Financial resilience allows us to recover from unexpected events. We must have a plan in place to manage economic challenges. It is an ongoing process that involves planning and disciplined saving to strengthen your ability to manage sudden expenses or loss of income.
How would you handle a financial shock? Planning before an event happens helps you be prepared. Two questions to ask yourself: What are the most important items in your budget? What expenses will we cut, if necessary?
Financial resilience involves risk management for informed decision-making. This leads to flexibility and peace of mind. What would you do if you lost your job? Do you have a side income or enough in savings to carry you through reduced wages? What if Scenarios let us find and assess threats. These threats could stem from financial uncertainties, legal issues, accidents, natural disasters…
Consider a personal mission statement to chart a course. Use action words that tie to your To-do List. A mission statement gives you a roadmap for the future, a set of ideals and end goals. But a mission statement does no good without an Action Plan (or To-Do List). Without it, you run the risk of it becoming a paperweight. Without effort, the goals and milestones you’ve mapped out may end right back where you started.
In essence, we evaluate threats (or risks) to understand their potential impact and probability. Decide which may need immediate attention and develop strategies to manage the risks. Can you avoid the potential threat or reduce its impact? This is where insurance may help.
Here are the steps to consider:
- Have emergency savings
- Keep debt levels manageable
- Be sufficiently insured (health, life, property)
- Budget and monitor income and expenditures
- Set financial goals and have a long-term strategy
- If possible, have more than one source of income