Financial resilience is the personal ability to withstand life events that have a significant impact on one’s income and/or assets. It is also a general indicator of the robustness of a financial system at any level of local, national, or international organization. At all levels integral resilience offers a lighthouse to ships on increasingly turbulent seas.
Financial resilience is the personal ability to withstand life events that have a significant impact on one’s income and/or assets. It is also a general indicator of the robustness of a financial system at any level of local, national, or international organization.
Physical, mental, and emotional health and vitality can be directly impaired by low financial resilience, and strong financial resilience can in turn contribute to an overall sense of wellbeing. On a personal level building personal financial resilience matches well BHI principles.
Some key recommendations:
- Maintain a low debt-to-income ratio. Monthly consumer debt payments should be 15% or less of monthly take-home pay. Example: $275 of debt payments divided by $2,500 of net pay equals a consumer debt-to-income ratio of 11% (275 divided by 2,500), which is under the 15% danger zone.
- Maintain an emergency fund of at least three month’s expenses. Keep this money liquid in cash equivalents such as a bank or credit union savings account, money market fund, or short-term CD.
- Never consider your education or job training finished. Continue to develop new marketable skills and take care of your health (e.g., good nutrition, screening exams, and exercise) to increase your human capital and remain employable in today’s very competitive labor market.
- Purchase adequate life insurance to protect dependents against the loss of a breadwinner’s income and disability insurance to provide continued income following an accident or illness.
- Increase your knowledge of financial topics so that you make smart financial decisions.
- And the five (5) key questions:
- How diversified are my income streams?
- How secure are my income streams?
- What’s my debt-to-income ratio?
- How much cash can you access in an emergency?
- How much slack do you have in your budget?
As Integral Resilience reduces fear and panic and supports prudent and farsighted decision making, it would be sensible to link financial and integral resilience in community health education programs.
- Steps Toward Financial Resilience
- Financial Resilience: What Is It and Do You Have It?
- 5 Ways to measure your financial resilience
- Intuit Innovation Lab: Building Financial Resilience Using Behavioral Science (Video)
- A Guide to Promising Asset-Building Programs for Communities and Individuals on the Economic Margin
- Financial resilience – Google Search
- Conceptualising Financial Resilience: Systems, Populations, Localities
Next: Insurance and Resilience