We explore financial resilience, the importance of building a financial safety net, and the best ways to manage your money
In today's challenging economic climate, understanding and boosting financial resilience is more important than ever. According to Fair4All Finance, a staggering 17.5 million people in the UK are on the brink of financial struggles. In this article, we explore financial resilience, the importance of building a financial safety net, and the best ways to manage your money.
What is financial resilience
Financial resilience focuses on developing a solid, long-term plan for money management. Ultimately, it should give you the strength to face unforeseen challenges that might affect your income or savings.
Throughout life, unexpected expenses or financial expenditures pop up. You might need to repair or replace your car suddenly or find yourself out of work for a while. If you have the financial resources to cover these situations without too much stress, then you are financially resilient.
The best way to consider your own financial decision is to think about how your finances would cope in various hypothetical situations. For example, if you had to pay an amount equal to one month's salary tomorrow, how would you manage?
Ideally, you'd have emergency savings put away for these situations. But even if your emergency fund falls short, being aware of how to borrow wisely and maintaining a good credit score can still keep you financially resilient. It's about having options and a solid plan to tackle unexpected expenses, even if you don’t have the cash upfront
How to build financial resilience
Building financial resilience isn’t always a simple journey. But once you start, you’ll find that it sets you on a path to better all-round financial health. By implementing these eight steps, you will become more adept at managing your money and securing your financial future. So you’ll be well-prepared for whatever life throws your way.
1. Set clear financial goals
Clearly outline your financial goals. Small, regular savings accumulate over time, helping you achieve your larger objectives. Whether it's building an emergency fund or saving for a specific milestone, having defined goals provides direction and will help keep you on track.
2. Track your budget
Keep a close eye on your day-to-day expenses. Create a budget, ensuring you allocate funds for bills and regular payments. Track your spending to avoid surprises and establish a routine of saving money consistently throughout the month, and put aside anything else that might be left over.
3. Consolidate your debts
Consider consolidating your debts by combining them into a single, manageable payment. This not only simplifies your financial life but can also lower your overall interest rate, making it easier to tackle debt.
4. Develop a savings strategy
Almost a quarter of Brits have no savings at all, which means that they have no safety net to support them against unexpected expenses. To ensure that you don’t become part of the statistic, start by regularly putting money aside. Establish a budget and work out an amount that you can afford to put aside every month (or week, depending on how often you get paid). No matter how small, it’s a good start towards financial resilience.
5. Shop smarter
Explore cost-effective alternatives when shopping for your weekly essentials. Consider budget-friendly supermarkets like Aldi, known for quality products at lower prices, which has experienced increased profits during the cost of living crisis. Being savvy about where you spend can significantly impact your overall financial health.
6. Be cautious about credit
Be mindful of credit card usage. Excessive purchases can lead to higher interest, making it increasingly difficult to catch up on payments. Limit your credit card transactions to essential purchases to help maintain control over your financial situation.
7. Automate your payments
Set up direct debits for bills to make sure you don’t miss a payment. By reducing the risk of late or missed payments – which can incur fees – this automation will help you maintain financial stability.
8. Look into your workplace benefits
Understanding and utilising workplace benefits can contribute significantly to your financial resilience. Explore any financial wellbeing programs offered by your employer and check whether your workplace has health benefits that could lower the cost of regular medical checks. You might find that you don’t need to pay out of your own pocket for some larger expenses.
Promoting financial strength and stability for all
Here at GWCU, we help to offer services and education to provide financial stability across the South West. Our affordable, low-cost loans help the local economy to thrive without putting an individual’s financial resilience at risk. Our range of savings accounts help members build a safety net and future wealth, managing money better.
We also help employers offer financial support to their workplace with our Money@Work scheme, allowing employees to access services directly from their payroll. Ultimately, our range of options helps borrowers to break the cycle of debt and build better financial health.