How to test your finances

First, you should find out how financially vulnerable or secure you are. Start by putting your current finances under the microscope. Most of us know roughly how much cash we have left in our bank accounts at the end of the month, but in reality very few of us physically draw up budgets. 

The first step to testing your financial resilience is to list all your income streams and every monthly cost you can think of, from mortgage payments to your daily coffee, and including less regular outgoings such as your monthly trip to the hairdresser and one-off items such as a new pair of shoes.

Add 5pc to your total spending and then subtract it from your income. That should give you a more realistic estimate of what you actually have left over from your paycheck.

Next, figure out your net wealth. To do this, add up all your debts, then add all your assets, including money saved in bank accounts, investments and any marketable items such as jewellery. Do not include your workplace pensions. 

To get your wealth score, divide your assets by your debts to see how many times your assets cover your liabilities. Your score will determine how vulnerable you are. 

The bigger the score, the better. If the wealth score is less than one, that’s a warning that you might need to make your financial position more secure.

One sign of financial resilience is having an emergency savings pot that can be accessed in case of unforeseen issues. As a rule of thumb, workers should set aside at least six months’ outgoings in a readily-accessible savings account to protect themselves from financial problems if, for example, they lose their job.