Financial resilience: how would you cope with a life changing event?

According to Scottish Widows, in the UK up to six million people each year suffer a life changing event that causes a sudden loss of income. Many more experience events that cause a sudden rise in outgoings. Examples include:

• Loss of a job
• Sickness leading to absence from work
• Becoming a carer to a relative
• The end of a relationship
• Bereavement
• Becoming a parent

Many of these events happen without warning, leaving individuals with little or no choice but to face them, but the impact can be substantial. The inability to pay essential bills and meet mortgage payments can lead to huge financial stress.

While many people have faced these challenges this year, the government support has enabled the majority to continue meeting their financial obligations. However, in more normal times, individuals need to find their own way through the new situation, coping with the stress of the event as well as the financial impact.

The ability to cope financially when faced with a sudden fall in income or unavoidable rise in costs is known as financial resilience. Not everyone has the financial resources to cope if they are unable to work. A poll of more than 2,000 adults by Zurich UK suggests as many as one in eight would have to sell their home to make ends meet if that ever happened. In the survey a third of respondents said they did not feel financially resilient.

How would you cope?

When asked how they would cope with a sudden significant loss of income:

• 40% would rely on savings for the short term (i.e. less than 6 months)
• 39% would find a second job that I could do with my illness/ injury
• 26% would sell other possessions (e.g. any valuables, etc.)
• 23% would rely on savings for the long term (i.e. 6 months or longer)
• 18% said their partner would start work/ increase their hours
• 17% would sell their car
• 16% would move in with friends or relatives
• 14% would find a cheaper place to rent
• 13% would sell their home
• 11% would get a lodger

These are all major decisions, and have a significant impact on you as well your partner and any family. Being financially resilient can and does help cushion the blow of these income shocks.

How can a financial adviser help?

Working with a financial adviser can help you look at alternate ways to cope with the impact of a life changing event or a major financial blow on your existing income. We take a long-term view with you, and take time to understand your financial situation, including the levels of savings or other financial support you have access to. We can then look at ways to protect your income that can help you in times of sudden change, to protect you and your family.

When you decide to insure your income, or your life, what you are really insuring is the financial stability of yourself and your loved ones. There are many options to explore depending on your circumstances and priorities, and it is our job as independent advisors to guide you through to achieve financial resilience for you and your family.

If you want to be more financially resilient and need professional advice to help you, please get in touch. Call us on: 01543 410512 or email enquiries@acuityfinancial.co.uk