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How resilient were you during your last financial setback?
Was it a catastrophe that you are still bouncing back from?
Did you learn anything that you will be putting into place to be better prepared for next time?
I think it’s not a matter of if we are resilient, I think everyone has some degree of resilience built into them. Whether they are able to cope with the change or not is where I believe that it gets displayed the most.
With our finances, sometimes we are better prepared than other times. For example, last week, my wife’s check engine light came on randomly. Getting the diagnostics test ran for free at our local AutoZone, we found out it was the spark plugs misfiring. We figured, ok, just needs a tuneup and it wouldn’t cost that much to get repaired.
We made the appointment with our local mechanic and had them look the car over and since we were having it worked on, we mentioned the other little things that were going on as well. When the mechanic got done looking it over and had called me to tell me what work he thought needed to be performed, it ended up being quite a bit more than we had anticipated. However, we were ok with this and since we had our emergency fund in place, we were able to pay cash, get all the work done and even score a discount at the same time since we were having more stuff worked on at once.
What we anticipated to be a $200 repair turned into almost a $1,000! If we hadn’t been so prepared with our finances, we would’ve had to sacrifice getting some of this much needed maintenance done and had to put things off. I view this as a good amount of resilience. There was no worry or angst when it came to how we were going to pay for the repair. We knew that it needed to be done and gave our bank info so that they could process the transaction.
What can you do to increase your resilience in your finances?
According to this article, there are 10 steps to increasing your financial resilience. The steps still hold true today even though it has been published since 2009.
He starts out just like I would tell everyone to start out by telling you that you need to learn to track your spending. Of course this is the first step in almost any person’s life since it shows you where the problem actually is. Tracking your finances can seem daunting, but when you start using great tools like Mint, Personal Capital, or even my monthly budgeting spreadsheets, it becomes much easier and will allow you to formulate a plan of attack.
The second step is getting rid of your debt. When you focus on creating cash flow by paying off your debt, you will have more money to cash flow emergencies. It’s not that you can’t handle the debt. When you have no extra margin to deal with it, unexpected expenses are sure to pop up. Getting rid of our debt has been such a blessing and has helped us take advantage of many great opportunities that have come our way since. Things like going down to one income so that I could stay at home with our two girls full time. Or being able to tackle unexpected expenses like in my story at the beginning.
Cameron goes on to talk about cutting costs through DIY solutions and sustainability. Honestly, I think we’ve saved hundreds, if not thousands in labor costs doing work ourselves versus calling a professional. I’ve done lots of home renovation things like put in a new drop ceiling in our basement and replacing the ceiling lights. I’ve replaced our kitchen laminate floor as well as put in an epoxy floor in our basement. These things would have been much more costly if we decided to call in a professional. And we’ve been able to learn a lot more about our house in the process as well.
The fourth thing Cameron talks about is creating multiple streams of income. He talks about creating passive income while working a full time job. This helps build up a steady stream of income that is used if your main job disappears. Recently, I’ve been working on this as I’ve starting working on my website much more. I’ve starting to monetize it through affiliate programs that I trust and can recommend because they’ve helped me. I think many people out there are after a secondary income. This will help move from working on something you have to do to something you want to do. If all your income doesn’t come from one place, you’re likelier to become much more resilient in the future.
To check out the rest of Cameron Shaefer’s steps to increasing your financial resilience, check out his article. He goes over more things such as:
- Building an emergency fund
- Maximizing the contributions to a Roth IRA
- Diversifying your investments
- Learn entrepreneurship
- Nurture relationships
- Hold on to money loosely
All in all, the more you build margin into your finances, the more resilient your finances will become. If you are looking to take action today, grab my 5 Actions To Improve Your Finances checklist for free. I give you 5 things you can do this week to help get on a better track.
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