Building Financial Resilience in 2024: A Step-By-Step Guide

• Emergency funds, paying off debt, buying insurance, and investing are all great ways to build financial resilience. 
• Pursuing further education to improve your career and financial literacy skills also improves your resiliency. 
• Remember to take care of yourself along the way. Your physical and mental health can significantly impact your financial stability.

Building financial resilience can feel daunting, but it’s worth pursuing. When you’re financially resilient, you’re better equipped to handle the ups and downs life throws at you without everything turning into a financial disaster. 

We put together some strategies to help you increase your financial resilience, one step at a time. Rome wasn’t built in a day. As you build momentum, things should get easier.

Build an Emergency Fund

The first thing you can do to build financial resilience is to set up an emergency fund. While most financial experts recommend saving at least three to six months’ worth of expenses, starting smaller is okay if you are making an effort to save money for the first time. 

Your first goal might be $1,000. That’s still a $1,000 cushion that can turn financial emergencies into mere inconveniences. With budgeting and saving tools, you can track your progress towards these goals and stay accountable and motivated. For example, with the Payactiv app, you can set up an automated saving goal¹ and set aside a portion of every paycheck towards it. You can also manage your budget and see where your money is going with in-app tools that help you build better financial habits.

Invest for Your Future

Once you have an emergency fund, you can take advantage of your employer-sponsored retirement plan. Some employers will match your contributions, helping to fast-track your savings.

Even if your employer doesn’t provide a tax-advantaged retirement plan you can look into other investment account options, like Roth IRAs, to grow your wealth.

Pay Off Debt

Another financial move that can help you build resilience is paying off debt. When you have a lower debt-to-income ratio, you have more money to work with every month and are more likely to get approved for a loan with favorable terms if you need to borrow money.

There are two main strategies to pay off debt: 

• Debt avalanche: Pay the debt with the highest interest rate first. Once you pay it off, focus on the debt with the next highest interest rate. If you stick with it, this is the least expensive way to repay your debt.
• Debt snowball: Pay off the debt with the smallest balance first. Then, move on to the debt with the next smallest balance. This strategy tends to motivate more people because they can reach a zero balance faster and enjoy the quick win.

But which option is right for you? It depends on what you find most motivating. If saving more money on interest sounds appealing, opt for the debt avalanche strategy. Otherwise, choose the debt snowball method if you want the quick wins of paying off balances faster.

Purchase Insurance

Insurance is there to protect you during uncertain times. While it’s essential to ensure you can afford the premiums before signing on any dotted lines, it can be a financial product that helps you build resilience.

Auto insurance is required by law if you have a car, but other common types of insurance include: 

• Health insurance
• Renters insurance
• Homeowners insurance
• Life insurance
• Disability insurance

Consider your lifestyle and budget to determine which coverages you want to purchase. Some factors you should evaluate include if you rent or own your home, your marital status, if you have kids, and your current health needs.

Always Keep Learning

Continuing your education builds financial resilience. Whether you’re building your financial literacy skills or fine-tuning the skills you use every day in your profession, all of that helps create more stability for yourself tomorrow. 

For example, increasing your professional skills can contribute to job stability or help you increase your salary while learning more about managing your finances can help you grow your net worth by learning new strategies to pay off debt, earn more money, and invest.

Take Care of Yourself

The road to financial resilience can cause financial burnout if you push too hard too fast. Proactively carve out time and budget for entertainment, relaxation, and time with friends and family. 

Even if you hit a few bumps in the road, know that most people’s financial journeys are two steps forward, one step back. Maintaining a positive attitude even when things don’t go according to plan is critical when you’re building resilience.

Bottom Line

No matter where you are on your financial journey, pursuing a few financial goals, like building an emergency fund and paying off debt, can be a great way to build financial resilience. 

You’ll also want to continue investing time into your education to learn new skills while being mindful to take care of yourself along the way.

¹Goal-based saving is a set-aside account, and you will not receive interest or other earnings on the funds within the goal-based account.

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