Financial Security: Covering the Costs of your Basic Needs
By, Bob Peters || August 21, 2021
Easy to say but hard to do? Not necessarily. Financial Security requires you to cover the costs of your Basic Needs and invest wisely earnings in excess of your Basic Needs . The more you earn, the easier it is to spend less than you earn. The more disciplined you are on spending the less you need to earn. Understand the difference between what is nice to have (aka Wants) vs. need to have (Basic Needs.)
“Three buckets: Basic Needs; Financial Security; Wants”
When you are young and financially dependent your Basic Needs are often provided by your parents; housing, food, clothing, transportation, healthcare, etc. You don’t need to think about Basic Needs when someone else is looking after you but when you leave your home as a young adult transitioning to financial independence you will need to earn enough money to cover your Basic Needs.
Are basic needs the same for everyone? Well, everyone has some of the same Basic Needs like shelter and food but there are other things that people may debate whether they are needs vs. wants. Are cell phones and internet access Basic Needs? If employers rely on communicating with you via cell/text or email you very well might include the cost of these in the Basic Need bucket. Every employer will have expectations about you being physically present at certain times. In this case, reliable transportation becomes a basic need for you to retain your employment.
As a first step in the transition to financial independence it will be necessary to understand the cost of your basic needs and secure employment that pays you enough to cover these needs. The cost of basic needs is influenced by the geographic considerations and the wages offered by employers in those markets. You might be able to rent a two bedroom apartment in a rural town for less than half the price of an apartment in a large city but if there are no jobs available in the rural town or the wages are considerably lower you are out of luck. Check out the website livingwage.mit.edu to determine what Basic Needs cost in different US communities and regions.
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