How to deal with a financial shock

In today’s unpredictable world, a financial shock – an unexpected and severe disruption to your financial situation – can strike at any time. And as the cost-of-living crisis continues, more and more Australian’s are at risk of facing a financial event or shock.

In June this year, InfoChoice carried out a ‘State of Aussies’ Savings Survey’ and the results weren’t great. Nearly one third of those surveyed have less than $5,000 in savings, with one in six people having less than $1,000. With household expenses increasing and savings decreasing, a sudden job loss, medical emergency, or worse, could have a significant impact – and not just on your bank account. A financial shock can also take a toll on your mental health.

That’s why we’ve put together some tips on how to manage financial shock, to help you navigate the unexpected; both financially and mentally.

When you experience a financial shock

When something happens that leaves you in financial shock, it can be incredibly overwhelming – especially if there are other things happening as a result of the unexpected event. In fact, money and your finances may not be the first thing you immediately think about.

The first thing we recommend you do is slow down or pause and assess your situation as calmly as possible. Begin by gathering as much financial information as you can, such as bank statements, bills, and any outstanding debt and repayment amounts. By getting a clear view of your financial position, you’ll be equipped to make informed decisions about your money moving forward.

You may also find it helpful to talk through your situation with a trusted relative or friend. Voicing your immediate money concerns with someone else could help you organise your thoughts and feel less overwhelmed by the situation.

Next, adjust your budget and reduce your outgoings where you can. Cancel any recurring memberships or subscriptions that you don’t need, trim down your spending on non-essentials, and create a new budget that covers your necessities only. A new budget will help you stretch your resources and provide a structured approach to managing your finances during this challenging time. Plus, by making changes where you can, you’ll then be in a position to ask for temporary assistance from your bank.

P&N Bank has temporary financial assistance available to customers who are facing financial difficulty and are unable to keep up with loan or credit card repayments. This assistance can include flexibility in meeting your scheduled repayments. Learn more about our financial hardship assistance.

Professional help options

You may also find it beneficial to consult with a financial advisor or counsellor. These professionals can provide you with personalised guidance and help you develop a recovery plan tailored to your specific circumstances. They can also assist with creating a debt repayment strategy, recommend local support services and offer advice on rebuilding your financial health. If you’re facing financial challenges, our financial coaching service could help.

Seeking professional help doesn’t end there though. It may be worthwhile talking to a mental health professional about your situation, especially if you’re feeling anxious, stressed or depressed. They can help you put strategies in place to help you move forward, positively.

If you or someone you know is in crisis, Lifeline WA provides support 24/7, on 13 11 14.

Next steps

Once you’re in a position to put the financial shock behind you, there are a few things you can put in place that will help you tackle any future unexpected financial events.

1. Create an emergency budget
   If you already did this to help overcome the original financial shock, documenting an emergency budget will be simple to do – it will also be easy to put into action at short notice in the future. Prioritise your essential expenses such as housing, utilities, and food, and identify what you’ll be able to cut back or eliminate if needed.
   
   
2. Build an emergency fund
   Once you’re back on track, prioritise building some savings and creating an emergency fund. This stash of cash should cover at least three to six months of living expenses and act as a financial cushion against any future shocks. Start small if necessary, but consistently add to it to enhance your future financial resilience.
   
   
3. Practice financial wellness
   Incorporate practices into your daily life to help prevent future shocks and build your financial wellbeing. Put an everyday budget in place, avoid excessive debt and invest in your financial education. Financial stability hinges on good habits and informed decision-making, not the amount of money you have. To get started with improving your financial knowledge, why not try our free tool, Your Financial Wellness?

Future moves

Financial recovery is an ongoing process. You’ll likely experience ups and downs along your financial journey as you get older and your life changes, so make time to regularly review your money situation. Your budget and savings plans can change to reflect you and your circumstances, so be proactive in making any necessary adjustments when they will help you.
 

Dealing with financial shock can be challenging, but with a proactive approach and the right resources, recovery is possible. Remember, we’re here to support you every step of the way and have tools and resources available to assist. If you have questions about your financial situation, don’t hesitate to get in touch. 

Other useful numbers and helpful resources:

• National Debt Helpline– Call 1800 007 007
• Mob Strong Debt Helpline– Call 1800 808 488
• MoneySmart website
• Way Forward website
• Lifeline WA – Call 13 11 14; Text 0477 13 11 14; Online Chat
• Beyond Blue – Call 1300 22 4636