Resilience in Today’s Environment

Posted by: Joseph Kuo | January 27, 2021

The ability to successfully navigate life transitions and bounce back from setbacks. 

In life, we will all encounter both expected and unexpected transitions. Over this past year, there has been no shortage of the unexpected, from the global pandemic to police protests to political unrest. While unexpected events happen every year, the pandemic has been unprecedented in its impact on our daily lives.

How we adapt and respond is a measure of our personal resilience. Resilience is a crucial skill that enables us to live the life we want. A strong resilience requires practical strategies and emotional fortitude.

In this article, we will focus on one aspect of resilience: financial resilience.

Financial resilience is built on a foundation of four layers: Building robust financial protections, expanding your income options, increasing your financial skills and knowledge, and taking charge of your financial destiny.

Building Financial Protection

Through life’s ups and downs, it is important to nurture your ability to bounce back from loss, disappointments, and difficult circumstances. Financial protection establishes a foundation of economic security for you and your loved ones. The better prepared you are, the quicker you can recover economically and emotionally.

Here are some common financial protection tools to consider.

  • Emergency Fund: Money set aside for emergencies. Save enough to cover the costs of unexpected repairs, emergency travel or replacing a major appliance. Ideally, this should be three to six  months of living expenses so you can recover from an unexpected job loss or injury that prevents you from working.
  • Property and Casualty Insurance: This is a category of insurance policies that covers:
    • Physical damages to things you own that are expensive to repair or replace, such as your home and car.
    • Legal liability resulting from ownership of your properties, such as others injured in an auto accident or in your house.
  • Life Insurance: Death benefit that will help fund goals you care about when you are no longer around to fund them. Some examples of these goals include paying off the mortgage and funding college education for your children.
  • Health Insurance: Insurance that helps you pay the costs of regular health care as well as catastrophic illness and injuries.
  • Disability Insurance: With medical technology today, it is much more likely to experience disability. This is a form of health insurance that provides periodic payments to partially or fully replace income due to illness or injury.
  • Long Term Care Insurance: Regular health insurance covers recovery from illness or injury but does not cover ongoing care for chronic illness or injury. This insurance pays for the care you might need when you or a family member require assisted care.
  • Estate Planning: This is the process of establishing instructions for what happens with your assets and your medical treatments when you cannot give those instructions directly. Instructions here include who gets to make decisions on your behalf and how you would like those decisions made.

Expanding Your Income Options

Life isn’t always fair or how we would like it to be. Income loss can happen unexpectedly regardless of whether you are employed by a business or are self-employed.

Proactive career planning and development can help you quickly regain your career footing as well as take advantage of new opportunities in your work life.

Activities that can support you in this area includes:

  • Taking advantage of workplace educational opportunities, including tuition reimbursement.
  • Keeping your resume updated including professional achievements and activities.
  • Working with your employer to find projects that will excite and challenge you.
  • Improving your communication skills.
  • Assessing the competencies and skills currently or likely to be in demand in your ideal workplace settings or industries.

Taking Charge of Your Financial Destiny

The only person who can really take charge of your financial life is you. How much control you feel you have is determined by three important characteristics.

  • Locus of Control: Describes how individuals perceive the primary point of control in their lives. Those who believe that they can influence the course of events around them- as opposed to attributing control to outside forces such as luck or fate, large institutions or power individuals- tend to be more proactive in making the “right things” happen for themselves.
  • Personal Responsibility: The attitude that “I am responsible for my experiences in life.” This does not mean that you do everything on your own. It does mean that, rather than blaming other people or your environment, you focus on what you can do now to improve your financial well-being.
  • Self-Confidence: This is your own evaluation of your abilities to accomplish your goals. Many people are self-assured in some areas of their lives but it is rare to feel confident in all that we do. Identify that first little thing that you can do to step outside of your comfort zone. Accomplishing that first step can give you the courage and motivation to take the next small step. By breaking down big goals into small action steps that you compound over time, intimidating tasks become simpler and manageable.

Increasing Your Financial Skills and Knowledge

We are rarely taught personal finances at home or in school, so it is important to take ownership of our learning in this area. You don’t need to become a financial expert. Even with just the fundamental principles of money management and financial planning, you will be better equipped to make sounder day-to-day decisions and evaluate financial advice.

Resources include:

  • Classes: Given the global pandemic, many courses are now taught online by a number of institutions. Do keep in mind that some classes can be more like sales pitches, so it is important to be discerning about your learning choices.
  • Books: Select books that promote sound money management and investing practices. Be wary of books on get-rich-quick strategies. If those strategies worked, the author probably wouldn’t be selling books.
  • Web Sites: Look for sites focused on financial education rather than product sales.
  • Financial Coach/Advisor: Someone who is focused on your success. Be aware of conflicts of interest if the coach or advisor is selling other products.

“Nana korobi ya oki” (seven falls, eight getting up) – Japanese proverb.

In a world of uncertainty, success requires having the ability and the confidence that you can get back up regardless of what life throws at you.

This confidence is both something that you build inside yourself and a resilience that you can create systematically over time. Financial resilience involves increasing your ability to prepare for and deal with financial challenges, both current and future.

If you want to improve your financial resilience, schedule some time and let’s tackle that together.