My friend Craig is an architect. A couple of years ago, he took me on a tour of his company’s offices. “The cool thing about this building,” he told me, “is that it’s especially resilient.” I could tell from the way he said it that the word resilient meant something a little different to him than it did to me.

“What do you mean?” I asked.

“In architecture, resilience describes a structure’s ability to return to its original state after a disturbance,” Craig explained. “Say strong winds cause a skyscraper to sway or an earthquake shakes a house. If they’re resilient, those buildings move with the outside forces but then return to normal when things calm down.”

“Ah,” I said. “When I talk about personal finance, I preach resilience.”

“Sure,” he said. “Resilience is a good thing, both in buildings and in people.”

Twelve years ago, when I was still struggling with money, my finances were not resilient. I had no savings, and I was living paycheck to paycheck on $50,000 a year. When even small things went wrong, such as car trouble, I found myself in crisis mode. How would I pay to fix the problem? How could I meet my other financial responsibilities?

When I began to turn things around, one of my first actions was to set aside a small ($500) emergency fund to cope with the unexpected. This idea — promoted by Dave Ramsey and many others — built some resilience into my budget, allowing me to cope with minor crises.

As time passed and my financial situation flourished, my ability to bounce back from unexpected blows improved. This was partly because having more money gave me more options. But it was also partly because I adopted an internal locus of control, accepting responsibility for the things that happened to me in life. Instead of waiting for someone or something else to fix problems, I decided that I would fix them myself.

The National Economy vs. Your Personal Economy

Over the past decade, I’ve come to hate the phrase “in this economy.” After the market crash in 2008, the mass media seemed to adopt the notion that we’re weathering an economic storm that simply will not stop. Even today — despite the fact that most economic indicators are positive — there are tons of articles built on the premise that the average person is being buffeted by forces beyond her control.

I disagree.

Besides, even when the national economy is bad, that doesn’t mean your personal economy has to suffer. For a few years now, I’ve been sharing a metaphor I’ve come to love.

It’s as if each of us is the captain of a ship sailing on the ocean. Sometimes the elements are favorable. Sometimes the seas are stormy. Yes, we can choose to surrender to the whims of the weather, but a smart captain does what he can to prepare for bad weather so that he can steer his ship safely to harbor. In short, the national economy does affect your personal economy, but you can’t control the former while the latter is entirely in your hands.

To make your financial ship resilient, you must adhere to certain fundamentals, such as:

• Building an emergency fund.
• Maintaining adequate insurance.
• Limiting debt.
• Practicing thrift.
• Investing for the future.
• Developing your social capital.

To paraphrase a famous philosopher, a resilient person is in the world but not of the world.

You cannot escape the national economy. You cannot escape the mass media. You cannot escape your friends and family. But that doesn’t mean you have to buy into what everyone else is doing. Most people have fragile personal economies that crumble when times get tough. You should build your personal economy to be flexible and adaptable.

Mind Over Money

It’s also important to remember the psychological side of money management. Much of the Get Rich Slowly philosophy is based on the need for financial resilience, or mind over money.

• When I say that it’s important to spend less than you earn, that’s because a positive cash flow allows you greater flexibility to respond to life situations. If you’re deficit spending, it can be tough to find the funds you need to cope with a crisis — especially if you have no savings. But if you have a personal profit at the end of each month, you have the ability to redirect some of the money temporarily to take care of business.
• I preach that the perfect is the enemy of the good. When you’re obsessed with finding ideal answers, you set yourself up for frustration when you realize there usually isn’t an ideal solution. Plus, perfectionism leads to procrastination and resistance, two natural enemies of resilience.
• Another aspect of resilience is the ability to respond to failure. Resilient people realize that failure is okay. What matters isn’t the mistake, but how you respond to the mistake. To become successful, you must learn to brush failure aside and continue marching toward your goal. (This is almost the definition of resilience!)
• And, of course, there’s my long-time motto at this blog: Do what works for you. Each of us is different. We have different goals, personalities, and experiences. We each need to find the tools and techniques that are effective for our own situations. There’s no one right way to save, invest, pay off debt, or buy a house. When you buy into the idea that there’s just one right answer, you’re subscribing to a fragile mindset. Resilient people are open to the idea of multiple paths to success.

In psychology, adaptability refers to how well a person can adjust himself to changed circumstances. Because we live in a constantly changing universe, your ability and willingness to adapt is a barometer that measures both your ability to thrive and your capacity for happiness.

For a smart money manager, adaptability and resilience are barometers for ongoing success.

Photo credit: “Resilience” by Anne Worner.