Building Financial Resilience
We are living in uncertain times due to Covid-19 and many people for the first time are feeling personal finance issues due to pay cuts, job losses and downturn of businesses, in general, the world over. Having a savings cushion is very important to sail through these tough times.
We would overcome this pandemic for sure but it is a good reminder for people to be financially resilient for any uncertainty life throws at you.
First of all, building financial resilience is not easy. It requires a lot of patience, motivation and careful planning to be free of worries, handle emergencies and do what you really need to do like not fearing to lose your job, pursuing your hobbies, travel, starting up your business, etc.
But why the heck do we need to build financial resilience? Our finances are one of the major issues for stress in this fast-paced world. With no financial safety net and rising consumerism, we have tons of ways to spend our money and live paycheck to paycheck with constant stress and worries. We have 10 and more ways to spend our money but for most people only one source to earn it.
Here are the 5 not so easy things you can get started right away. Doesn’t matter who you are, what job you are doing, where you live, etc. It just works for everyone and everywhere universally.
1. Learn to Budget
Learning to budget is one of the most important habits to develop. It helps to be aware of how much money you have and to cut back on spending if you overspend during the month.
Budgeting helps to create a spending plan and allows you to always have money for important things that matter to you. Now with so many phone apps, it is easier to keep a track automatically without much effort or you can use a simple pen and paper or excel sheets. It also greatly helps in regular savings.
2. Clear and try to finish your debt as fast as you can.
A debt of any type is bad. Period. It feels so easy to spend and get high for some time and then worry about it later for months and years to come.
Have any type of debt? Think of how you can pay more than the due amount.
Can you pay just 100 bucks extra this month on your credit card/EMI/mortgage etc? If yes then great, go for it.
You start paying a bit extra each month it would snowball and your debt will finish much faster. A very dead simple thing I personally do is to deposit any amount of money from savings to my credit card account during the month-end even before the statement is generated early next month.
3. Stay away from any new debt — credit card, home loan, etc.
Getting into debt is easy but getting out is hard and could very least take months and years. Going for a newly launched phone on a credit card? Not great. Can you save for that and try to pay full upfront? If you can’t do that then you are not earning well enough and you need to rethink life priorities.
Would you want to pay XXXX amount per month on your housing loan/mortgage for 20–30 years which would easily double the cost of ownership due to interest + maintenance + housing taxes OR you can simply rent by paying XXX per month and save the remaining cash and invest in Index funds which would compound your gains.
Always remember when you borrow money from banks you are working for the bank but when you save and invest the bank(financial institutions) works for you.
4. Create a “Fu*k Off” fund.
Create a stash of savings to match your living expenses for at least 6 months. You can do it for a year? Great. Go for it. For 2 years? Even better.
Not investing in stocks or mutual funds or any government or private pension scheme either. Just cold hard cash available to you when you need it immediately.
Use a separate bank account where you only deposit and touch it only to stand up for your principles and dreams when the need arises.
Fu*k off fund would help you when you can’t take the shit that you hate anymore. Like wanting to change job but scared of it or can’t afford to do it. Taking a long vacation or trying to upgrade yourself or starting your dream projects. When your basic expenses are taken care of you start thinking from what your heart desires and take bigger risks.
5. Start a side hustle
Good at something or anything? Think about how you can start monetizing it. Are you a software developer/designer? Start freelancing. Know how to do digital marketing? Start doing it for startups. Good at copy-writing? Create your own class and teach online. At this time and age, every skill can be monetized in one way or another.
A side hustle is a gateway to be self-employed and gain freedom from a 9 to 5 job or start your own business one day. Many companies and businesses started as side projects once and are now full-fledged thriving businesses.
Having a Financial Resilience is important for everyone, we have been neglecting it since forever but now everyone must focus on being financially resilient since we are in a bear market situation and many of us will lose our primary income source, our investments will take time to recover from losses and many businesses will shut down. Financial Resilience will help us survive this situation.
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The article was originally published by Yogesh Gupta on this blog
