2.1 Financial resilience
Our financial resources are made up of our assets (what we have) and our liabilities (what we owe to others, i.e. debts). Unstable earnings or debts can have a major impact on how secure individuals feel. Most of us have had periods of leaving bills unopened or may have been surprised by an unexpected car repair. It is easy to underestimate how much these nagging fears and feeling slightly out of control of our finances can drain our energy.
The impact of financial uncertainty can clearly be linked to career resilience. For example, if you are facing redundancy, worries about how you might support yourself and/or your family afterwards can significantly reduce your resilience at a crucial time, when you need to be at your most adaptable.
More positively, financial insecurity might also drive your career resilience. You may be motivated to set career goals that allow you to progress and obtain a salary that will give you the security you are aiming for.
Understanding your assets and finances is important in times of change, particularly if you are considering a career change or setting up your own business, Knowing what assets you have and tracking your income and outgoings can relieve pressure, so you know that you could afford a month off work without earning, for instance, or can identify which credit card to pay off first. Some people save towards a ‘freedom fund’, putting away 10 per cent of their income each month, to show they are committing to making their longer-term dreams possible. That may not feel possible for now, but what might feel possible today?
As you can imagine, throughout the uncertainty of the recent pandemic, much has been written about building financial resilience, particularly aimed at those in professions where the impact of lockdown and closure was felt strongly. Shaw (2020) offers four tips for building your financial resilience in tough times, that can be applied to whatever challenge you are facing:
- Use free mobile apps and budgeting tools – to help you get more ‘hands on’ with your finances and keep an eye on daily changes to your accounts. Some are designed to help with budgeting and set specific savings goals.
- Consider interest-free cards – a zero-interest credit card may help to spread your costs, but be sure you can clear your balance before the interest kicks in.
- See if it’s worth switching your savings – the top rate deals in the savings market change frequently, so keep an eye on the best accounts.
- Future-proof your retirement – bear in mind that the state pension age generally increased to 66 in October 2020 for new retirees, and younger generations face being closer to 70 when they retire. Automatic enrolment ensures that eligible employees are enrolled in a workplace scheme, and adults aged under 40 may also consider opening a Lifetime ISA.
Activity 4 Into action: finances
Earlier this week, you came up with a 20-minute action to boost your physical activity. What 20-minute action could you do now, that would make a difference to how you feel about your finances?
You might consider some of Shaw’s top tips, or try something else. For example: you could print off bank statements for the last three months and try to identify your spending patterns; you could use a notebook or phone app to start tracking what you are spending over the next month; or you could write down what your teenage child owes you and discuss a repayment plan! Have a go now.
If you did take action, how do you feel now? Was it as tricky as you feared? Were you over-ambitious in what you thought you could achieve? How motivated do you feel to take a second step?
Many of us feel on unstable ground about finances. However, getting clearer about your personal situation can help forestall difficulties. Taking small actions to solve problems, from opening a pile of bills to requesting a pension forecast, can build confidence and remind us of just how competent we are.
As well as supporting you financially, your employer might put other mechanisms in place to boost your resilience. You’ll learn more about some of these approaches in the next section.