5 Tips for building financial resilience
Updated: Mar 1
Resilience is the ability to quickly recover from setbacks. While setbacks come in all shapes and sizes, most will have some kind of financial impact.
So what can you do to build your financial resilience?
Expect the unexpected
We usually won't get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is right now. While you can’t know exactly when, it's wise to know that there are things that are possible - and that these things will likely mean a financial disruption. Not fun.
Consider some of these we all hear about:
A house burning down or a car being stolen and trashed.
Not being able to work because you're sick or injured.
The death of a loved one and family income provider.
Many of these events can be insured against. If you've taken out an insurance policy, then you’ve already made a start on your resilience plan.
Create cash buffers
While you can't insure against everything, you can build yourself a cash buffer. This might simply be a savings account earmarked for an Emergency Fund that you put into on payday. Or it could be just getting ahead on your mortgage repayments. If your home loan offers a redraw facility, you could use it to tap into those funds in an emergency.
Buffers are even more important for retirees who draw a pension from their super fund. In volatile markets like we have right now, keeping a cash buffer means that you wont have to sell down your investments when values are low. This will really help to preserve your balance in the long run.
Google 'how to save money' and you'll be flooded with tips on how you can cut costs and make your cash stretch. In difficult economic times, cost-cutting can help keep your cash buffers and other important insurances in place at a time when you need them most. The key to this is - yep, that's right - a budget. Which you should just think of as a simple plan for your spending and saving.
Invest in quality
There's plenty of companies that have a long track record of consistently pumping out profits and dividends to shareholders. Aussie's also have an historical love for property - 'bricks & mortar' just feel solid and provide them with rental income. They may not be as sexy as the latest crypto alt coin, but when markets get the jitters like now, you need investments that will maintain their built-in value. This is really important. The more volatile a portfolio, the more likely an investor is to sell down into a falling market. This turns paper losses into real ones, which robs the investor of the opportunity to ride the market back up again.
Ask for advice
Building financial resilience can seem a bit complicated at first. Yes, there's a range of technical issues that need to be balanced against one another and then prioritised to meet your situation - but the real hard bit for some people is just asking for help. A good financial adviser will take the sting out of the technical jargon for you and will help you get started. They'll look at all the resources available to you (time, income, assets, skills, personal drive etc) and together with you, create your very own plan for financial resilience.
Shaun O'Keefe helps families feel more financially secure. He's found that he can help more people, more effectively when he helps families. As a fee-based financial planner, he works with families just like yours to bring personal values and financial resources in line so that you can keep focussed on the priorities in your life.
The information contained in this article is general in nature only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision concerning a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.