Each year, many families find themselves in debt and some near financial ruin. By putting lots of thought into your finances and creating a strategy to control your spending habits (home budget), you can not only side step many financial pitfalls, but find yourself financially secure. In fact, what exactly is financial security?

The problem with defining financial security in these terms is that having $10 million, $50 million or even $1 million is a pie-in-the-sky dream for most of us. We’d all like to have millions of dollars, and it’s not bad to aspire to that goal. The problem is, if we define financial security by such large amounts of money, most of us will believe that it’s out of our grasp.

Financial security isn’t making or having a certain amount of money. There are many people who have made millions of dollars who are not financially secure. If someone makes $200,000 a year, but spends $300,000, are they financially secure? Of course not.

For most of people, financial security consists of four things:

1. Being debt-free. Certain debt is understandable. Borrowing money for an education or to start a business may also be acceptable, but borrowing money for other reasons is probably a mistake.

2. Being in control of your expenses. If you control your expenses so that they are less than your income, you can save and invest the extra money, and you’re on your way to becoming financially secure. Setting up a home budget is one of the ways of controlling your expenses; there are plenty of resources and tools available to help you understand how to build an effective home budget and to put it into practice. The main reason to set up a home budget is to control spending and make sure you are not living beyond your means.

3. Consistently increasing your savings/assets/net worth on a monthly basis

Most people have little to show for years or even decades of hard work. We should focus on saving money every month. It’s a great feeling to watch your savings grow, especially because the interest compounds without any extra effort from you. Instead of you working for money, your money can work for you.

4. Not being forced to work at a job you dislike just to pay the bills

If you are debt-free, control your expenses, and focus on increasing your savings on a monthly basis, you can survive tough times, such as a layoff, for months, or even years, without a change in your lifestyle. You will also have the freedom to quit a job you don’t like and take your time finding a new job, preferably one that you will enjoy. Financial security is an admirable goal for which we should all strive.

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