Preparing for the next Black Swan event
Written and accurate as at: Jul 20, 2020 Current Stats & Facts
In the Whitsunday’s there have been several over recent years including cyclones, unprecedented shark attacks and now the worldwide COVID-19 pandemic. Historically these things aren’t really that rare, think the huge rise in the Australian dollar 10 years ago, the cyclical mining booms and busts and Ansett’s collapse 20 years ago.
The big question is ‘what should we do about them?’
Many take the easy option and say you can’t do anything and the government will and should always be there to bail us out. The more prudent accept that whilst government may assist in extreme cases, Black Swan events are more regular than that and can strike individual businesses and families at any time. This means we need to take responsibility for our families and employees security.
The solution is to build some resilience, the ability to deal with things because you have thought about what to do when they eventually happen. This resilience comes from having a plan in place and building up some financial resilience which then provides the bedrock for your personal, internal or emotional resilience. It’s a simple fact that in our society we need money to survive, building a veggie patch and a chook pen will only get you so far.
Financial resilience in business or family life means building an accessible cash buffer of 2 to 4 months of expenses. Building a surplus into your regular income less expenses can be hard. In its simplest form this involves either increasing income or decreasing spending for a period of time, until the reserves build up to your goal amount of 2 to 4 months of expenses. Having this cash reserve tucked away in a smart place means you can get by if the unexpected happens.
Financial and emotional resilience also comes from knowing what your financial future looks like. If we’re unsure if we’ll achieve important future goals like education or retirement, sub consciously it’s hard to relax and enjoy the journey. Understanding where we’re heading financially and then assessing the options and our ability to make any changes necessary is what good financial planning is all about.
Once your situation has returned to something more normal, if you’d like help mapping out a financial plan to build resilience and certainty about your future give us a call.
For a free consultation with local people who understand the complexities of these or any other financial matter, contact Eclipse Financial Services on 1300 857 359 today or visit www.eclipsefs.com
We’ll even shout the coffee!
