How financially secure you feel depends on these 5 factors
Posted by: Uma Shashikant on Aug 28, 2017, 06.30 AM IST
How do you feel when you review your financial situation? Is there a sense of elation and satisfaction at having accumulated a decent amount of wealth? Research shows that many tend to be somewhat dissatisfied and insecure about their wealth. They somehow believe that they could have done better or that they have not done enough.
How we think about our wealth and money depends on several factors. Psychologists point out that we may each have our own money story, where we have accumulated some beliefs about money, based on our experiences in life. We may also have some notion about how much we can have, or how much we believe we can earn, or how much we deserve. It is not very common to find people whose aspirations for financial security matches what they have.
Some of the richest people also live with fear, insecurity and a sense of inadequacy about their wealth. The fear of losing what they hold or being cheated out of their wealth leads some to mask, hide, hoard and live in miserliness disproportionate to their wealth. This insecurity about wealth among the wealthy might come from a poor sense of self-worth, or an underlying sense of shame or feeling of being undeserving or incapable of owning so much wealth. Financial insecurity among the wealthy is now diagnosed and treated as a mental illness.
The poor suffer from financial insecurity arising from the demanding conditions in which they live their daily lives. Uncertainty about the future, the lack of confidence about a sustained income, the risks from natural and manmade disasters, unexpected illness and becoming victims of crime or violence are all risks that the poor and underprivileged are exposed to. Several studies about improving social indices across countries point out that creating a secure macro environment in which the poor have access to better education, healthcare and infrastructure can mitigate such risks for the underprivileged in society. The strange thing though is that the large swathe that lies in the middle also seems to suffer fears and insecurity about finances, coming from several factors. Psychologists say that the mental state of feeling secure is tied to five primary factors.
The first is the continuity of livelihood. If a household is faced with the dire possibility of loss of income, there is no financial security as there is no income to take care of the basic needs. The desperate acts in human history, from trafficking to slavery and bondage have been traced back to the emotional craving for stability in livelihood. Even in modern times, there are many who will continue to work in jobs that they profess to hate, only because they do not have the courage to disrupt what they see as their livelihood.
The second factor is the predictability in relationships. We seek the joys of returning to familiar faces and conversations, and develop a keen sense of support from family and friends. However, who our friends are, how our relatives behave with us, whom we marry, and how we treat our children, all have an implicit bearing on our levels of financial security. Not all of us are able to clearly demarcate how these relationships would work if money were not part of the equation.
Therefore, we develop money habits and conversations that please and awe those who matter to us. Our sense of financial security can peak or dip based on how we perceive the behaviour of these people. A parent chiding a child about not achieving her potential, or a spouse pointing out how the neighbors are better off, or a friend failing to chip in as expected, can all disturb our sense of security and well-being.
The third psychological factor is the sense of safety from violence and crime. Studies about the status of women in many emerging economies such as India, show how women feel vulnerable and exploited in societies that deny her an independent economic status. Abusive relationships and sustained crime against women hurt their financial security severely. In societies where crime is rampant, and where the rule of law is not enforced, fear dominates the lives of rich and poor.
The fourth factor that contributes to security is the sense of belonging to a social group. Shared customs, culture, and tradition provide the ground for recognition, respect and acceptance in a social group, which reinforces the sense of achievement and well-being. Sociologists point out that those who do well within their known social or community groups enjoy a high sense of pride, accomplishment and security. Well knit social groups and networks also provide the scope for a safety net during uncertain times.
The fifth factor is the protection from calamitous events, manmade or natural. Vulnerability to events that can destroy everything that one might have built, create a heightened sense of fear and insecurity. Families that have lost a breadwinner, families that deal with debilitating disease, families that live on the fringes of a society with the fear of being uprooted and families that have to live in dangerous terrains and locations due to impoverishment, live in fear and insecurity about their futures. We are anxious when we do not know what to expect. We feel afraid when we think that what we have may be lost. We are insecure when we believe that what we have is not adequate, or is not in keeping with what is expected in the social circle that we belong to.
The solutions to the problem of financial insecurity lies within the five factors that we just discussed. Saving and investing habits are prescribed with the objective of augmenting income. To set aside some of our present earnings, is to protect from risks to future earnings. Building good quality lasting relationships that offer support when needed is the much-neglected social capital that everyone needs. Investing money, time and energy towards helping those in need, helps bridging the gaps between the rich and the poor.
Each one of can enable those who work for us at our homes and our surroundings build financial security for their families. We can pause and think about how we contribute to the continuity in livelihood, protection against calamity and safety from crime for them. We can have enough money in the bank. But whether we feel secure, safe and satisfied about it, is a matter of the mind. We can choose to be secure about what we have, without having to brag about it to impress a group in which we do not belong.
(The author is Chairperson, Centre for Investment Education and Learning) This article appeared in Economic Times dated Aug 28, 2017, 06.30 AM IST