Personal finance expert Rob Gardner explains how to build financial resilience by treating your savings like your smartphone battery…
The average person in the UK gets into £439 of debt at Christmas, spending on average almost £740 more in December, according to a study carried out by the debt collection company, Lowell. And it takes most people four months to get their finances back into shape after the festive season.
Debt, even in the short term, is an issue, as it can cause significant stress and prevent us from becoming ‘financially resilient’, which is what we need to break the cycle of debt. Financial resilience is your ability to withstand unexpected life events that impact upon your income and expenses. Having the means to deal with an unexpected expense means you are financially resilient.
This is important as it sets you on the path to ‘financial freedom’, which is about being in control of your finances and your relationship with money.
Saving money is crucial to building financial resilience. But seven in 10 people believe their income is insufficient to allow them to save, according to a recent survey carried out by Money Matters.
This is unsurprising, considering the cost of living crisis. But personal finance expert, Rob Gardner, says that the key to financial resilience is as much about understanding how to keep what you have, as it is about how much you earn.
He says: ‘Of course, it’s a lot easier to save money when you’re earning £50,000 a year rather than £25,000. However, there are steps that everyone can take to start saving more.’ Here, he explains how…
Understanding your financial resilience
Rob says: ‘Imagine your financial resilience is like the battery on your smartphone. Think about your current smartphone battery as though it was your money ‘today’. If you’re like me, you probably feel anxious if your battery is not fully charged, or if it drops below 20 per cent while you’re out and about without a charger. When your phone is fully charged, you’re happy. When we get paid each month and see our bank balance rise, we feel happy. When it’s low or we are in debt, we feel understandably anxious.’
Low power mode
Rob says: ‘Budgeting your money is like managing your phone battery. When your phone enters low power mode, or tells you you’ve only got 20 per cent left, you minimise your usage by turning off apps that are draining the battery, and it’s the same principle for building up your rainy day fund.’
Out of battery
Rob says: ‘Before setting up a rainy day fund, make sure you first clear any personal debt. Priority number one is clearing high interest debt like credit cards. If you can’t afford to pay more than the minimum monthly payments, check what interest rate you’re paying and focus
