Tips on how you can be more financially resilient

It is World Thinking Day tomorrow and this got me thinking about my past and recent experiences with money and how we can be better prepared to deal with life events that just happen unexpectedly.

So what exactly is financial resilience?

Financial resilience is the ability to withstand life events that impact your income. As women we typically go through 6 stages in our life:

Growing up and studying
Start working
Relationships
Motherhood
Carer
Ill health at end of life

Financial resilience is about how we can better equip ourselves to deal with these stages. So how can you better equip yourself during those moments of illness which can happen during any of these life stages?

Coping with unexpected circumstances

Recently I was unexpectedly in hospital for a week, which of course left me unable to work. I had to re-book my one to one clients, rearrange my podcast interviews and do what I needed to do to just survive that week! My husband was also poorly so he was at home off work for a week and looking after himself and the children.

I was ironically on a retreat called ‘Be Love’ which was all about self love and relationships, and covered some taboo subjects such as sex. Pretty ironic because I started to feel quite poorly on my way home with what I thought was the flu, but actually turned out to be a nasty abscess in my pelvis! (I will save you the gorey details!)

Financially, I was fine. I have an emergency fund in place. I have an extra insurance buffer which kicks in after a month of being unable to work (which fortunately wasn’t the case this time around), and I also have private insurance which paid out £800 for my hospital stay. I didn’t need to use my emergency fund after all. Result!

How many people do you know who have been sick or had poorly children? It can have a devastating impact on our financial health, not to mention our personal well-being and state of mind. One of the things we can do to be more financially resilient to these unexpected financial situations is to be more financially proactive than reactive.

What do we mean by financially reactive?

When we think of the word reactive we are talking about where you have the kind of relationship with money where you don’t plan ahead. So rather than planning ahead you are reacting to money and financial situations. Reacting to bills that have to be paid, reacting to expenses that pop up that you haven’t planned for.

Recently I was contacted by a client who has previously completed one of my courses. She explained that she had been caught out by her car having two burst tyres, and when she was faced with the repair bill her initial reaction was to panic.

The client told me that she’d literally done a happy dance in the mechanics waiting room once she remembered that she now has small pots of money set aside to cover unexpected financial emergencies like this. She was so thankful. She demonstrated her financial resilience.

When a crisis pops up, you aren’t prepared for it. That’s the nature of a crisis, unfortunately. But you absolutely can be financially prepared. If you are employed you may have sick pay through your employer to help cope with the financial burden. But often these benefits are very much short term. If you are self-employed, have you considered how you would manage financially?

6 tips for you to think about to get more financially resilient:

1. Think about creating a savings pot called “your sinking fund” for that short-term protection.

Having an emergency fund will help you to feel financially secure because you have the worst case scenario covered. Recent stats recommend that you have 12 months – largely based on the fact that everyone will be made redundant at least once at some time in the career. The debt charity Step Change published a report which showed that last year almost 14 million Britons faced an income shock or a change to their circumstances. We need more safety nets to weather these shocks.

2. Consider Insurance

For longer term financial resilience, consider whether an insurance plan is right for you. There are several different types of insurance plans you can look into, and it’s important to consider what is right for you and your personal set of circumstances. Income Protection plans are invaluable if you are unable to work due to sickness or accident and typically have a minimum 1 month deferment period, meaning they won’t pay out until this time has passed. It stops lots of claims being made for illnesses such as colds or man flu!

3. Check your employee benefits

Dig out your employment contract and review your sick pay arrangements. If you have sick pay benefit through your employer which covers your earnings for 3 months, for example, you might want to think about building a pot that will sustain you for 6-9 months should the need arise. If you have changed from employed to self-employed, consider replacing some of these lost benefits.

4. Convenience VS Cost

Think about convenience over cost; personally, private health insurance meant I had the convenience of choosing to go private for my treatment. It also provided me with £800 (which meant I didn’t have to use my emergency fund) and it gave me peace of mind at a time when the NHS was just snowed under. Literally!

5. Personal financial resilience

Think about how you can be financially resilient for yourself – do you have your own retirement planning provisions in place rather than relying on those of your partner or spouse. On my previous podcast episode I talked to Caroline Strawson about how she went through one of those 6 stages of life with the break up of her marriage and how she overcame this by re-building her life and finances after being in a narcisstic relationship. We will cover pensions in more details in future podcast episodes but something to think about.

6. Consider your budget ‘slack’

My final tip is to think about how much financial slack you have in your budget to weather a financial shock. While having a resilient financial plan can help in the such times as sickness, it can also prove invaluable when the inconveniences that we all face in our everyday lives arise. Having some slack is one part of that, along with a clear awareness of your present financial situation and of what you need to do to make your finances strong and healthy.

Find out if you could be more financially resilient

If you want to talk more about this, don’t forget you can join my free Facebook group. Follow my page at The Money Panel and you’ll see the group linked there too.

And if you would like a review of your personal finances to see how you could be more financially resilient, feel free to get in touch at hello@themoneypanel.co.uk.