3 Tiers of Financial Resiliency: How to Create a Shock-proof Life

When it comes to money, most people are fragile, scared, and don’t know what they’re doing.

Think about it…

  • US consumer debt has hit an all-time high at an average of $136,000 per American
  • In 2017 the average savings rate of Americans was 2.8% of income, the lowest that has been recorded.  
  • A study by the Federal Reserve showed that 50% of Americans couldn’t come up with $400 in case of an emergency.
  • 78 % of people are going through life living paycheck to paycheck.

Statistic: Personal saving rate in the United States from 1960 to 2017 | Statista
Find more statistics at Statista

My main goal here at PF Geeks is to show you how to manage your own finances so that you can accomplish your unique life goals.

The nuts and bolts of personal finance are incredibly simple.

  1. Spend less
    1. Cut costs on the majors: housing, transporation, etc
    2. Identify some daily habits that reduce monthly expenses
    3. Avoid lifestyle inflation
  2. Make more
    1. Ask for a raise
    2. Side hustle if that’s your thing
  3. Invest the rest
    1. Index funds
    2. Portfolio strategies
    3. Automate your investing

Don’t get me wrong, there are a ton of small details within that framework that can lead to HUGE gains like how one small change will save you $400,000 more for retirement or how reducing food waste can save you an extra $215,000

Once you’ve gotten the basic framework down, personal finance is all about executing your plan and enjoying the present.

BUT there is one missing piece from that framework.

How do you protect your money and reduce financial risks?

Whether you’ve got a million in the bank or you’re trying to climb out of a deep hole of debt, you need to take some steps to protect yourself.

So here’s my question for you…

How protected are you? What would it take for you to break?

The reality is the world we live in is nearly impossible to predict.  

Devastating hurricanes along the gulf coast. Fires raging through California. Political insanity and economic instability. Let’s be real…. the market sneezed last month and half of America freaked out.

The truth is, we are living in unpredictable times.

One of our goals is to make our finances as resilient as possible.

My goal is to protect my wife and I from the predictable and the unpredictable–from the risks we know and the ones we don’t know even know exist yet.

I want to be financially strong and have as few weak points as possible. I want you to take necessary steps to protect your money so that you never have to worry about money again. When money is concerned, I so desperately want you to live a stress free life.

These days, you’ve got to put measures in place to protect your money for the future.

3 Tiers of Financial Resiliency

Resiliency is defined two ways:

  1. The ability to absorb shocks
  2. The capacity to recover quickly from difficulties

Being financially resilient means that you can weather hard times, recover quickly from difficult circumstances, and absorb the shocks that life throws your way.

Personally, I want our budget, our finances, and our retirement to be as resilient as possible. I don’t want things we can’t control to set us back and keep me from providing for our family and chasing our financial goals.

I want to run through 3 tiers of financial resiliency and some specific actions you can take to build up a life foundation that is shock proof.

  1. Career
  2. Health
  3. Money

Financial Resiliency

Tier One: Your health matters because it is the greatest risk to your financial well-being and the biggest unknown in your retirement plan. Also, being alive is generally a good thing. When your health is at risk, you can’t work.

Tier Two: Your career matters because without it you wouldn’t have money coming in. Job security is both how secure you are in your current job, but also how quickly you are able to find new employment.

Tier Three: Money isn’t the end goal, but it’s the tool you need to live your life. The more secure you are financially, the more resilient you’ll be in hard times or recessions.

Health

In almost all of the discussions I see online about personal finance, the one that comes up more than any other is healthcare. Not only are there so many unknowns about the future of healthcare in our country but you really have no way to predict your own health.

The healthier you are though, the better off you’ll be.

Tanja Hester, an incredible blogger at OurNextLife has put together a series of posts detailing how they are planning for healthcare in early retirement. I HIGHLY recommend checking them out on their “Start Here” page.

Health risks

Here are 5 quick & easy ways to improve your health.

1. Walk more often

Walking is by far the easiest daily habit you can start to reap massive health benefits. Walking will keep your hips healthy, lose weight, improve your posture, and increase your energy levels.

This is double important if you’re like me and spend 90% of your working hours sitting.

Walking 30 minutes a day can also reduce your risk of heart disease and stroke by 27%. It’s also been known to help prevent type II diabetes and asthma. Source.

2. Kill bad habits

This one should obviously go without saying, but bad health habits like smoking and excessive drinking are costly and bad for your long-term health. Smoking alone can cost upwards of $1,000,000 over a lifetime.

3. Eat healthy

People who eat healthy are usually happier, wealthier, and more successful. You’ll be less likely to spend money out of pocket on health related issues and you will spend significantly less later on in life.

Eating healthy also doesn’t have to be expensive. Chicken, beef, vegetables, sweet potatoes, and beans are staples of a healthy diet that is budget friendly.

Want to get all of my favorite cheap recipes?? The PDF of 46 recipes all come out to less than $2 a serving.

4. Maintain a healthy weight

If you want to really improve the quality of your life, maintain a healthy weight. This is something I’ve been really working on personally. College and my first few years post-grad haven’t been good to me, but its time to right the ship!

Here are just a few ways that maintaining a healthy weight can protect your money:

  • Insurance: Some insurance providers will provide discounts for losing weight. The healthier you are, the less you cost them. Good providers will pass these savings along to you, the customer. If you want help figuring out where to start, check out this awesome resource on life insurance basics
  • Clothes: If you find yourself yo-yo dieting then you probably are familiar with the pain of spending money on more clothes when you know you have clothes that are just 10lbs under your current weight. Trust me, I know what that’s like.
  • Healthcare: Take diabetes for example. The average person will spend close to $8,000 every single year on healthcare for diabetes.

5. Sleep

Want to know my top-secret, ultra-effective, productivity-producing life hack?

Sleep more.

HarvardMed put together a great study on the effects that sleep can have on your health. It is definitely worth a skim, but here are some of the highlights:

  • People who habitually sleep less than six hours per night are much more likely to have a higher than average BMI and that people who sleep eight hours have the lowest BMI.
  • Insufficient sleep is also associated with lower levels of leptin, a hormone that alerts the brain that it has enough food.. As a result, poor sleep may result in food cravings even after we have eaten an adequate number of calories.
  • One study found that sleeping too little (less than six hours) or too much (more than nine hours) increased the risk of coronary heart disease in women.
  • Chronic sleep issues have been correlated with depression, anxiety, and mental distress.
  • Sleeping five hours or less per night increased mortality risk from all causes by roughly 15 percent.

6. Insurance

The entire point of insurance is so that you can protect yourself from massive financial loss. There are different kinds that you may need: term-life insurance, disability insurance, home insurance, and flood insurance if you’re in Houston like me.  

Job Security

Career

When it comes to being financial resilient in your career, the key is to reduce your risk of being fired and be as hireable as possible in case of job loss.

1. Become invaluable to your organization

The best way to prevent job loss is to be as valuable as possible to your organization. Do excellent work, beat deadlines, and contribute positive value to the company. If you’re in sales, this means bringing in more than the company is paying you. If you’re a project manager, this means beating deadlines and meeting expectations.

I take a wide and deep approach to this. I love to be really strong in one area while still having a hand in multiple other areas. The more you handle in your job, the more difficult you are to replace. My buddy Erik is wicked smart when it comes to growing his career. He just shared his best advice on how to become a 6 figure earner!  

2. Build a true friendship with those in charge

The truth is sometimes companies have to let people go. Once all the under-performers have been fired, the next round of cuts will probably target the fluff jobs or the workplace jerks.

No one in charge enjoys firing, but they would especially not fire a friend. Don’t pursue friendship just to avoid losing your job, but this is one of the perks to being well-liked around the office. Learning some basic principles of persuasion can help you establish yourself in the workplace without being manipulative. 

3. Update your resume every 6 months

If you ever lose your job, the quicker you can have your resume put together, the sooner you can take action on applying for new jobs. I knew a guy who had been at the same job for 17 years and when it came time to update his resume he had no idea where to start.

The more regularly you update your resume, the better.

4. Always be networking

The best time to be networking is while you actually have a job. Get to know people in your industry at other companies. Meet with them to learn and grow to perform better in your current role, but also to build some ties at competitors in your industry.

5. Accept and reply to LinkedIn requests from recruiters

I know those cold-messages you get from recruiters are obnoxious, but you don’t need to burn a possible bridge for no reason. Whenever you deny these message requests, you have essentially blocked that recruiter from ever reaching back out to you.

Instead, respond with this simple message:

“Hey ______,

Thank you so much for reaching out about the opportunity with *insert company or industry*. I really do appreciate it but I am happy in my current role. I’ll be sure to let you know if or when I decide to look for other opportunities.

Rich, ______”

This keeps the relationship open and you now have someone you can go to if things ever get bad. I was a finance major in college and I get these requests on a monthly basis even though I work at a church.

I never plan to switch careers, but if I ever did I have a list of around 40-50 recruiters I can reach back out if needed.

6. Build your own business

I almost didn’t include this one because it is so obvious, but this is just about the only guaranteed way to be truly resilient in your career. One of my good blogging friends wrote a massive guide that will help you start your own business! It absolutely should be required reading for every hopeful entrepreneur! 

7. Work for a smaller company

Fun fact: Back in 2008, around 27% of firms with less than 100 employees had to make job cuts while 45% of firms with 500 or more workers did the same. (source)

Work at a smaller company and become less susceptible to job loss.

 

protect your money

Money

Now, for the $$$$. This is an area that most personal finance bloggers have covered at length so I’ll be brief and just link out to awesome content that you should go read.

1. Emergency funds

The whole purpose of an emergency fund is to give you a buffer when life decides to smack you in the face! You just never know what kind of emergency you might run into. Check out my Ultimate Guide to Start and Build an Emergency Fund to get started! 

2. Live on one income

If you’re in a dual income household, then the BEST thing you can do to insulate yourselves financially is to only live on one of your incomes. This gives you an incredible amount of protection against financial worry and job loss.

3. Reduce expenses

This is an area that I love to write about! Spending less money isn’t sexy, but it is one of the easiest ways to make your finances more bulletproof. The less money you spend, the less you need. Duh.

If you don’t have a lot of room to increase your income, then you’ve got to reduce your expenses.

Download my massive list of 150 proven ways to save money to help you do exactly that.

4. Automate your finances

The last way to make your money a bit more shock-proof is to simply take YOU out of the equation. The less your financial plan requires your time, energy, discipline, and ability to remember, the better.

Things you can automate:

  • Debt payoff
  • Retirement savings
  • Credit card payments
  • Bills
  • Emergency fund savings

*Bonus* If you want to train up your kids to be financially resilient, then you absolutely need to start teaching them at a young age. The key is to teach them the importance of delayed gratification early on.

My buddy Matt wrote an incredibly detailed guide on the marshmellow test and you absolutely need to check it out. 

5. Side Hustle

If you can find a way to make some extra cash on the side, then you’ll be much more financially resilient. A side hustle can help you pay off debt, boost your emergency fund, and become financially independent faster. 

Final Thoughts

It’s impossible to predict the future. If you’re being honest, you really have no idea what tomorrow will hold for, but there are steps you can take today to position yourself as best as possible. All of the actionable steps I’ve offered up today are free ways you can create financial resiliency.

I would LOVE to hear what you think! What are some steps you’re taking to protect your health, career, and finances?

11 thoughts on “3 Tiers of Financial Resiliency: How to Create a Shock-proof Life”

  1. Good read! Are you familiar with Maslow’s Hierarchy of Needs? This reminded me of a simpler, financial version of that. Understanding our levels of need (financial or otherwise) is critical to knowing where to best focus our energy. Thanks for the thought-provoking article!

    Reply
    • Yes! I am definitely familiar with Maslow’s Hierarchy. In fact, it was part of the inspiration for this! Glad you find the article enjoyable.

      Reply
  2. Some great points and steps here. During a recent layoff at my plant much of these preventative measures would have helped many of us – me included. Things are better now, and experience tends to be a great teacher. Thanks for sharing.

    Reply
    • Glad to hear these things would’ve helped! I spent 5 months unemployed in between jobs and I could’ve definitely used a lot of this then. I’ve definitely been able to put these into practice in my new role.

      Reply
  3. Great info! I’m always so focused on just one part of that pyramid, and let the other tiers fall to the wayside. Example : I’m working overtime at work, but def eating unhealthy and not working out, and am too tired to keep up job hunting and networking.
    It’s so hard to balance it all!

    Reply
    • Balance really is the hardest thing. Have you read about the 4 Burner Theory? James Clear has a great article on it, but essentially he talks about different approaches to managing the different “burners” of life. Eating healthy and working out will help you work harder and perform better! It’s just so difficult to make the time in the moment.

      Reply
  4. I hear you on the linkedin recruiter requests. I haven’t counted but I feel like I’m ‘friends’ with more recruiters than people I actually know. I do decline requests from locales I know I’m not interested in moving to, especially if they haven’t written a good greeting. I did get my last job (east coast) through a recruiter based in CA. But if you are a recruiter in Ohio, not sourcing in my preferred living area corridor (which they should tell me in the opening), I’ll pass.

    I’ve worked for small and large companies. While your statistics about % layoffs if good, the 60 person company, the board of directors closed the doors and everyone, including the CEO were looking for new jobs. I don’t expect any job to continue so your tips on networking and emergency funds are spot on.

    Reply
  5. Great advice! When people are solely focused on one goal (like climbing the corporate ladder), health can sometimes get put on the back burner. It’s so important to focus on your health because how you feel impacts all other areas of your life.

    Reply

Leave a Comment