How to Reach The Goal of Financial Resilience
When financial emergencies strike, it's often challenging for many people to handle them. Your ability to bounce back from these problems is called financial resiliency and is perhaps the most important goal in your life. Obtaining it can make your life more comfortable even if you don't become a millionaire.
In this article, we'll define financial resilience and create a guide that can help you get started on this process. We also include several frequently asked questions that can address concerns that many people often have when starting this process. With our help, you can get started on the path toward better financial health.
What is Financial Resilience?
Financial resilience is a term that refers to a person's ability to handle various life events economically without struggling. For example, it may include things like your ability to pay unexpected medical bills, repair your vehicle after a major breakdown, or handle other unexpected events. These events will always be challenging to handle, but high resilience means that you can bounce back more easily.
For example, if you follow the process we've created for you below, you can learn more about your financial resiliency and ensure that you work towards better economic health. We can't promise you that this process will go off without a hitch. Few things in life are easy and gaining financial resilience will take a lot of tough work. But it's nothing you can't handle!
7 Steps to Achieve Financial Resilience
Improving your financial resiliency can seem imposing on the surface. We understand that. However, it isn't impossible if you take the time to carefully plan and handle this process. It's your life, and you can take control of your financial situation. The following process includes seven steps but may vary. For example, you may need to perform more frequent financial analyses, depending on your situation.
Step One: Sit Down With a Financial Planner
The first and perhaps most important step that you need to take here is to sit down with a financial adviser and learn more about your financial options. These professionals can help you better understand things like your debt repayment cycle and how it may affect your overall financial health and your resiliency.
They can also help you track potential emergencies, give you a better understanding of your overall financial health, and help you create a plan that makes sense. These professionals can also help you get the most worth out of your money by investing it in various ways, including finding stocks or bonds that may suit your specific financial needs.
Step Two: Track Your Spending Needs
Excess spending is likely the biggest factor affecting your resiliency. People rarely take enough control over their spending and get in way over their heads, even when they have a good income.
Know where your money is going every week and month
Track important debts that you have to pay every month
Identify unnecessary expenses you can easily manage
Gauge how these costs limit your resiliency and ability to bounce back
Examine various steps you can take to improve your overall spending habits
This step is one of the most important that you can take because it will slowly help you better understand how your spending affects your financial health. Most people aren't careful enough with their spending and are shocked at just how much money they spend without realizing it.
Step Three: Minimize Unnecessary Costs
Just about everybody has some kind of unnecessary costs that affect their overall financial strength. For example, you may like buying certain collectible items that look cool in your home but which aren't necessary. Here are a few unnecessary expenses that you may need to address:
Unnecessary streaming services that you and your family rarely use
High-cost internet services that may be overpowered for your needs
Cable services that you rarely use because you prefer to stream
Expensive products, like food and toilet paper, that may be cheaper in bulk
A Friday night pizza with your family and a streaming movie rental
Eating out in general, as you can cook at home for much less money
We know that many of these things might seem absolutely necessary. How can you get through life without binging the newest Stranger Things season? Well, you can find friends who have Netflix and stream it with them. It's all possible, but it may be the hardest part of this process.
Step Four: Handle Your Debt More Carefully
Try to handle your debt-to-income ratio by paying off as many small debts as possible and potentially merging everything into one payment. Debts you may consolidate include medical expenses, student loans, credit card bills, and more.
Talk with a debt management firm about these steps and identify bills that you have to pay each month. See if you can't find a way of cutting back on these expenses. For example, turn off your lights, use your air conditioning less, and consider using candlelight at night once a week to cut electric costs.
Step Five: Expand Your Income
This step is tricky for most people to handle because it may require major life changes or working more than you want. However, it is possible to expand your income by following a few simple steps. For example, you could try steps like:
Finding a new job that provides better compensation options
Starting side hustles, like mowing neighbors' lawns or online writing
Creating artwork that you can sell online on various services
Buying and selling used items from thrift shops
Investing in passive income options, like real estate and stocks
Obviously, buying property or stocks may seem out of reach for many people. However, these passive income streams can be a powerful way to improve your overall financial health. You may find yourself working on the weekends or after your 9-5, so be prepared for that.
Step Six: Set Up Your Emergency Fund
By now, you should have minimized as many of your expenses as possible and may even have extra income coming into your life. Now, it's time to take one last step and set up an emergency fund that can help cover unexpected expenses. These simple steps can help improve this process:
Collect change after buying things and put it in a large jar
Deposit that change into your emergency fund every month
Put your tax return in a special savings account
Set up a separate emergency account where you place money every month
Never touch this money unless you absolutely need it
Invest emergency fund money into high-yield savings accounts
Even if you don't have a lot of extra cash left over at the end of the day, you can slowly build up an emergency fund to help handle difficult situations. If you took the other steps above and have more money coming in and lower overall costs, you should find this process much easier.
Step Seven: Analyze Your Financial Health Every Quarter
Don't assume that your plan is going to be flawlessly executed and require no changes throughout the years. In fact, it is important to sit down with your financial planner at least once a quarter and talk about your financial resiliency. They can assess your overall economic health, track how well you're saving, and come up with any adjustments.
For example, they can help you track whether your emergency fund would cover potential expenses. They can also make it easier to plan changes, such as shifting your financial investments into different sectors. Making these simple changes throughout the year can help you better plan your resiliency and adjust to any mistakes you may have made in your planning.
FAQ About Financial Resilience
Before taking the steps mentioned above, it is important to understand a few common questions that many people ask about their financial resiliency. These concerns come up a lot when meeting with various financial experts and can be a little tricky to understand at first. Thankfully, we're here to help you better understand their potential impact on your financial stability.
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Professional credit checks are a good first step when trying to gain financial resiliency. That's because they give you an idea of what steps you can take before beginning. For example, they can tell you if your debt is affecting your credit score and what collections you may have on your account. Talk to your credit check company to learn more about your resolution options.
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One option for creating an emergency fund is to set up a separate saving or checking account where you automatically deposit some money with every paycheck. You don't need to send any over 5-10 percent of your cash. It is also a good idea to take things like cash winnings or your tax returns and store them here. If setting up a medical emergency fund, consider a tax-protected medical savings account.
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If you don't have a lot of disposable income but want to be resilient, you need to take a lot of steps to cut down on your debts and payments. This may include downgrading your internet options, minimizing your streaming, growing some veggies in a small garden, and cutting back on how often you eat out. These things often seem like a necessity but can be cut from your life even if it's hard.
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You should only declare bankruptcy if you have no other choice. While there's no shame in taking this financial step, its impact on your credit score can devastate and may affect many elements of your economic health. That said, sometimes you may have no chance but to do it. If you simply can't pay off your debt and want a fresh start, consider this option to get better results.
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If you need some money to pay off debts and increase your resiliency, working with lenders or debt consolidation experts may be a good idea. However, it is important to really consider the potential implications here. Adding more debt to your account may not be a wise idea if you're already having a hard time with your payments, so talk with your family and investment team before borrowing.
Factors that Affect Financial Resiliency
There are many factors that affect your resiliency and your ability to recover from serious economic shocks. Understanding these elements can help you gain better financial resiliency. These items will vary depending on the individual and their specific personal situations. Just a few things that you need to understand when trying to gain higher resilience include:
Total Household Income: It is important to know how much money you make in your house before you plan any financial resiliency process. For example, you can consider any money you, your partner, and your children make, as well as any side hustles that your family may possess.
Investments: Do you have any stocks, 401 (k), or retirement investments that you can use to help stay financially stable? You must consider these as part of your overall worth when defining your financial resilience, as you may have to dip into them in emergencies.
Personal Assets: While things like cars, lawn mowers, ATVs, homes, property, and much more all cost money to pay for every month, they're also assets that you may use when managing your resiliency. Don't neglect to consider these factors when trying to plan a resilience process.
Must-Pay Debts: There are some payments that you just can't get around paying every week or month. For example, car loan payments, mortgages, and utility costs are things that you can't ignore. You also have to pay student loans, medical bills, and other expenses that may affect your credit score.
Unnecessary Payments: We all have unnecessary payments that help make our lives a little more comfortable. For example, some people smoke or drink from time to time or have the fastest possible internet connection. These potentially unnecessary expenses may affect your resiliency by draining your funds.
Emergency Funds: Have you set up an emergency fund to handle various financial problems? Or do you have a savings account you could dip into if you needed to use it? This type of emergency fund is an important part of gaining financial resiliency and staying economically strong.
Potential Funding Options: If your financial strength doesn't seem high enough for obtaining resiliency, consider various funding options. By this, we mean grants, loans, or other types of investments beyond any others you may have already purchased.
For some people, financial resiliency can seem almost overwhelming to get because of all these factors. However, it isn't as complex as it might seem on the surface. Yes, you'll need to seriously examine your economic status and balance your needs with your ability to pay. But you can work with many financial experts, including investment professionals, to make this process easier.
How Goalry Can Help
If you think you need financial help to gain resiliency but aren't sure where to turn, you can download our app to get started. Goalry is not a lender, and we cannot guarantee that you'll get any money. However, we have built strong relationships with multiple financial firms and can help you find ones that suit your needs and give you the support you need to become resilient financially.
You start by downloading our app and setting up your profile. From there, you can search for different financial firms that may suit your specific needs. For example, you can find lenders who may give you money to start a new side hustle, debt consolidation firms that help minimize your owed cash, and expert bankruptcy attorneys who can help you if you do need to declare bankruptcy to regain resiliency.
This process is simplified with Goalry because we let you create search parameters to narrow your options intelligently. If you have bad credit, you can set a filter that will seek out only lenders who work with people who don't have strong credit. Our goal is to help you find the financial team that makes the most sense for your needs and ensure that you don't get in over your head.
While we can't guarantee you'll find the financial expert who meets your needs, our app can simplify and improve this process and increase your chances of success. If you're struggling with financial resiliency and want to regain the stability that has so far eluded you, we strongly recommend that you get started with us ASAP to get help for this challenging process.
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In Conclusion
As you can see, gaining financial resilience is an important step toward becoming a more independent and successful person. We don't want to claim that this process will be easy or immediate. However, we do believe that anybody can achieve resiliency by taking a few careful steps that minimize their financial problems and cycle their funds back into supporting their overall financial strength.
By working with an expert financial team in this process, you can get the long-term support that you want and need and ensure that you don't run into any struggles. Before claiming bankruptcy or taking any drastic steps, make sure you start with more conservative and controlled measures. Doing so can ensure that you get the best results and minimize any issues with your financial health.