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Financial Resilience

Updated: Sep 16, 2022

As we clean out bad habits and take a new perspective in our hearts, the key to remaining focused and maintaining a good healthy heart posture is having the right tools to help us with our finances. If our hearts are influenced or affected by how we do our finances it is imperative that we are intentional in how we grapple with finances.

Once we have established in our hearts that God is our source and that we serve God and money serves us, having a clear approach in our finances will help us build a resilience so that our hearts are not shaken by monetary matters.

We asked Joseph Phiri, a certified financial planner to give us some practical approaches we can take to make sure we establish healthy habits that ensure we build and remain resilient.

Here is what he had to say:

1. Desire to Create Financial Resilience

Covid-19 and the global financial crisis highlighted how many households in our community and indeed our nation were vulnerable to the financial shaking and turbulence that subsequently followed.

These events have led people and firms to rethink how prepared they are to weather financial shocks. This has resulted in financial resilience awareness and strategies such as cultivating habits of savings, debt reduction and smart money management.

2. Understand What financial resilience is

It is the ability to cope with income or expenditure shocks as a result of life events and how quickly you recover from periods of financial adversity. Many events lead to these shocks such as loss of household income, retirement, divorce, disability, ill-health and accidents. The extent to which a household can recover from loss of income or an unexpected increase in expenses through savings, insurance or both determines their financial resilience.

3. Be Intentional in your approach and take Action:

Households can adopt the following habits and strategies to deal with events that affect their finances, whether it be a sudden fall in income or an unavoidable rise in expenditure.

a) Have a Financial Plan – without a vision, it is easy to cast off restraint

Just as the old adage goes, if you fail to plan you are planning to fail. The paramount importance of having a blueprint for any thing in life can never be over emphasised as a plan helps in setting up goals, objectives and strategies for achieving such goals. A plan helps one to stay disciplined in achieving their set goals and there is need for regularly revisiting the plan to ensure that one is on track and so manage any distractions, resetting in the event of changes in life such as a salary increase, increased responsibility, marriage, divorce, children etc.

This is therefore a good starting off point in creating financial resilience and setting one’s journey in motion. It is also recommended that one engages the services of a professional such as a financial planner/ advisor to help them in drafting a plan that take into account their unique circumstances and applicable taxes to reduce their impact or take advantage of concessions and so achieve better financial outcomes.

A financial plan should set goals to help one stay focused on what matters most, but a plan alone is not enough as some plans can be purely aspirational, so it is essential to follow-up a plan with budgeting to ensure affordability and realise possible amounts that can be better managed or used in supporting the set financial plan.

b) Adopt Budgeting – take control of where and how you spend your money

A budget helps you:

  • understand where your money goes

  • Control your finances while avoiding any wasteful spending. We are called to be good stewards

  • spend within your limits

If you want to be savvy with your money, invest time in budgeting and know where your money is going – this includes understanding your exposure to debt which affects the health of a household’s finances.

c) Manage and Limit your Debt

Accessing debt can be beneficial to households in a number of ways such as the accumulation of assets and paying for education but if overused it can be detrimental to the financial health of a household and lead to untold distress on household disposable income, lower saving and possible at the expense of retiring to an uncomfortable retirement.

An increase in cost of servicing debt such as interest rates increases will crowd household disposable incomes and possibly lead to adverse future outcomes build on lower savings. To avoid these adverse effects, it is better to minimise or limit the use of and reliance on debt. If possible, only consider it for asset accumulation such as house and car purchases whilst avoiding unsecured lending as it is costly and mostly spent on consumption goods – rather save for some big items, use lay byes where possible or limit to an interest free term, usually six months.

*N.B. Outright ownership of your assets provides one with more of a financial cushion and increased security

Reflect and as you plan & take Action:

'We can make our own plans, but the Lord gives the right answer.

Commit your actions to the Lord , and your plans will succeed.

We can make our plans, but the Lord determines our steps. '

  1. What does Financial Resilience look like for you and your household?

  2. Having a financial plan is critical. Name 5 things you would like to achieve in the next 10-20 years depending how old you are. write down a plan of what then how you would be able to achieve these things.

  3. Consider if you have spoken to God about your financial Goals & Plans

  4. Debt is a tool we can use to accumulate assets like a house. It can be abused if we use Debt to finance an unhealthy high-life lifestyle - Consider what debt you have and consult God and then speak to trusted counsel like financial advisors whether your debt is manageable and reasonable.

  5. How can you cut down on your debt and move to outright ownership? List all the debts you have and make goals to eradicate it. If you are deep in debt consider debt counselling from a professional.

taken from Creating Financial Resilience by Joseph Phiri - a certified financial planner

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