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How to Be Financially Resilient

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How to be Financially Resilient

You may have heard the term “financial resilience” before. It’s, quite simply, the ability to withstand life events that put a dent in your income or assets—things that can happen to anyone any time, like job loss, natural disasters, an illness or accident, a serious change in the market.

We try to be resilient in all areas of life, of course. Psychologists ponder why some people are more resilient than others; is it a trait that comes from nature or from nurture?

But when I’m talking to clients about their approach to their personal finances, it becomes pretty clear that those who have the ability to bounce back quickly from a money problem are able to do so because somewhere along the way they’ve become resilient.

All of our money habits are learned, mostly through childhood messages and experiences. But as grownups we’re still perfectly capable of learning new habits that serve us better.

I thought I’d ask an expert about how to be resilient. So I spoke with Robert Goldmann, a brilliant Harvard Business School alumnus and business and life coach for business owners, professionals and executives. His book Act from Choice can show all of us how to develop habits that serve us better.

It’s no accident that when we sat down to talk, the conversation was less about money per se and more about the general human ability to recover from traumas large and small. It is, after all, completely disquieting to have a financial setback. Here is what he told me:

Michael Kay: What is resilience?

Robert Goldmann: Technically, the term seems to be used mostly to discuss the ability to bounce back or overcome — to get beyond the influence of past trauma, so that you can make decisions and act in the ways you would have absent the experience.

Kay: Where does resilience come from?

Goldmann: Here’s something to ponder. Is there a meaningful conceptual distinction between having little resilience and being a pessimist, versus having a lot of resilience and being an optimist?

We’re shaped by genetics and experience. It’s not about character.

There’s no reason to think that resilience is formed any differently from many other personality traits or emotional styles. Genes influence both of those sets of dispositions.

Those dispositions may influence how we react to life experiences from trauma—which can come from a lot of varied sources, from serving in combat to not being popular in pre-school to growing up in an angry household.

Kay: Why is resilience important?

Goldmann:  When speaking about resilience, we’re asking if a person burdened by the emotional effects of the past, to the point of being less than fully objective or functional, can get past those effects.

Can they erase the effects of the trauma or insult when making choices about how to be in each moment? To the extent one is unable to see clearly, they are not in the appropriate mindset to react in their best long-term interests when they’re confronted with certain situations, due to their emotional reaction to something that happened in the past.

The results can be devastating—anger, aggression, drug seeking, habitual cowardice, self-aggression. Bad choices. Destructive behavior. The list is endless, unfortunately.

Kay: How do we build resilience?

Goldmann: I suspect that there is no way to build resilience; rather, you succeed by managing the lack of it.

For example, research shows that the brain never forgets past trauma. What happens is that the frontal cortex learns that things that trigger your reactivity do so because of associations with past trauma. That means the triggers in themselves are innocent.

In therapy, the prefrontal cortex realizes the trigger is not dangerous. That part of the brain reaches into the amygdala, the part that triggers the emotional reaction, and turns it off. So far, so good.

But other characteristics of the original trauma that stimulate the reaction, if unlearned, will continue to be stimulated, and the emotionality will be stimulated. For those who have a short but long-acting fuse, leading them to be hyper-reactive, the Act from Choice Method will help them become more aware of their distorting emotions, so they can try to overcome them.

Kay: How can we increase our awareness and ability?

Goldmann:  First, there has to be motivation. You have to realize that your reactivity tends to be high, and your short-term resilience low. You have to  be motivated to work with the situation to avoid the consequences of what you do in these situations.

If you are motivated enough to manage these situations, you train a Sentinel, as I describe it in the book. It’s a sort of alarm that you develop in your brain to make you aware when you’re in the danger zone of being emotionally reactive.

A plan is necessary. In this case, the most important part of such a plan is to be ready with delaying tactics. These are ways to keep yourself from responding until you are out of the reactive phase. The Resource Companion that accompanies Act from Choice has a list of delaying tactics a person might  consider, as well as ways to enhance your motivation in the moment and boost your willpower.

Motivation, training to be self-aware, and having a plan of action—all of these are essential to learning to manage resilience.

While Goldmann argues that the resilience trait is developed at birth, he firmly believes in the ability to build resilience through practice and therapies. With knowledge and practice, we can build and strengthen our resilience over time.

Related: 5 Powerful Financial Planning Strategies To End the Year

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