You Don’t Need a Huge Salary To Build Financial Security

Five if you include robbing a bank, but don’t rob a bank.

Money worries are a top stressor for many households, so getting to a place where you can stop fretting about bills is nice. However, financial security looks different to everyone.

According to a Cashback Loans study, 51% of Americans need an annual household income of $150,000 to $200,000 to feel secure, while 35% of the 3,000 surveyed said an annual household income of $100,000 or less would be enough.

Don’t Wait: Warren Buffett’s No. 1 Investing Rule That Most Americans Ignore

Hop On: How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too

Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University, said people may be focusing too much on income and not enough on wealth.

“One can have a relatively high income but be financially insecure,” Johnson said. “People should focus more on building wealth and less on building income.”

D’Andre Clayton, cofounder of Clayton Financial Solutions in Greensboro, North Carolina, agreed that income alone doesn’t determine financial security. Instead, he said, people should pay attention to the amount of money left after the bills are paid.

“Income only tells me how much money comes through your household, whereas financial security tells me how well your household can withstand disruption,” Clayton said.

Here are four steps experts say you can start now to build greater financial security, regardless of your salary.

Know Where Your Money Is Going

Understanding how much it costs to run your household each month is vital, and a budget that shows where your money comes from and where it goes each month is a good place to start.

“Know how much you spend monthly and what you spend it on,” said Gerry Keene, financial service certified professional and a financial advisor with more than 20 years of experience. “If you spend more than you earn, reduce spending until you spend less than you earn.”

A realistic budget should have room for necessities, discretionary spending and savings. To free up room in your budget, review subscription services, gym memberships and recurring bills — if you don’t use them, cut them.

Build an Emergency Fund

An emergency fund can help keep an unexpected expense from becoming a financial crisis and from going into debt.

Matt Twiford, managing director of Pegacorn Group LLC, recommends starting small rather than waiting until you can save several months of expenses.

“Something is better than nothing should an emergency happen,” Twiford said. “Having that cash buffer is key because it helps you avoid borrowing at high interest rates and large fees.” Once your emergency fund grows to three to six months of expenses, Keene suggests working with a financial advisor.

“Establish a medium-term account because this account enables you to make larger purchases and take vacations in the midterm (five-plus years),” he said.

Attack…