Building Resilience Through Financial Savings and Investments

In this episode of the Less House More Resilience podcast, host Laura Lynch discusses the importance of financial savings and investments as a key component of resilience. She emphasizes that while financial savings are crucial, they are just one aspect of a broader understanding of resilience that includes well-being, adaptability, and community support. The conversation explores how savings can provide security during income loss, contribute to personal well-being, and the associated risks of investing.

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Transcript

Less House More Resilience ... (00:51)
Hey there, welcome to Less House, More Resilience podcast. Laura Lynch here, your host. I am feeling like we should talk about savings and investments. It's been kind of a wild ride the last week or so in terms of the market news. Maybe you don't follow the market news, but things have been kind of interesting.

And so I thought we would talk about savings and investments as one of our dimensions around the resilient wealth wheel. So the resilient wealth wheel is a worksheet that I put together. It's over there at https://www.thetinyhouseadviser.com/resilientwealth there'll be a link, of course, in the show notes, so you can grab that. And we are covering all of these topics, one after another last

time, I talked about living environment. And the concept here with the resilient wealth wheel is the idea that there's all these ways that we can build resilience and our life in this moment in history. They're all tied together, they all compound upon each other and savings and investments is one of those areas. Now, as you might know, I am a certified financial planner.

My firm is a registered investment advisor. So the savings and investments topic is actually how I come to this whole entire framework. is my professional work. And so it is the area where I've had the most say education.

With that said, it's also where I've had the most say, bias and programming in terms of the notion that we create our security through our money. So departing from that, and then looking at all the other domains of our life that create that security and resilience for us has been an eye opening.

journey for me.

I do need to let you know, of course, here at the top that everything I say today is really intended to be big picture and educational. It is not intended to be individual financial planning or individual investment advice. I really only give individual financial planning and investment advice to my individual clients.

There's a lot of fin-fluencers financial influencers out there in the world that are giving you the latest hot takes. And that's definitely not what I'm doing here today. I want to conceptualize with you how it is that our savings and investments are part of our resilience picture. And even if

we focus on all of the other areas in the resilient wealth wheel and don't think about how we might need to put away a little bit of money for a rainy day, we're probably out of balance. Likewise, if we only focus on making sure that we have enough money, as the predominant culture and narrative in our world tells us to do, then we will also

be out of balance. So the whole point of this exploration of resilience is to bring up all of the ways that we actually create adaptability and security and a sure future for ourselves in a world in which we're facing a lot of unknowns and a lot of changes and a lot

of changes that are compounding on other changes. You know all the things that are happening. I don't need to necessarily reiterate them all. But there are changes in the labor market, there are changes in monetary policy, there are changes happening in the climate, there are changes happening in society, there are changes happening in politics, and all of these things are tied together. And so they are creating conditions.

that make it such that we all might feel a little bit uncertain. And therefore we need to focus on figuring out ways that we can create an image of how we take care of ourselves. And this has a lot of different components. One of them, of course, is our savings and investments. Now, if you have any savings and investments in the United States, you are doing pretty good.

because we know from statistics that 30 % of folks would actually have to go into debt in order to take care of a $400 emergency. So we should consider ourselves lucky if we do have a little bit of extra on the side. And we should work towards increasing that little bit on the side if we have the ability to do so. But we should also keep in mind that that's just one component.

to our future security and adaptability. It isn't the only thing.

So if you talk to any financial professional out there, most of them will tell you about your emergency fund that you should have. This emergency fund is really designed to protect you against loss of income or medical or other logistical emergency. It is based on

typically a number of months of income, which is meant to cover your living expenses for a period of time, you can do your own imagining about what an emergency might look like for you. It might not look like what we think of when we think about income loss or natural disaster or medical, it might be something else for you. So figuring out

what it is that might be possible unexpected events, and how you want to save or protect yourself from them is exactly the point of the resilient wealth wheel. This is exactly the point. We just want to figure out what are the unknowns that are possible and how do I construct a picture of how I take care of myself in that world.

Now, savings and investments being something that we hear about a lot in terms of retirement accounts, in terms of how much money you need to retire in terms of how much money you need for an emergency fund. These are all

constructs of the financial services world. And that's not to say that I don't have those constructs too, or that those constructs are wrong. But

Retirement is a moment of voluntary income loss. There are lots of instances of potential involuntary income loss that people face, whether it's from caregiving responsibilities, or healthcare emergencies, or job loss due to AI or employer restructuring, there's a lot of ways that we can be in a position to have less income. And it's not always just voluntary.

And I would suggest that the risks of having one of the other things happen are probably increasing. And so therefore, figuring out ways that you can shift your life to adapt to that situation is important. I talked about last time how our house and perhaps the debt that we have or the house payment that we have contributes to our resilience in times of income loss.

Financial savings and investments tie into all of our areas of resilience because they all tie into each other. So having some extra money on the side can allow us to weather a health crisis, but it can also allow us to invest in our health. It can allow us to buy perhaps the care support that we need in order to be in the best and healthiest position possible, which is really important for being resilient and adaptable.

Our savings and investments can also allow us to develop a new skill or competency or career. It allows us to buy the education or the resources necessary in order to learn something new and become good at something that we might later be able to make money at. It is essentially an investment in our abilities.

Our money also contributes to our relationship and communities. When we think about how money allows us to have another family over for dinner, or money allows us to support local businesses, or money allows us to take time away from work to volunteer at a local organization that we care about, or money allows us to even invest in a small startup in our community.

These are all ways that our money can invest locally in our community that doesn't look like something in a brokerage account.

Our savings and investments also allow us to create some self-sufficiency and redundancy. You cannot put solar on your house to make sure that you have protection from the grid or a cistern behind your house to collect water off of your roof unless you have some cash. This is just true. We have to have money potentially for all of these things unless we have good trade and bartering relationships from our community.

In which case we could perhaps trade a skill or a service in order to get some of these material goods that we need.

I'm sure we'll be covering this more in our community and relationships episode. We need savings investments also to potentially be more adaptable. If we want to pivot and change careers and get retrained and be adaptable to what's going on in the labor market, having some money to cover our basic needs.

is really important.

If we want to be adaptable in order to move to a different part of the country where we feel more aligned or we feel like it's more in itself resilient, this is going to take some savings and investments.

Debt mitigation obviously is impacted by savings and investments. If we have some extra money and we're able to pay off our credit card debt, that allows us to become more resilient because we owe others less and we're not obliged to continue to make payments. And savings and investments can also contribute to our ability to make best use of our natural resources.

and to support the earth in the way that we want to.

It would be hard for all of us to walk away from the money system. I read a book a couple of years ago, The Man Who Went Without Money or The Man Who Quit Money, I think was the name of the book. And it was quite interesting just to listen to how a human being would survive in this monetary system that we live in without participating.

We are all part of these systems. are all part of the monetary system. We're all part of the capitalistic market system. We're all part of the political system. We're all part of our civic discussion. We are all part and we all have an ability to make influence through our participation and that is true with our savings and investments.

If we want to align our money, our savings and investments with what's important to us, we may consider things like banking with more of a local and community bank, we may think about investing in companies that we feel good about. We may think about making sure that we are taking a portion of the money that we would be investing in

⁓ say a publicly traded company and investing in the small businesses in our local community. There are lots of ways that we can consider options. At the end of the day, every dollar that we spend or put somewhere has impact and it has a knockdown effect. And so if we think about our money and the impact that it has, we can

direct our human capital, our time, our attention and our money in ways that perhaps are more productive in the ways that we view our hopes for the future.

Savings and investments also come with their own associated risks. You may have heard the disclaimers around consider the risks of investing. Those risks that they're talking about are generally largely loss of principal or market downturns. And so when we put money somewhere other than in our back pocket,

It has the ability to fluctuate based on what's going on in the market economy. If we put our money only in our back pocket, it has the potential to lose value because things are getting more expensive over time.

And the market economy that we invest in it should be said, goes up and down, and sometimes it goes up and down quite dramatically. And if we look at the longer span of history, and human history, we will see that oftentimes, the market history that we're pointed to as evidence of the past isn't that long.

So we have to be aware that what is going on today may not look like what has gone on since the Great Depression. It may look like something else. And so we should think carefully about where we're putting our money, not only based on our values, but also based

all the ways that we might want to invest in resilience for ourselves.

Everything is a trade-off.

Everything is a trade-off in terms of where you put your money today is an opportunity that you didn't take.

So if we're closely looking at trade-offs, we'll know that when we take our dollars and we shop at one place, that we're not shopping at somewhere else. And likewise, when we take our money and invest it in one place, we may not be investing it in another. And so we have to perhaps consider whether or not we want to invest in

publicly traded companies as an example, versus buying some property or some land or whether we want to invest in property and land versus helping our best friend start up their business and invest in the private markets in that way. There's lots of different trade-offs, but when we say yes to something we say no to something else. And so being aware

that when we say yes to stocking money away in our savings and investments, we're saying no to spending that money on building relationships in our community or building skills or reducing our debt load. As an example, you can only

do so much with the means that we have. And so we just have to think about where we're prioritizing, why we're prioritizing there, and what exactly that is doing for us and for the others that we care about in line with that idea that we want to be creating resilience and building a future for ourselves and those that we care about.

As I mentioned earlier, my background here and the people that I hang out with in my industry can be really overly concentrated or exclusively concentrated.

on this financial savings and investments as our nest egg as our plan for the future. And I just want to call out the notion that when we look at past crises that have happened. Oftentimes, it has been our relationships and our community that have been the things that have taken care of people. And so I don't want us to spend too much

of our human capital, our time, our attention, our resources, our energy focused on making sure that we are saving as much as possible in our savings and investments and forget to put energy in the other areas of our life. And by energy, I also mean our money.

I'm definitely not here to scare us all to death. And I'm definitely not here to make us all feel like the world is so uncertain and that there is no hope for us. I want to make sure that we're being really balanced in thinking about how we are building our future.

and looking at all of the different aspects of our lives that take care of us and not being so solely focused on the one place in the one area that really likes our attention. It really likes to grab us and take us down this road of I need to save save save for my future.

And I definitely think we all need to save for our future if we have the resources to do so. But we also need to be thinking about how the community resources, our physical health, our skills, our flexibility, our debt are all things that impact our ability to deal with what's coming up in front of us. So I hope this was helpful in terms of a big picture.

look at the financial savings and investments. As I said, didn't give any sexy hot takes today on where you should put your money, but just wanted you to have the broader context of thinking through savings and investments as both something that we should add to our plan for resilience, but something that we shouldn't just solely focus on.

And so we'll continue our tour around the resilient wealth wheel. You can grab that worksheet at https://www.thetinyhouseadviser.com/resilientwealth And I look forward to talking some more about these different topics. I have some good guests on the line. So it'll be good to have two way conversations about the ways that other people are thinking through resilience right now.

I hope you're thinking about resilience. Obviously you are thinking about it or you wouldn't be here. And if anything comes up for you that you think would be a great topic to cover, definitely let me know. You can send a text by clicking that button in your podcast player.