1. Building Financial Resilience
“Start where you are. Use what you have. Do what you can.” – Arthur Ashe
What is financial resilience?
Financial resilience describes the ability to withstand the pressures and shocks of life events in the short term without negatively impacting your long-term financial goals. By building financial resilience to your planning, you create a kind of buffer around you that protects you from going into unmanageable debt, going bankrupt or other disastrous scenarios if the worst should happen. It requires a combination of planning, commitment and financial literacy to ensure that you create and maintain the appropriate buffer.
Since we cannot predict the future, the best way to prepare is to plan for all eventualities. Consider what you would do if you lost your main source of income. Over 25% of all UK households have no savings and that number is rising – how would you afford next month's bills if you have been living paycheck to paycheck? At times like this, a financial buffer of 3 to 6 months worth of household expenses in a designated savings account would be enough to give you the time and space you need to recover from the setback and find a new source of income.
It might sound difficult enough to save even three weeks of expenses, but once you consider that it would be impossible to do so with no income, then that should encourage you to get started! We have prepared some information for you on how to create your financial future, and an important part of that is creating a strong foundation from which to move forward. Added to that, the mental well-being benefits that come with knowing that you are financially protected in the event of an emergency can be life-changing.
What kind of emergency would I need financial resilience for?
We have all had the experience of being met with completely unexpected bills – whether it’s a broken boiler, a flat tyre or a household appliance finally packing in. Some of these bills can be hundreds of pounds, and unless you have savings set aside then that money is coming straight out of your monthly wage. This may mean that you have to delay or even not pay other bills, you might need to cancel some of your subscriptions or drastically cut back your food expenditure.
In situations like this where the unexpected amount is a few hundred pounds, it can be an inconvenience to try and find this money. But now let’s think of the once in five years or once in a decade events that may require even more money such as property damage due to flooding, funeral costs for a death in the family or being made redundant. These expenses can run into tens of thousands of pounds and if you are already living on a tight budget and finding it hard to make ends meet, that level of debt would be devastating.
2. Setting up a Limited Company
One of the first decisions for a new business owner is to decide what regulatory structure is best for your business. Depending on the type of industry you are in, your target clientele and your anticipated turnover, you may have several options available to you.
The most popular and flexible option for a new business owner is likely to be setting up a limited company. There are many advantages to this kind of set-up, and we will cover these in detail below. Even if you are not a business owner, it is useful to understand the benefits of a limited company.
Shares
The creation and distribution of shares is a unique feature of a limited company. It allows for multiple owners and operators of the business and allocates a fair and regulated process for profit sharing, raising investment and founder exits. Don’t let the terminology phase you, shareholder structure is a transparent and easy-to-understand model and will help you organize an internal structure for reporting purposes.
Mark Munnelly can help new business owners identify the most suitable share structure for their business. The quantity, type and issuance of shares can be determined based on the needs of a growing business, and the industry experts at Mark Munnelly can advise you in this area.
