Ways to build financial and mental resilience

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Everyone faces setbacks and difficulties, but why do some people seem better equipped to move past them? Psychologists define the ability to adapt and bounce back from adversity as resilience. 

Everybody is resilient in their own way. It’s a matter of how much you tap into it and use it in the moment. It’s a skill that can be learned by people from all ages, backgrounds, incomes, and education levels.

Becoming resilient doesn’t mean you’ll be free of problems and disappointments. It’s about having a mindset that allows you to process, cope — and even thrive — as life throws you curve balls. It’s about moving on no matter what.

Since our finances and daily state of mind are so connected — debt can cause stress, joy can cause overspending, etc. — understanding how to build mental and financial resilience together makes sense. Let’s start with mindset. 

6 keys to building positive mental resilience

Resilience expert and researcher Jurie Rossouw breaks mental toughness into six components.1 Each plays an important function on its own, but they also affect each other.

1. Vision

Develop a larger sense of purpose or vision for your life. Set goals aligning with your vision that guide your day-to-day choices. Maintain perspective on the larger picture when faced with an immediate challenge.

2. Composure

Try and keep calm while facing sudden changes and conflict. Keep an eye on your emotional triggers so you stay focused and think clearly.

3. Reasoning

Plan and take action ahead of time to tap into opportunities. Think through how you would problem-solve during a crisis and take measures to prevent things from going wrong.

4. Tenacity

Be persistent in your efforts and stick with goals. Dig just a little deeper to keep going or rework a strategy. Stay hopeful when faced with obstacles.

5. Collaboration

Develop a strong support system of friends, neighbors, and community organizations that offers safety and resources if needed. Have meaningful relationships and collaborative partnerships. Build your own community.

6. Health

Stay healthy as much as you can by eating nutritious food, make time for physical activity, and get sufficient sleep. Have a strong inner foundation to live with vitality and power.

Understanding all the ways that your resilience can be dialed up or down — and developed over time — is the first step to a stronger mind state. After some practice, it can help you through the major challenges of life, from health concerns and natural disasters to loss of a loved one or unemployment. Of course, the biggest effect may be in your day-to-day life. You may just find yourself staying a little calmer after your toddler colors all over your couch (again). 

Rossouw’s six descriptions directly overlap with our financial lives, too. For example, composure can help you stay on budget, tenacity can help you learn skills and advance your career, and vision can help you plan for retirement.

Building stronger financial resilience

No year may have tested people’s resilience more — financially and mentally — than 2020, and much of the lingering stress, job uncertainty, and health concerns may remain. For many of us, 2020 taught us that we need greater financial fortitude, the ability to withstand sudden decreases in income and unexpected bills. 

To dial up your financial resilience, here are six things you can do to be more in control of your money and live a life that can weather the unexpected.   

1. Have a detailed financial plan

Create a well-thought-out plan for how you’re going to spend your money. By tracking expenses, you can cut unnecessary expenditures and use that money to pay debt or build savings. Organize your spending by automating bills that are fixed. Knowing where your money goes can empower you to spend money based on your values and what matters most.

Resiliency reminder: Have a vision

2. Save for emergencies

An emergency fund offers a short-term buffer when you’re facing unexpected expenses or loss of income. Work to save three months of living expenses that can sustain you during disruptions in money flow. Having your emergency fund can offer greater peace of mind. If your money is tight, consider saving at least $1,000 to get started.

Resiliency reminder: Be tenacious

3. Reduce and eliminate debt

It’s hard to build savings and investments when you have credit card debt and personal loans. Make an action plan for the debt you want to pay off first, and increase payments when possible. Perhaps identify debts with the highest interest and then work backward. For example, if your credit card has 6% interest, pay that off before your 4% home equity loan.

Resiliency reminder: Use reason to find your next step

4. Protect your assets

Consider working with accredited professionals to find suitable insurance coverage to protect your assets in the event of damage or loss. Purchasing adequate insurance to protect you and dependents with continued income can be a good start. And safeguarding your accounts and credit report by monitoring financial accounts and reporting any suspicious activity is another good tip.

Resiliency reminder: Collaborate with others

5. Invest in your career and education

Increase your potential earning capacity by developing marketable skills. Invest in your learning by taking courses, getting certified, and consuming education materials. Diversifying your skills can make you a stronger job candidate and provide options to make money outside your day job. By having additional income streams, you may become less dependent on a salary from your primary place of employment.

Resiliency reminder: Broaden your vision and pursuit it tenaciously

6. Learn to live frugally

Living frugally isn’t about deprivation, but about prioritizing your needs over your wants. There are cheaper alternatives for everything, from clothes to cable TV options. Honing your ability to live frugally builds confidence in your ability to stretch your dollar and live a simple life.

Resiliency reminder: Keep composed

 

No matter what hardships we face, we all want to move through them with more ease and confidence. To do this, try becoming more resilient, mentally and financially.

The good news is that resilience is like a muscle: the more we use it, the stronger it gets, and the stronger our ability to deal with life’s challenges.

 

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1 "The 6 Domains of Resilience,” HelloDriven.com
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