Developing Resilience for Mental Wealth & Money Management, part 1

 

Resilience can take you far in life and it’s what most athletes train for. Whether or not you think you are an athlete, I’m here to tell you, you are an athlete in the game of life. I recommend we all grow our resilience muscles.

Let’s start with defining it:

Resilience

noun

1. The capacity to recover quickly from difficulties; toughness.
2. The ability of a substance or object to spring back into shape; elasticity.

And then let’s look at some synonyms of resilience – flexibility, pliability, suppleness, plasticity, elasticity, springiness.

I’ll go further and state that if we can develop resiliency in the game of life, we’ll be able to recover quickly and bounce back from adversity.

The Importance of an Emergency Fund

Living through adversity will strengthen your resilience muscles.  We all face them – trials, tribulations, storms, and sickness. They can hit us at any time. These things usually include a financial burden. If we can prepare ahead financially for such occurrences, we’ve already lessened the load of the burden.

If we have a financial backup when a storm hits, we can then focus our mental and physical energies on the storm at hand. This will help you to possess resiliencey in the game of life.

How Much of an Emergency Fund Does One Need?

When I originally began looking at my finances and working to pay off my debt, I listened to a lot of what Dave Ramsey teaches. Now that I’ve paid off my debt and have become an investor, I have broadened the sources from which I seek financial advice.

However, I do subscribe to what Dave Ramsey teaches about emergency funds. It’s solid advice.

If you are in a position where you are still paying off debt, then you should, at least have a baby emergency fund of $1,000. Sometimes with the women I advise, I’ll even say, a baby emergency fund of $500 is a decent starter.

Whichever one you choose, at least you have a little cushion to fall back on if some emergency occurs during your debt pay off journey. The idea is that if an emergency strikes, you don’t have to go into more debt for it.

Once you are out of debt, Dave recommends you enlarge your emergency fund to three to six months of expenses. I agree with this but if you can grow it to cover one year of living expenses all the better.

Calculating The Emergency Fund

Obviously, the baby emergency fund needs no calculating. If you don’t have one, start selling, or working extra and save one up!

If you are in a position to have a larger emergency fund of three to six months, the calculations can be quite simple. First and foremost, you need to be on a budget and I’ve written several articles on budgeting to help you get started:

• How to Do Zero-Based Budgeting
• Budgeting for the Future
• Budgeting with a Credit Card

The first one, how to do zero-based budgeting, is the most basic step by step guide to building a budget. If you don’t have one, I recommend you start there.

Once, you have your budget, it should be rather simple to calculate your bare-bones monthly expenses. Think about it, if you are in an emergency situation where your income has decreased drastically, you won’t be spending money on frivolous things. Rather, you’ll just be funding the basics.

That being said, you only need to include the very basics expenses when calculating your monthly emergency amount. Here is an example of how to calculate your monthly emergency amount and hence, your three month, six month and twelve-month amounts:

You remove any unnecessary amounts and just factor in the amounts you need to keep paying to survive.

I promise you once you have an emergency fund of even three months, you’ll gain a HUGE sense of financial peace. I did! I know I have a fallback plan in the event my life gets thrown upside down.

And that gets us to to the next segment of this post…where to focus your mental resilience in an emergency.

Mental Resilience

I wrote about the money component first because money is fairly black and white. It’s just a basic math problem. However, so many of us don’t look at our finances because it’s a source of pain, shame, and/or fear. Once we face it and can see the numbers in black and white, we can develop a plan. Once, we develop a plan, the fear, shame, and pain start to dissipate.

Once we are on a budget for our money, we can focus your mental capabilities elsewhere.

Mental resilience is the ability to recover quickly from mental obstacles. For those of us, in recovery from addiction to any type of substance or habit, we know the source of addiction is but a symptom. The real work is uncovering the root of why we turn to that substance in the first place.

This is the deep, healing, soul-searching work of recovery. It’s never recommended one goes it alone because sometimes we uncover deep wounds and/or traumas from our past. If you are in recovery, be sure to have a sponsor and accountability partners to walk with.

Amazingly, those of us in recovery are usually equipped to handle an emergency situation. Why? Because we’ve developed the tools to overcoming life’s daily obstacles.

How do you Cope?

However, if you are not in recovery, you can still develop mental resilience. If the fear of money is gone, you can focus on how you mentally deal with emergencies. When an emergency arises, our coping skills will surface. At this point, I recommend, you just pay attention.

Next time, you are faced with adversity, I want you to write down your thoughts, actions, and plans that you make as you are dealing with the situation.

Sure, you might need to focus your energy on the emergency at hand. However, at the very least, you can observe your habits and patterns. Journal at the end of the day and save this up for a time when you have the capability to review.

Once, you are through the emergency, and have time to reflect, review what you observed and recorded in your journal. Identify any coping patterns.

Were you focused on solving the problem at hand? Did you self medicate with some type of substance or activity? Did you look to place blame? Do you possess leadership abilities by gathering a team and delegating tasks? Did you isolate?

The above questions are to uncover a number of coping skills both healthy and unhealthy. At this point, I still only want you to observe without judgment.

Next Steps

I know for me, when I finally took a long look at my coping skills, the unhealthy ones were ugly to me. I knew one thing for certain and that was I didn’t want to possess them anymore.

I suspect as you take a closer look at how you cope in adversity, the healthy skills will cause you to beam with pride and the unhealthy ones will make you squirm with regret.

Once, we identify what we want to change about ourselves, we can actually begin the work of sanctification and find our way to healthier coping. That will be part 2 (next week) of developing resilience for mental wealth and money management.

Closing Thoughts

We are all in the game of life. Furthermore, none of us is immune to adversity. My goal is to help others develop resiliency for maintaining mental wealth and money management.

First and foremost, you need an emergency fund. Why? So that emergencies won’t derail you and exaggerate the situation. When there is no money, it only compounds the situation. When there is a financial backup plan, there is peace and mental capacity for dealing with the emergency.

Work on building your emergency fund now.

Secondly, as you face adversity, observe and record your tendencies. Next week we’ll talk about what to do with what you’ve observed in an effort of beginning the process of sanctification.