Mundo’s Guide on What is Financial Security, and What is the Best Way to Achieve it

In an ever-changing world, the lack of security is a major concern for everyone, and the businessperson in particular. What is financial security? This term is used lightly, especially in publications about financial services, but does it have a formal meaning? What do we mean when we talk about how to achieve financial security? Today, Mundo decided to touch upon this subject in our asset protection and trust section. 

What is Financial Security in the 21st Century?

When we talk about financial security, we talk about a subjective concept because it depends on each individual. What it takes to make someone feel secure may not be the same as with someone else, and this depends on personal experiences and expectations. A clear example becomes evident when comparing it to an investor's risk profile. 

These are stipulated after assessing the person's goals, age, earnings, and the family context. Evidently, a married couple with three children won’t take the same level of risk as a 20-year-old Silicon Valley genius who has just sold the first app for thousands of dollars.

Therefore, we want to highlight that the present article describes nothing but Mundo’s perception of financial security and the means to obtain it. 

What is Financial Security, and Can We Really Have It?

At the risk of sounding too apocalyptic or falling into dystopic fantasies, we need to acknowledge that no structure is 100% safe. There can always be a loophole or an unforeseen event that can turn things upside down.

However, leaving out such extreme situations, we can at least try to consider as many variables as possible to achieve the level of financial security that makes us feel comfortable. How many second citizenships do you need? For many, one is enough, but others would rather have three, four, or five, so there’s always a plan C, a plan D, a plan E, and so on.

Furthermore, economic citizenship and residency are a reliable path to obtaining multiple nationalities as long as the involved countries allow it. Without further ado, let's delve into Mundo's guide on how to achieve financial security.

How to Achieve Financial Security

Financial Security through a Trust

In the world of finances, everyone will tell you that there's no safer structure than the trust, especially when stablished in the right jurisdiction. Countless times we've recommended Nevis because of its protective legislation of local trusts, but trusts can be set up in different jurisdictions.

The essence of a trust is the same as a foundation and consists in separating legal ownership from the original owner. A settlor of a trust signs an agreement with the trustee and allocates certain assets that will be managed and administered by the trustee under the settlor's instructions.

More information

Is this the right way to achieve financial security? We can't say that trusts are infallible, but they are fairly safe: they have been consistently chosen by the wealthiest families, and they have safeguarded colossal fortunes.

The downside is the loss of control. Even with a variety of tools that can be applied to gain higher control, it is never the same as owning the assets directly. This is why Mundo recommends that trusts should be a part of a wider financial plan, like the Five-Flag Theory teaches us. 

How to Achieve Financial Security: Complementary Paths

Even though the following are not specific tools concerning financial security, they can be related to what is financial security and how to achieve it.

Territorial Taxation

What is financial security good for if you lack a smart approach to taxation? The secret for tax residency to work is to establish your tax residency in a territorial country, and your business in another jurisdiction, which must be flexible and tax-friendly. *

The same works for those who receive royalties or get their money from selling, let's say, software. In this case, they may want to receive earnings in an account outside their place of territorial tax residence.

*Note: Taxation planning must be done carefully and with proper advice from professionals with expertise in each jurisdiction involved. Being tax-free in one jurisdiction does not exempt you in another one, and ignoring this may lead to fines, loss of money, or maybe jail. 

Second Citizenship or Residency Is Always a Plus

When asking ourselves how to achieve financial security, the concept of economic citizenship and residency comes up, especially in places like St Lucia, in the Caribbean, or Vanuatu, if you prefer a more exotic destination with a deep past. 

It wouldn't be out of place to ask what is financial security and how it is related to second citizenship. For starters, they are not, except for one detail. Second citizenship or residency is about having options. In simple words, if you have a business in a friendly jurisdiction that allows you to reinvest, to access convenient policies, and to transfer your money wherever you want, we can say you have found your own golden fleece. However, every jurisdiction can change its policies, and when we say “every” we mean EVERY ONE OF THEM. 

International investors surely look for those places with impeccable economic and political history, but who knows? Changes can come at any time, and it's better to be prepared. So, if living or doing business in the previous country suddenly is not convenient anymore, you’ll always have a place to go thanks to your multiple nationalities.

Disclaimer: this article contains a subjective guide about financial security, however, this article does not constitute financial or asset protection advice. This article doesn't take a position on what is financial security and how to achieve it. 

The Path to Achieving Financial Security

The question of what is financial security is a subjective one. The purpose of this article is not to provide financial security or asset protection advice, but to give ideas on the tools that can be used to feel safer about your finances and related decisions.

Mundo is an online publication featuring topics for perpetual travelers and international investors. Our team is connected to agents, advisors, real estate developers, and lawyers, and we can help you open bank accounts abroad, establish a trust or a company, buy real estate, and obtain a new migratory status.

Contact us and tell us about yourself and your goals, and we'll help you achieve them efficiently and straightforwardly.

Get in touch with the Mundo team