Building Financial Resilience: Part 1 - preparing for the unforeseen
Having Financial Resilience is a necessity if we want to not just survive, but thrive especially in our current economic climate. The strain imposed on households due to the rising cost of living and the higher mortgage repayments is REAL.
Do you feel like you're on the back-foot (constantly) and like you're a hopeless victim to these circumstances? It's easy to feel overwhelmed when the knocks keep coming.
Financial stress is the tip of the iceberg. The knock-on consequences of financial stress include relationship breakdowns, family issues, a myriad of health issues including loss of sleep, rising anxiety, despair...
Despite wanting things to stay the same, they don't. Our environment is always changing. Instead of fighting (or denying), what if we could learn to adapt, prepare for the unforeseen all the while being ready to seize opportunities when they come along?
Building financial resilience is a skill anyone can learn and implement, so let's explore some of the concepts to becoming financially resilient.
What is Financial Resilience?
Financial resilience is the ability to withstand and recover from unexpected financial setbacks while maintaining a steady course towards your goals.
It means having a robust financial foundation that helps you to endure 'downturns' and adapt to changing circumstances.
Preparing for the unforeseen
Building financial resilience is a journey and one of the best places to start is having a plan for when the unforeseen occurs.
An example is like having a fire evacuation plan for a building. If you know exactly what to do, you have the resources to do it and you can keep it together under pressure, the outcome is likely to be miles ahead (life or death) from having no plan, no resources and no ability to cope.
Cashflow Confidence Podcast
Check out the conversation with Sami from Live to Serve Academy on money management and financial resilience
Have an Emergency Fund
Shit happens (a lot). We know this, but we don't plan for emergencies because it's unforeseen and we 'hope' it won't happen.
When was the last time any of these (or similar) happened?
- Medical emergency (dental, vision, accident, caring for a sick relative)
- Major car repair (engine, breaks, tyres, welch plugs, exhaust, gearbox)
- Major house repair (plumbing, electrical, appliances)
- Job loss, redundancy or change in income
- Needing to move house
Having access to funds for these life events need to be part of your resources toolkit.
Your plan is to put aside these funds for Emergency-Use only. Being disciplined is part of your resilience training. Sorry - yes that means these funds are not for holidays or other types of discretionary spending.
As a guide, aim to have a minimum of 3-6 months worth of living expenses in your Emergency Fund.
If you have income protection insurance, that's great but there is often a 3 month wait period. Be Prepared.
Managing Debt
Being able to manage debt is a crucial part of financial resilience. You want to tackle and eliminate high interest debt as soon as you can. i.e. credit cards & personal loans. Many people get trapped in a credit card debt cycle. Credit cards attract interest rates of avg. 22%pa! AKA wealth destroyers.
If you want a time-tested formula and plan to get out of bad debt, check out our Debt Buster Program. The course to end your debt merry-go-round.
If you find yourself unable to meet your minimum payments, then you may be experiencing financial hardship and you should contact your credit provider as soon as possible. The worst thing you can do is ignore it.
Diversify Income Streams
Relying on one source of income can leave you vulnerable. If you haven't already, consider exploring additional income streams such as:
- Part-time work
- Side hustle
- Renting out a spare room
- Freelancing
Insurance Cover
It's estimated 82% of us are underinsured. No-one likes paying insurance sure, but what if? What if that one time you need it, you're not covered or you don't have enough cover, what then?
Most of us insure our cars but not ourselves leaving our families vulnerable if we can't work or if something happens to us.
It's understandable insurance premiums might be one of those things that gets cut in hard times, but consider looking at ways to save on the premium rather than cancelling it altogether.
Call your provider and ask how you can save with them. They don't like losing customers. If you don't ask you don't get.
In Conclusion
Achieving your finance goals and navigating the path towards greater resilience is easy to do. It's also easy not to do. Which one will you choose?
As a finance coach, I am committed to financial transformation for those that want to put in the work.
One day is now! Start small, build and watch the transformation.
Check out how to work with me here
Personal Finance Coach - Empowering you to be in control
Disclaimer: this content does not constitute advice and should not be relied upon as such. Cashflow Mastery is for educational purposes only. It is not to be taken as Financial, Taxation, or Legal advice. Full terms are found on our website.