Financial resilience refers to our capacity to weather and respond to unexpected life events and financial shocks affecting our income and assets.
These could include sudden illness, natural disasters, or job loss - essentially, circumstances that are both unpredictable yet par for the course over a normal lifetime.
In Malaysia, the conversation surrounding this topic often zooms in on retirement savings, and whether we have enough to sustain us for our golden years aand this underscores just how crucial financial resilience is.
The more financially resilient we are, the lesser the impact of a shock, the quicker our recovery, and the lower our vulnerability to disruptions to our longer-term plans.
However there exists a 'resilience deficit', typically due to an insufficient savings buffer, living expenses that go beyond financial means, and a lack of financial planning.
Another factor that widens the financial resilience gap is an absence of protection, either for investments, assets or for the basic necessity of health expenses.
This observation is crucial, as HSBC's research suggests that individuals lacking financial safeguards such as insurance or sufficient savings to sustain themselves financially for six months are less confident in their ability to achieve their various financial goals.
Indeed, in the absence of a safety net, lingering 'what ifs' and worries about potential losses can hinder our ability to make confident financial or life decisions.
There's a strong connection between our financial, physical, and mental realms.
HSBC's study shows that people with high physical wellness are 1.5 times more likely to be financially fit and 9.3 times more likely to have above average mental wellness, while those who are financially fit are 4.3 times more likely to have higher mental wellness.
It stands to reason that improvements in one area can positively impact all, while improvements across all areas compound the positive effects on wellbeing and resilience overall.
Building on these observations, it's clear that there are some straight forward, practical steps that we can take to enhance their financial resilience and, ultimately, boost their confidence in achieving their life objectives.
First, expand our knowledge.
If the world of banking products and financial terms seem overwhelming, dedicating time to learn more about finances can empower ourselves to make informed decisions and stay engaged.
Numerous free resources are available - from dedicated websites to personal finance podcasts and a wealth of books at your local library.
Financial institutions like banks should also offer educational materials to guide you in the right direction.
Second, make a plan.
It doesn't have to be complex, but clarifying our current situation and future goals will help us chart the best path forward and stay on course.
A basic budget can assist in managing our finances effectively.
Additionally, define our short and long-term financial objectives, conduct monthly reviews to align our finances with these goals, and adjust your plan as needed based on income, expenses, and personal changes.
Third, identify gaps in our safety net.
Where are the blind spots? Where do we need protection? If you already have insurance solutions, whether for health, life or property, be proactive about evaluating them against our current circumstances and in line with our long-term goals. Seeking advice from an expert is a good first step.
Fourth, get serious about savings and investments.
Bolster our savings buffer against unforeseen circumstances by establishing an emergency fund to complement other existing safeguards.
And it's never too late to start exploring investment options. Investing can help generate wealth over time and provide a passive income stream. Again, speaking with an expert about next best steps is a good place to start.
As we all lead busy lives, it is important we set aside time to take stock of our financial plans. Building financial resilience is not an overnight process. But the benefits of doing so go beyond the purely financial.
An investment in financial resilience is an investment in overall contentment and quality of life. And we don't need research to tell us that this a goal we all pursue.
*The author is country head of Wealth and Personal Banking, HSBC Malaysia