To be financially secure means having enough resources to support your standard of living today and in the foreseeable future.
To be financially secure means being able to sleep well at night, with no fear and worry that you won’t have enough money to provide for yourself and your family.
If you want financial freedom, then achieving financial security is your first goal.
Which now begs the question, how do you achieve financial security?
Fortunately, I discovered a simple test to find out how financially secure a person is, and that is to ask yourself this:
How many people will it take to ruin your finances?
I learned this concept from author and entrepreneur, James Altucher, who once wrote:
“Count right now how many people can make a major decision that can ruin your life.”
I don’t like it when one person can make or break me. A boss. A publisher. A TV producer. A buyer of my company. At any one point I’ve had to kiss ass to all of the above. I hate it. I will never do it again.
The way to avoid this is to diversify the things you are working on so no one person or customer or boss or client can make a decision that could make you rich or destroy you or fulfill your life’s dreams or crush them.
According to James Altucher, you would need to have at least 20 people to “pass”. So I tested myself, and fortunately, I learned that it will take about 35 people for me:
- 4 directors of the board, who can make a majority vote to take me out of my company
- 5 account managers of different advertising agencies, who can drop me as a supplier
- 7 managers of each of my small businesses, who can suddenly run away with my money that they handle
- 8 business partners, who can cut me out of our projects
- 11 major clients, who can leave me and take their business elsewhere
I believe it will take at least three out of these five scenarios to happen to make a major impact in my cashflow; four to bring me down to my knees; and all of them to completely ruin my finances.
As you might have realized, having several businesses and multiple sources of income has allowed me to spread my risk. I am able to diversify my cashflow so that I am not financially dependent on one person, nor to a small group of individuals.
For me, this is really how you become financially secure, and a great first step towards financial freedom.
How about you? How many people will it take to ruin your finances?
Photo credit: rdoyle
Tags: Personal Finance