Financial vulnerability, in essence, is determined by a person’s exposure to risk, and the level of resilience they have when it comes to the occurrence of said risk. In practical terms, this occurs when someone puts themselves and their finances at risk, without the stability needed to manage the consequences. Crucially, vulnerability is not static. It can fluctuate gradually over time and often goes ignored where someone is not actively experiencing a challenging financial period.
Anyone can become financially vulnerable. Nearly anything can trigger this vulnerability. Whether it’s a major life event (such as divorce or unemployment) or high amounts of accrued debt, there are a variety of reasons that recovery from financial harm may be more difficult than it has to be.
Unstable financial conditions are undoubtedly one of the leading causes of lowered resilience in the face of these situations. For example, someone with limited savings may have next-to-nothing left over after necessities have been paid for. Others may not even have enough to cover these costs, leading to large amounts of debt. Even where no significant personal risk is posed, external factors can exacerbate these circumstances – such as a rising cost of living, or increased interest rates.
In fact, even a low-level of financial understanding or awareness can make someone financially vulnerable. Insufficient awareness of transactions and balance fluctuations can quickly become a vulnerability where missed payments or overcharges go unnoticed. When unknowingly faced with risks such as these, the event of financial injury can seem all the more overwhelming.
So, while these situations can be challenging for anyone experiencing them, certain groups may have additional personal struggles that influence their ability to manage such. Examples of this may include those with an existing health condition or disability; individuals with an established addiction; or even those with no existing support network to fall back on. Although not a given, these factors can often lead to a sense of inability to control personal or financial circumstances.
One’s capacity to understand the consequences of financial risk, and further, how to manage such, plays a large role in mediating vulnerability. Where additional related expenses have to be factored in, it can be difficult to see the possibility of stability.
Recognising financial vulnerability (whether it be in yourself, or a person you care for), therefore, is not about assigning fault, or poor decision-making. It is about understanding how easily circumstances can change, and how even a strong sense of resilience can be unsettled when risk is not understood or prepared for.
Taking small, achievable steps can help to ease this process. One of the primary ways this can be done is through regular monitoring of spending. This monitoring does not have to be excessive – where awareness becomes obsession can actually factor into vulnerability, particularly where it prevents someone from funding necessities. Weekly or monthly reviews to ensure all transactions are correct can be just as effective.
As for developing greater financial knowledge, this realistically stems from the above. Financial comprehension, for most, does not mean knowledge of each specific term and process – it simply means maintaining an awareness of how your finances change over time, and bringing any issues to light.
Importantly, the task of managing financial risk is not something that has to be done independently. Support can play a crucial role in this process. Whether it be trusted friends and family, a carer, or a professional service, a second opinion can often help to provide clarity and reassurance during these times.
Ultimately, financial vulnerability is not a permanent state, nor does it impact a small majority. By recognising the risk factors, building resilience, and reaching out for help where it’s needed, individuals and those supporting them can better protect against instability, navigating any challenges that arise.
If you, or someone you know, could benefit from additional financial support, don’t hesitate to get in touch. For further guidance, you can call us on 0161 791 3064, or email info@moneycarer.org.uk. We’re here to help.