Written by 10:40 am Money & Lifestyle

7 mindset changes to improve your financial resilience

About 7 minutes to read

Financial resilience refers to the ability to withstand life events that impact your income or assets. These can be negative events – divorce, loss of work, global pandemics – or they can be more positive events like getting a raise or becoming a parent. How resilient you are will define your response and how easily you cope with the change in your circumstances. 

It’s about our ability to roll with life’s punches. 

And for most of us, this means that at different times of our lives, we will feel more or less resilient than at others. 

Right now, for example, many of us will have been able to save more thanks to lockdown and the lack of commuter costs, social outgoings and so on. This may create a greater sense of financial stability despite the economic turbulence, as we organise our savings, secure our investments, and shore up our financial cushions. It may even mean that you’ve started asking more questions. What do you do with your savings next? Should you invest your money? And, if so, where and how much? 

But for others, the last year has been fraught with hurdles – especially those who were furloughed, made redundant, or had their salaries reduced. In this case, any sense of security may feel hard-won, if not precarious. In fact, according to the FCA, the number of adults in the UK with low financial resilience has increased by 20% in the wake of the pandemic, leaving 12 million people struggling with bills, debts, and repayments. The same report says that almost a third of households in Britain have seen their income drop by a quarter, on average, with people from Black, Asian or minority ethnic backgrounds being even more likely to have suffered financial losses. 

Whether you’ve been able to save or been rattled by a year of upheavals, there’s no doubt the pandemic has made all of us reconsider our relationship with our money. And I don’t know about you, but I’ve definitely felt that there’s a new sense of urgency about it all, spurred on by the new year and questions about what 2021 has in store for us. 

Certain things can stand us in good stead – help us weather whatever storms or droughts that come our way. Things like having savings or an emergency fund, having insurance or having a steady income can make it much easier to foster resilience. But it’s not all about money in the bank. Having a strong support network of family, friends, co-workers or neighbours can also improve our resilience, as well as investing time in increasing things like our financial literacy and learning new skills to keep our CVs current. In other words, it’s not just having economic capital, but human and social capital that makes us resilient. 

And fortunately, there are things we can do to bolster our resilience. Even if you’ve not been able to save over the last few months, it’s not too late – and is never too late – to start making a few changes so that you can prioritise your financial wellbeing and ensure that you and your money are future-proof. 

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We spoke to Rachel Coffey, a life and careers coach, about her recommendations on building financial resilience. “Compared to other problems, like our health,” says Rachel, “It’s important to remember that money comes and goes all the time. It’s a fluid thing. It’s actually one of the easiest things to get more of if we put ourselves in the right space to do that.” 

For this reason, Rachel suggests that when it comes to resilience, one of the most important things we can do is encourage a shift in our mindset, allowing us to approach financial hurdles in a different way. “Where we place ourselves in relation to a problem is really, really important,” she explains. “People tend to place themselves in the middle of a problem, almost like they are the problem. And the first thing we therefore have to do is take ourselves out of it, so we can see the problem for what it is.” 

We’ve pulled together seven tips below on how to shift your money mindset and boost your financial resilience. 

1.  Know yourself and your financial situation 

The definition of anxiety is fear of the unknown. It’s an impending sense of uncertainty, or a stress response to a perceived threat in the future. For people with low financial resilience, anxiety around money is common – and it’s the unknowns that trigger it. Perhaps you’re in the red and don’t know why. Perhaps you’re worried about losing your job and don’t know how you’d cope if that happened. 

“In terms of resilience, the emotion of fear is completely disabling. It makes people angry and frustrated, annoyed or just run away. There’s kind of nothing scarier than not having enough money,” acknowledges Rachel. “But we can’t engage in ostrich behaviour and pretend things aren’t happening. This only creates more stress. Instead, we need to deal with the challenges, look at the situation, and this gives us the power to make a plan, talk to people, take control.” 

Managing your response to uncertainty is a key part of developing financial resilience. A good place to start is therefore to do an audit of our finances so that we know exactly what money we have coming in and out. This takes away the uncertainty. 

2. Reflect on how you relate to your money 

We also need to spend some time considering our relationship with our money. Especially if we’re going to change our mindset and boost our resilience. 

“Often when people are struggling it’s because of how they relate to money,” says Rachel. “For example, if someone runs their own business, especially if that business means selling a service over a product, this can dramatically impact their sense of self-value. They’ll see themselves as the product, which can make them feel less confident in selling their services or more likely to take something personally that’s really to do with the business. They need to take themselves out and see these things as separate. This is something we all need to do when it comes to our money.” 

The point is that by assessing our relationship with our money, by ensuring we have visibility of our money and taking the time to know how we feel when spending, saving or facing unexpected costs, we can massively reduce the unknowns. We can take control of our anxiety and start to increase our resilience. 

3. Get organised and make a plan

Organising ourselves and the spaces around us can have a transformative effect upon our finances, says Rachel. “Some of us aren’t very good at managing our schedules or our time, and this tends to leak out into our finances. Strangely enough, organising our diaries so we feel on top of it, and even tidying our desks around us, can give us a feeling of being in control, of knowing what’s next – and this can make us feel equally more confident in our money as well.”

Planning for our money is similarly powerful. From creating a budget to setting up regular dates for financial self check-ins, or arranging your direct debits into savings and investing spaces – there are a lot of ways to organise your money and make a plan for it that covers you for the short and long term. This helps us build habits that serve us better, boosting our confidence. Plans always need a little flex (after all, you have to be able to stay nimble if things change) but with one, we’re better set up to react to challenges and hurdles. 

4. Set some goals 

Goals are essential to us at ikigai; helping you achieve yours is at the heart of what we do. Why? Because goals are hugely powerful things, and consciously setting them not only spurs on our motivation, but increases the likelihood of us achieving what we want too. 

Saying that, however, achieving goals is also a lot simpler when we change the way we approach them. Rather than placing them on a map far away, it’s about a shift in perspective that brings us and our goal closer together.  

 “People often think about themselves as ‘making money’,” Rachel says, “But we don’t make money. We make the opportunity to have money come to us. So if someone is having problems with money, it’s not about staring at the minus and thinking ‘this can only get worse’, it’s about stepping back and thinking ‘right, what can I do here?’. Even if it’s a small thing, step one might be to pause the damage, but the second is to work out ways to create new opportunities for yourself to bring more money in.” 

5. Break things down 

It might sound counterintuitive but when faced with a difficult situation, looking at the whole thing as a problem might be the worst thing we can do. When we look at a challenge and try to focus on every aspect of it, we can quickly become overwhelmed. However, this can be overcome if we look for the specifics, honing in on the exact issues rather than assume the whole thing is dreadful. 

Rachel gives the example of a house sale that looks like it’s about to fall apart after issues are found in the survey. “When something’s happening that we’re not happy about – financial or otherwise – then we tend to think of the whole area of it as not working. For example, you’re buying a house but the survey shows it has damp. Our brains will tend to focus on the damp, making the whole situation feel like one big unmanageable problem – but actually, if we dig down, everything else about the sale might be fine, and we actually need to think about solutions so we can move beyond it and move forward.” 

“People are often very capable, but when they’re feeling emotional it’s hard for them to find perspective. If we can see the problem for what it is, things change.” 

6. Keep learning 

Financial resilience goes deeper than our pockets. It’s about our human capital as well. Consider what skills you have both in terms of your career and more broadly. One of the tips that comes up a lot is making sure that you never stop learning – that your skills and knowledge are up-to-date at work, that your industry connections are constantly developing and that you stay on top of the trends that may impact your development or prospects. By doing so, you can keep yourself on the front foot when it comes to your career, meaning if you do find yourself out of work or wanting to move jobs very quickly, you’re in a strong position to do so and your CV will have plenty to speak to. 

In a similar vein, taking the time to learn more about money, economics and finance, can be very helpful. It’s all about increasing your financial literacy and therefore your confidence. You might find it useful to listen to podcasts or follow social accounts like GoFundYourself or Rainchq, which break things down on social media too. 

7. Reach out and talk to people 

We need to talk about money. We say it every week and mean it every day. Talking about money is one of the single most powerful things we can do for ourselves and each other. And it can play a fundamental role in how resilient we are. Give yourself permission to talk about money – even if it’s still a little taboo. 

As Rachel says, “In normal life, we’ll call friends up and have a bit of a moan or a vent, but a lot of us don’t generally like to do this about money. We tend to keep it to ourselves a lot because our money is often linked, even subconsciously, to our sense of value as a person and we don’t want to seem like we don’t have value. But there’s always someone we can talk to and we can share tactics and things too. Yes, we need to sort our own finances out, but friends and family can really help. There’s also lots of free financial advice out there. So it’s really about not feeling like you’re on your own. Because it’s when we feel alone that we tend to be more likely to practice avoidance.” 

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We built ikigai specifically for those who want to bring their lifestyle to the next level, by taking better care of their finances.

ikigai beautifully combines wealth management and everyday banking in one single app. And by doing so, it creates a whole new world of opportunities.

Visit https://ikigai.money to find out more.

Maurizio & Edgar, Co-Founders, ikigai

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Last modified: 17 February 2021