Some Tips on Building Your Financial Resilience was originally featured in the Knoxville News Sentinel
As I used to lace up my Converse Chuck Taylors in the high school locker room, I recall coach saying, “The best offense is a good defense.”
So when we are getting knocked down or muscled around, how can we bounce back with a strong defense? Like the fast-paced game of basketball, real life has many moving parts. I experience the ups and downs of marriage, three children, living elders (thankfully), a house (and a mortgage), co-workers, cars and a dog. And in the arena of money — financial markets swoon, investments tank, companies fail and household bills might surpass our financial means in any given month. On some days, the stuff just hits the fan. The question is not “if” it will happen, but “when.”
So, the defensive goal is to build resilience in our lives. How? I interviewed several of my co-workers and we came up with this list of tips:
- Financial resilience starts with having a financial game plan: Set goals. Measure your progress. Maintain discipline. Construct an accountability model with your spouse and a few key advisers. Then, when you get knocked down you can make adjustments to get back in the game.
- Have a spending plan. Cutting back on unnecessary expenses can build some margin into your budget. This provides some cushion for when tough times hit. “I see so many people with tons and tons of ‘stuff’ that they never use,” observed a colleague.
- Reduce and control debt. The weight and burden of debt can break down your mind, body, and spirit. Pay off outstanding credit charges each month. Make smart decisions about financing home, auto and education purchases. English philosopher and statesman Francis Bacon said: “Money is a great servant but a bad master.”
- Automate your savings from your paycheck or checking account. First, be intentional about accumulating an “emergency” cash reserve to handle unexpected expenses. Then, start adding to growth investments for long-term accumulation of wealth and financial freedom.
- Avoid speculative risks with money you can’t afford to lose — serially failed business ventures or treating a hobby like an investment (coins, stamps, Beanie Babies). Some people repeatedly try to sink a desperation shot from half-court. Diversify your investments and include cash and bonds to preserve funds for shorter-term goals.
- The foundation of a good defense is insurance protection. Carry adequate coverage for catastrophic events, but also to protect your finances from more-frequent but unplanned setbacks to health, property, income, etc.
- Finally, the tools and resources of resilience include soft and hard skills: determination and gratitude are just as important as budgeting, saving, and risk-management skills.
In summary, check the scoreboard often. Be flexible in your strategies. Expect adversity. Have a game plan to recover and win when you fall behind.