Kimberly Palmer: Building financial resilience can help you ride out tough times

abcnews.go.com:

Financial shocks are bound to hit at some point, and building financial resilience can make it easier to handle them when they do

Financial resilience provides a safety net that you might rarely use — but when you need it, you’ll be glad you have it.

“A household is financially resilient if they are prepared to encounter unexpected financial shocks,” says Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center, a think tank in Washington, D.C.

Shocks could include costs like a surprise medical bill or home repairs or lost income from a layoff. They tend to be “unpredictable in their timing, but we generally know they will happen throughout our lives,” Sprick adds.

Given that we’re all likely to face financial shocks at some point, here are some ways to improve your financial resilience.

LOCK DOWN YOUR CASH FLOW

“Sometimes, we go out and spend without thinking,” says Troy Anthony Anderson, who develops financial education extension programs for the University of Maryland in Calvert County. That’s why he recommends writing down expenses to track exactly where money is going as a first step toward figuring out what to cut, such as going out to eat or to the movies.

Anderson suggests planning for the entire month so you don’t overspend each time you get paid. “Ask yourself, ‘Do I really need to eat like a king or queen when I get my paycheck?’ The direct deposit clears and you go to Texas Roadhouse or Outback, but then the following week (you) have no money and have to make peanut butter and jelly,” he says.

To stay on track, Anderson keeps a limited amount of cash in his wallet for discretionary expenses and writes down what it can be used for on a sticky note that stays with the cash.

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