4 steps to building a resilient financial life

Life can throw curved balls at you, bringing unexpected events and expenses. That’s why building financial resilience in your life can be so powerful and start by learning to have a basic idea of ​​how your finances work and what you can do to make them work better for you.

If you’re feeling a little unsure or overwhelmed about how to get your finances in order, the first place to start is to define your goals. What do you want to achieve? It can be sticking to a budget, paying off debts, saving for retirement, building an emergency fund, or saving for a big expense like a car, a house, or a child’s education.

Let’s look at four foundations for building a more resilient financial life.

Step 1: Be SMART with your goals

Whatever your goals are, I encourage you to put pen to paper and write them down. I like to use something called the SMART goal setting method, which stands for:

  • Specific
  • Measurable
  • Action oriented
  • Realistic
  • Limited in time

For example, if you want to pay off the debt, start with the actual dollar amount of how much you want to pay. This makes it specific and measurable. Then, become action oriented by defining the steps you will take. If he’s paying off the debt, maybe you can cut back on meals out or pay the tax refund to your credit card account.

By making your goal specific, measurable and action-oriented, you will be able to see if your goal is realistic and if not, you can adapt it, for example by extending the time frame. Speaking of time, the T in SMART stands for Time-bound – give your goal a due date so you have a goal in mind. Once that deadline is reached, you are encouraged to reach the next goal, and then the next, and this is how we make progress in our financial lives.

Step 2: be organized

I like to use the house building analogy. It’s fun to dream of your floor plan and decorations, but house construction doesn’t really start until you open the ground and lay the foundation. Creating a more formal budget is the foundation of our financial life, helping us see exactly where money flows so we can better allocate it to our many needs, wants and goals. Calculate every dollar that comes in, including earnings from your job or any other source, such as a rental property or secondary hustle and bustle. So, keep track of your expenses, from rent and gas to coffee and birthday gifts. Once you have listed all these expenses, separate them into two columns by needs and wants.

This part will be different for everyone. For example, we all need to wear clothes, but do you really need new clothes every month? Maybe you do this if you have a growing baby or need a new coat, but maybe not, and maybe you can put new clothes in the “wish” column instead of the “need” column.

Another useful tip is what is called the 50-30-20 rule: think about 50% of your budget to cover needs such as utility bills, food, housing, insurance and utilities; then 30% following wishes such as streaming services, holidays or new gadgets; and then the remaining 20% ​​to savings, such as the retirement account, equity portfolio and emergency fund.

Step 3: be realistic

Practice makes perfect, so think of your financial life as a game of darts, where each triangle on that target is a different aspect of what you said you would spend or save to achieve your goals. The more you practice throwing that dart, the better you will be in hitting the target consistently.

Of course, many of us live on pay for pay or piling up debt to make ends meet. If that’s where you are today, it’s still helpful to have a clearer picture of your goals, income, expenses, needs and wants. Write down everything and try to identify places where you can potentially reduce. For example, you probably need your cell phone, but is there a less expensive plan that might work? If there’s really no room for maneuver, look for ways to get additional income, perhaps turning that passion project into a secondary hustle and bustle or finding a flexible part-time job.

Making ends meet can be difficult, so it’s important to put energy into building a financial cushion when you get the chance. You may also have heard that it’s a good idea to set aside three to six months of essential expenses as an emergency fund, but for many of us that’s easier said than done. Keep in mind that savings don’t appear overnight. Start small, find out what works for your lifestyle, and save, even if it costs $ 5 at a time.

Step 4: get support

Financial literacy is simple, but not necessarily easy. The earlier you start budgeting, saving and investing, the more time you have to grow your money and help you reach your goals. Even small amounts of invested money can add up over time, thanks to the power to capitalize on interest. So make sure you work towards building your financial resilience today so that when you retire, you can live the kind of life you’ve always imagined. If you feel behind, don’t panic – start today and start with the little one you need.

Our finances are such an important area of ​​our life which is why I personally find it very reassuring to know that there are many types of professionals out there who can offer support as you evaluate your options, prepare your next steps and work towards achieving your goals. your goals. Perhaps you are ready to build a financial support team with the help of lawyers, accountants or financial advisors and coaches. Many companies offer their employees access to financial education, advice, and resources as part of their benefits package, so check to see if your company offers additional support that can help you take control of your financial journey today.

This article has been prepared for informational purposes only. The information and data in the article was obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or warranties as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. It does not provide personalized investment advice and has been prepared regardless of the individual financial situation and goals of the people receiving it. The strategies and / or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends investors to independently evaluate particular investments and strategies and encourages investors to seek advice from a financial advisor. The suitability of a particular investment or strategy will depend on the investor’s individual circumstances and objectives.

Head of Financial Welfare, Morgan Stanley

Krystal Barker Buissereth, CFA®, is the managing director and head of financial welfare for Morgan Stanley at Work. In this role, she is responsible for working with corporate clients and organizations on creating, implementing and managing financial wellness programs that meet the needs of their employees.

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