How Not To Be Financially Vulnerable

We often naïvely assume that our monthly pay cheques will cover whatever life throws our way. But it may not cover all our emergencies, which is why we need to create a safety net

- LARISSA FERNAND

The lady in the salon where I frequent shared her financial situation with me once. She told me how she and her husband bought a tiny home (one room, kitchen) with a home loan. When the pandemic hit and there was no income, she said at least they never had the stress of paying rent because they owned the house.

Her husband developed a nerve condition and can no longer work. For one, she is relieved that at least they have a roof over their head. Now it is her income that runs the household, and her college-going daughter has a small-time job that helps. I liked the phrase she used, "we are each other's safety net".

Yes, family is a safety net, but it is not sufficient. You need to provide another buffer. There are few individuals who have never undergone financial stress. In fact, I would say that at any point of time, we are all financially vulnerable to some extent. If for no other reason than a sudden change in circumstances or health condition can hit us hard.

A monetary issue is not just a game of numbers. It has instant emotional repercussions. Financial strain increases stress levels exponentially. Being financially vulnerable is also being psychologically vulnerable. You cannot blindly hope or assume that all will be well.

Here are three extremely practical ways to reduce financial and psychological vulnerability.

Build An Adequate Emergency Fund

We often make the naïve mistake of assuming that our monthly pay cheque will cover whatever life throws our way. Your salary may cover some emergencies or contingencies, or may not.