If you are working, paying rent or a mortgage, and paying for groceries and bills with a bit left each month to go into savings, then you are probably doing pretty well in life. But how long would you be able to maintain your current lifestyle if you faced a financial shock like losing your job, or an unexpected financial crisis?
Unfortunately, everyone is likely to face financial challenges in their life, whether it’s losing a job, the car breaking down, or needing to take a pet to the vet. Financial resilience isn’t just a measure of how strong your finances are in these situations, but also of how quickly you could bounce back.
There are steps you can take today to start building your financial resilience to protect yourself and your family against the unexpected.
Here are Money Compare’s top tips to improve your financial resilience and weather any unexpected financial storms:
1. Build your buffer by building an emergency fund
Building up your savings is a key way to protect yourself, so you have something to draw on when the unexpected happens. There is no set amount that you must save, the priority is more to start saving what you can now. A regular savings habit will start to add up, even if it’s just a safety net of $500 to start, you’ll be ready for many of life’s twists and turns. Sorted recommend that you aim to build up a buffer that would cover your current lifestyle for up to 3 months.
2. Protect yourself and maintain adequate insurance
Rather than carry big risks on your own, having an insurance company do it for you can bring peace of mind. When choosing insurance, think about what is most important to you when it comes to protecting your home, car, health, travel or business. Make a habit of checking and comparing your insurance policies as they come up for renewal, to make sure you are getting a good deal that suits your stage of life.
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3. Manage your debt
Most of us will have times when we need to go into debt, whether it’s a mortgage for a first home, credit cards, or a personal loan for a big one-time expense. Choosing the best type of mortgage, loan or credit card will help you save on interest payments and fees. Managing your debt well will also help if something unexpected happens. Check out our guide for comparing mortgages, personal loans and payday loans. Use our credit card payoff calculator and mortgage calculator to start planning repayments.
4. Invest for the future
Set yourself up for a comfortable retirement and invest in Kiwisaver. KiwiSaver can help you save toward a more secure retirement, boosted by contributions from your employer and the government Our retirement calculator can help you start thinking about how much money you will need to retire comfortably.
Compare Kiwisaver funds
5. Get your papers in order
Whether it’s a will or an enduring power of attorney, it’s good to know that you’ve got your paperwork at the ready. Getting your papers in order is impossible when left too late, but entirely easy ahead of time. Here is why wills are important and how to write one