When a crisis comes, panic usually isn’t far behind.
Many of us are now living with the threat (or the reality) of redundancy or a drop in income. Social distancing rules and self-isolation has hit businesses hard, prompting fears of the worst recession in history.
So how can you ensure that your financial resilience is strong enough to withstand everything that’s happening? Here are five things you can do.
It’s a good habit to get into, crisis or not, but particularly when turbulence hits: review your monthly outgoings. Are there any subscriptions that you aren’t using any more? Are you splurging on unnecessary luxuries that could be cut down on, or swapped for less extravagant alternatives?
Once you’ve chopped away the dead wood, it’s time to review your utility providers to see if you could save money on your bills. You might be overpaying without realising, especially if your contracts auto-renew.
As the old adage goes, don’t ask, don’t get. Always approach your existing supplier first to see what deals you’re eligible for. Then, compare and contrast these by shopping around. You could be amazed by how much you can save by doing this regularly.
One of the best ways to build financial resilience is to establish multiple income streams. For most, the 9-5 will provide the majority of their income. But have a think about where else you could begin to generate some income, however small.
Do you have a hobby that could double as a money-making activity, for example selling handmade craft products? Do you have specialist knowledge in a subject that you could tutor in your spare time?
When it comes to income, every little helps. Take up opportunities as they arise and feel reassured that, should the worst happen, you’ve already got a backup in place to support you financially.
As a species, we’re hard-wired to spot threats and respond quickly thanks for our fight-or-flight mechanism. Sadly, not even our financial decisions are immune to this knee-jerk reaction. So, when crises rear their heads, it’s natural to want to bring your wealth closer.
This isn’t always in your best interest though. Crisis or not, it’s important not to try to time the market or withdraw your money strategically.
Instead, have courage in your convictions and keep your money where it is. Investing is a long-term commitment, so short-term dips are expected. By leaving your money in the same place over a long period of time, you are more likely to offset these ups and downs.
If you haven't started investing yet, don't use the pandemic as an excuse to put it off. Investing isn't a luxury; it's a necessity. The sooner you start the better.
It's always important to have emergency savings, but now especially. At the time of writing, interest rates on savings across the board have plummeted. The impact of the pandemic on the banks has been felt universally. This is bad news for savers, but that doesn’t have to mean there isn’t hope.
With so many players on the field, often it’s the newer or less established banks that offer more competitive rates. Keep your eye on financial advice sites such as Martin Lewis’ Money Saving Expert or comparison sites. By staying informed, you’ll be able to move quickly when a good deal appears.
A caveat to this is: always read the small print. Often introductory rates only last for a short time (usually a year), after which the interest rate drops to a mediocre level. If this is the case, make a note to shop around as you approach the end of the offer period.
Money might make the world go round, but it’s certainly not the only place you need to build resilience in. During crises like pandemics or recessions it’s important to remember that money is a tool. It’s no good having a full bank account if your mental or physical health is suffering as a result.
So, when you’re able to, make sure you invest a proportion of your wealth in taking care of yourself. Whether it’s a gym membership, a good book, or the ingredients to make your favourite three course meal, investments in your emotional wellbeing will pay dividends.
Financial resilience is a long-term habit that should be practised every day, and not just in times of crisis hits.
Indeed, the sooner you begin to practise these behaviours, the greater your chances of weathering any storm that comes your way.
So even if you've fared pretty well so far in the current pandemic, don't rest on your laurels. Periods of financial stress are an almost inevitable part of life; just make sure you're prepared for when they come.