Liz Koh: Security brings peace of mind

Financial security is something most people aspire to achieve. Worrying about money causes stress, loss of enjoyment of life and is often linked to relationship problems, so being financially secure can make you happier.

The definition of financial security is a personal thing and depends to some degree on what you consider to be a minimum standard of living. At the very least, everyone needs a place to live, the basic necessities of life such as food, clothing and heating, and sufficient resources to be able to enjoy life.

The basic elements of financial security are:

Being debt-free. This includes owning a home without debt as well as having no credit card or store card debt.

Having enough money in reserve to cover unexpected expenses or an unexpected loss of income. A basic rule of thumb is to have the equivalent of at least three months' living expenses in reserve.

Having a secure income that is sufficient to maintain your desired standard of living. Securing your income requires keeping your skills up to date, maintaining good health and a good relationship with your partner, or finding ways to generate passive income.

Having sufficient assets and investments to provide for your future needs. This includes your long-term goals as well as your retirement needs.

Being protected from financial risk through having adequate insurance cover, a diversified investment portfolio, and a means of protecting your assets in the event of business or relationship failure.

Achieving financial security is difficult for those on low incomes. However, there are many instances where even people with good incomes have failed to put in place the basic elements of financial security and suffer badly when they have a sudden in change in their circumstances.

Liz Koh is an authorised financial adviser. The advice given here is general and doesn't constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.