“I’m tax exempt, my money’s spent”
It’s not very pleasant, wondering how you will pay for the next meal, let alone keep the house warm.
It is also a distraction from leading a meaningful and purposeful life by making a difference to others. Being “tax-exempt” for the wrong reasons leaves you focussed on your personal circumstance, not on others.
And making a difference to others carries a responsibility. Others will look up to you and need you, so staying financially resilient is essential to avoid becoming “tax-exempt”.
Three tracks of financial resilience
Financial resilience means looking at money from three different but related angles.
1. Practical money
From my previous work, I know that many are ignorant of their basic financial situation. Very few people can accurately state their income, outgoings, assets and liabilities.
Practical money means measuring and managing your cash flow, building reserves, reducing debt and setting and targetting key personal financial ratios – essential spreadsheet work, in other words.
2. Emotional money
Money can trigger powerful emotional reactions, not least fear and greed. Indeed, money is a great spiritual teacher, so it is worth being prepared to open up to what money tells us about ourselves. Unfortunately, however, few people explore and manage their relationships with money.
Without a good relationship with money, money is more likely to control you than vice versa. It is essential, therefore, to recognise and manage the emotions that money generates.
3. Planning money
We plan a lot these days. Work projects, travel, holidays, education, meals and health all get planned to a greater or lesser extent. But unfortunately, money doesn’t usually get the same treatment.
However, financial planning is essential to financial resilience. Good financial planning combines practical and emotional money. It provides the framework to structure your finances to achieve your aspirations, rather than letting your money dictate what you can do with your life.
First steps to financial resilience
To avoid becoming “tax-exempt”, start by working out your monthly, quarterly and annual income and expenses and create a statement of your financial assets and liabilities. Then, think about what these financial statements tell you.
Next, reflect on what drives you financially. Is it fear, greed or something else? Reflect on how your emotions influence your financial decisions and whether they hinder or help your financial resilience.
Finally, create a financial plan that strengthens your financial resilience by building cash reserves and reducing debt. To do so, you will need to widen the gap between income and expenditure, an emotional decision that your relationship with money will drive.
Becoming unintentionally “tax-exempt” leads to stress and self-absorption. In addition, it distracts you from making a difference to others, so focus instead on becoming financially resilient.
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