Smart Money Management: How to Build Financial Resilience

Posted October 1, 2023 by in Lifestyle

Money management is a crucial skill to learn as an adult, and important at all stages in life – from those first forays into independent living to those final preparations for retirement from work. The importance of learning to manage your money has only become clearer in recent years, as household costs continue to balloon against a relatively stagnant average income.

Indeed, the consequences of poor financial literacy today are greater as a result. An inability to ensure that the books are balanced each month can lead to a swift descent into debt, which can in turn have negative consequences – from stress and anxiety to tangible issues like ineligibility for a mortgage. How, then, can you build financial resilience in a hostile financial landscape?

Setting Clear Financial Goals

The first step in your financial resilience journey should be to set some clear, actionable and above all achievable financial goals. Aspirational saving is a wonderful thing, but basing all of your financial decisions on pie-in-the-sky end results can lead very quickly to dissatisfaction. First steps might involve escaping any existing debts, while larger, longer-term goals might involve saving up a deposit for your first home, or saving for an enjoyable retirement.

These goals can help you remain on course, honest, and motivated to manage your money well.

Debt Management Strategies

If you have any short- or medium-term debts, these should become your chief priority. This is because the interest rates on certain debts can undercut your savings efforts; being debt-free makes saving and otherwise managing your money a far simpler endeavour.

There are a number of ways to approach dealing with debt. If you have multiple debts, you might consider using a debt consolidation loan to pay them all off, reducing your debt to a single point of contact and single set of repayment terms. Paying that loan, however, is another matter entirely. In the short term, you might consider using reputable pawnbrokers to access immediate cash, particularly if longer-term financial literacy habits are going to stick. This should only ever be a short-term solution, though. 

Creating and Sticking to a Budget

In the long term, you should rely on primary sources of income for any expenses or payments you need to make. Having a budget that ensures your income is more than enough for your outgoings will always trump seeking additional cash elsewhere, which can quickly turn into a fresh iteration of a bad financial situation.

This means reckoning with your monthly finances, identifying weak spots and indenturing a new set of financial rules for yourself and your household. Doing this can help you maintain a positive financial outcome each month, allowing you to save money.

Saving, Short and Long Term

In the short term, your savings should not be explicitly kept for the long term. This is because emergency costs can quickly wipe any progress you’ve made – a demoralising outcome for otherwise perfect financial planning. You should build up an emergency fund worth around three months’ household income, from which point you can safely build savings using long-term vehicles like index funds and ISAs.

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