?