Since the start of the famous mortgage meltdown, which resulted in financial crises, “Resilience” has often been thrown around a lot. In simple words, resilience means rolling with the blows and keeping going despite the conditions, etc. Resilience in finance implies the ability to bear financial crises and keep moving forward.
A few examples of economic resilience are getting a divorce, facing unemployment, dealing with disability, and other health problems that affect an individual and others, such as recession, stock market falling, and acts of terrorism that affect society. According to research done by a professor at the University of Minnesota, five main characteristics enhance resilience in people and enable them to face life changes and challenges.
Here are the five main characteristics to enhance resilience.
Positive
There is a famous example: what do we do when nature gives us lemon? We make lemonade.” Such illustrations portray the image of a positive individual who always tries to make the most of everything and never loses hope. A positive person can overcome almost anything. However, there is a thin line between positive and denial. Always be optimistic in all matters.
Focused
Maintaining a solid focus is extremely necessary; determined people will always find a way to get ahead. Staying focused is the main goal. People should always look towards the future and stick to their goals so that declining life events and other barriers cannot discourage them.
Flexible
Be flexible and learn to adapt, being open and adjustable when it comes to new opportunities. Adopting change is a high-key trait that makes a person resilient.
Organized
Staying organized is crucial. People who can set priorities properly and develop controlled approaches to manage change have a higher chance of being resilient.
Proactive
Be proactive in all of your affairs. These are the type of people who instead work with change and try to adjust to different environments rather than defend against it.
Building Financial Resilience
Financial resources such as savings, insurance, and decent-paying jobs can enhance financial resiliency in people. Another reliable source is capital, which can be when someone’s knowledge, skills, contacts, and other personal self-improving qualities.
Health is a big part of a person’s finances because it can affect someone’s efficiency and presentation. Having solid social capital can also increase financial resiliency in people. A strong social support system includes having good friends, family, neighbors, colleagues, and other people who can give financial and emotional support when needed during tough times. A few examples of this are below:
- Maintain a ratio of low debt-to-income. Once-a-month customer debt payments should be around fifteen percent or less than take-home monthly pay. For example, if 275 dollars of debt is divided by 2,500 dollars of net income, it will equal a consumer’s debt-to-income ratio of eleven percent.
- Having a reliable backup and emergency fund with at least three months’ worth of expenses for bad times. Keeping a liquid amount in extra cash equals a credit union savings account, money market fund, etc.
- Never stop learning new things, including education, job training, etc. Experts always advise people to care for their physical health and never stop learning new marketable skills. Insurance is another excellent way to obtain future security during challenging times such as accidents or illnesses.
- I want to learn more about finances and gain financial knowledge to help make better financial decisions. It is incredibly beneficial for a person to know more about such basic investing principles.
Not having surety is a scary thing. But it’s also a big reality of life that a person can’t ignore. It’s always better to prepare for the worst to avoid being a victim.
Summary
In summary, the article emphasizes the crucial concept of resilience in the financial realm, particularly in the aftermath of events like the mortgage meltdown. Resilience involves navigating challenges, adapting to change, and persisting through adversity.
Applying these traits to finance involves building resources such as savings, insurance, and stable employment. Personal assets like knowledge and social connections contribute to financial resilience. Health and a strong social support system are integral components.
The proactive pursuit of financial knowledge and preparation for uncertainty empower individuals to navigate the complexities of the financial landscape successfully. Building financial resilience helps individuals weather challenges but positions them to thrive in a dynamic economic environment.
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