Start saving, budget and think long term: how to build financial resilience
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Put in place plans to cope with whatever life throws at you – from interest rate rises to car repairs. Financial resilience doesn’t just mean having lots of money stashed away, but rather having contingency plans in place for certain scenarios. For example, could you cope if interest rates rose, you lost your job, your car gave up or you separated from your partner?.
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Aiming to be financially resilient means finding a way to make your situation secure – no matter how unpredictable life may be. An emergency fund offers a buffer against financial shocks, such as job loss, being unable to work for health reasons or needing home or car repairs. Having these savings can mean the difference between coping with a financial setback and needing to borrow money to survive.
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The investment platform Hargreaves Lansdown publishes a “savings and resilience barometer”, which it calculates every six months. For savings, it measures resilience as having an emergency fund to cover at least three months’ worth of essential spending. The latest data found 65% of people were in this position. If you are one of the other 35%, see whether you can work on getting up to that level of savings.
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Budgeting tools – often offered as part of mobile banking apps – can make tracking your spending much easier than it was in the days of receipts and spreadsheets. Sarah Coles, a personal finance expert at Hargreaves Lansdown, says: “Building an emergency fund often starts with drawing up a budget to see exactly where your money is going. This should reveal the areas where you can cut back a little, to free up cash for savings.”.
