Do you think you have a financial defense attitude?
Apparently, this can be very useful when you are going through a crisis – which is exactly what we are going through right now. The recession just started and it’s making people feel uncertain about their financial future. According to reports, before the pandemic and recession happened, 49% of Americans were already living from paycheck to paycheck.
That means they hardly have any savings to help them survive an emergency. So what happens when they are faced with a back-to-back crisis? The coronavirus pandemic and the recession are two devastating events that can easily cripple anyone. Having both of these happen one after another will wreak havoc to your finances. Not just in the present, but also in the future.
So what can a financial defense attitude do to help improve your current situation?
Definition of a financial defense attitude
To understand what this attitude is, let us define what financial offense is.
A financial offense involves 2 types of income. One is the income you get by working a job. If you work more or add another job, you can increase this income. The other income is the one you get from passive income sources. This refers to the income you get from your investment portfolio that includes stocks, real estate, and bonds.
So when you have a financial offense attitude, it means your idea of security comes from earning more.
With that definition, it should be easy to understand what financial defense is. You are not focused on your earning but on how you spend your money.
With that, having a financial defense attitude means you are being frugal. You have priorities and you put that first before any other unnecessary expenses. Part of your priorities is paying yourself. You need to have the mentality of putting yourself first by making your savings a priority. So to make yourself feel secure, you will lower your spending and save more. Of course, it’s not as easy as you think. This is why being frugal is a must. It should involve planning so you can still have a good quality of lifestyle while still accumulating wealth.
Now that the definition is clear, what are the benefits of having a financial defense attitude during a crisis?
Helps you stay financially afloat
First of all, this will help you stay financially afloat. If your income is reduced, you don’t have a lot of money to use on expenses. But with this attitude, you will make sure that you have savings. You will do what you can to cut back on expenses. It will be easier to adjust because you are used to being cautious with how you spend. With this spending habit, it will be easier for you to stay afloat even if you have limited finances.
Reduce financial stress
Reports revealed that 9 out of 10 Americans feel anxious about their finances because of the current crisis. Once you feel anxious and stressed, that will make it harder to choose the right options that will improve your financial situation. But if you have a financial defense attitude, you can deal with the stress in an easier manner. You know how to handle your finances so it can help you survive the crisis.
Brings clarity to your financial future
Since you are not feeling stressed about your finances despite the crisis, you will naturally feel more in control of the situation. This will help you make decisions about what you want to happen to your financial future.
You see, no matter how bad things are, it has an end. This recession may be bad but it will end sometime in the future. So what you have to do is to think ahead. Make sure when all of this ends, you will be found in a better position. So start making plans now. Don’t let your fear of what’s going on around you paralyze you. When you start making plans now, you can keep moving forward no matter what the situation is.
How to use a financial defense attitude during a crisis
Now that you have a better understanding of what a financial defense attitude is, it’s time to find out how you can apply it right now.
Here are specific tips on how you can act to be more cautious of how to spend your finances to make it more secure.
Fine-tune your remaining budget
Your budget plan is the first thing that you have to look into. Particularly, you want to check your limited budget. The goal is to make sure that you are fully aware of where your finances currently stand. This will help you revise your budget so it has the best chance of helping you survive this crisis.
While a budget plan is very helpful, you need to make sure it’s aligned with your current situation. How much money are you really earning right now? If it’s lower, you have to adjust your budget. You don’t want to be overspending during a crisis.
Prioritize your payables
Once you have scrutinized your budget plan, focus on all your payables. This includes your debts and your monthly bills. You have to rank these according to priority. You want to make sure that the important ones will always have funds. If not, then you need to change how you spend. That way, you can stick to your budget. More importantly, all your priority expenses will not be compromised and will all have funds so you can pay it off.
Create another source of income
While this may not be the typical financial defense attitude, this does make sense during a crisis. So even after you have scrutinized how you spend your money, it’s important for you to look at the income coming in. It will give you more room to improve your financial situation.
How does this relate to the concept of financial defense? When you have more money, you can pay off priority obligations more. For instance, you can aggressively get rid of your credit card debt. You can increase your monthly payments. If you can get out of debt faster, it’s easier to make improvements to your finances despite the crisis.