Good financial preparation ensures that you can make choices when needed, in fun and not so fun moments. So it makes sense that a buffer is handy and provides financial resilience, but did you know that a buffer also allows you to make better decisions when the going gets tough?
It’s our hobbyhorse: be prepared. That you have your money matters under control, so you don’t leave things to chance. An example: suppose you want to go on a trip, actually start planning that, set aside money every month and don’t leave your dreams to chance. That’s a great goal to think about and look forward to. But that preparation is also important for when you are ever faced with less fun tasks. In fact, with proper preparation, you will ensure that you do not fall into a downward spiral of money problems.
The pitfall of overoptimism
Some interesting data, like in this article in the Volkskrant “why people mostly don’t see financial woes coming.
We have a natural optimism that makes us think that we are not the ones affected by a crisis and ignore bad news. This often causes us to think “someone else, not me. Daniel Kahneman, psychologist and Nobel laureate, talks about “overoptimism” being deeply embedded in our brains.
A smart girl
Another trigger was that we once heard that you should never assume you will maintain a certain level of prosperity. We agree; “by being smart with your money, it naturally becomes more. But this also means that it could just be less.
And that’s possible, because we don’t know what the future holds. But what if you use that level of prosperity intelligently and thus prepare. Use the gap between your expenses and income smartly, set up multiple income streams and prepare financially for your future. After all, there are always things happening in your life that you would rather see differently, so how nice is it if money doesn’t cause a lot of stress right then.
Why do poor people do stupid things
A tantalizing title of an article in the Correspondent, with Eldar Shafir speaking. One of today’s most influential thinkers. Shafir studies the psychology of scarcity and what he says is not wrong: “People act differently when faced with a sense of lack. Studies show that people with money problems can pull the strings in the short term, but not in the long term. They simply do not see and act on solutions. It even goes so far that in one study, people’s IQ drops by 13 points when there are money problems.
This is also cited in the article in the Volkskrant; lector of Poverty Interventions Roeland van Geuns of the Hogeschool van Amsterdam, says: ‘Once in the grip of money distress, it becomes even more difficult to sort things out, plan a new career or think of alternative sources of income. Money stress causes you to sleep worse and fret, with the result that there is less mental space left to sort things out, plan and manage impulses.’
So, that comes in for a moment. When you have money problems, it’s just harder to get out because you can’t think of the long term. It’s fetching water with a broken bucket.
Financial resilience
At Elfin, we have a mission and that is to help all women become financially independent! This also creates more financial resilience and therefore better resources to take care of yourself when things get tough. And the economy is simply moving, unexpected things happen, both globally and privately. So don’t bury your head in the sand, prepare for what life brings you so that you can move forward when you have wind in your sails, but also navigate yourself through a storm.
