Most people will experience a financial setback at some point in their lives. But there are some events that can turn your world on its head and force you to start over. That might include job loss, relationship breakdown, illness or injury, or even a natural disaster.
Adjusting to life after a dramatic turn of events can be stressful, and it doesn’t help that the usual bills and expenses don’t stop coming. If you find yourself in this position, there are a few things you can do to help get back on track.
Check your insurance
First things first, it’s worth taking a look at any insurance policies you have that might be able to help. Even if you haven’t taken out a standalone policy, many people have some combination of death cover, total & permanent disability, and income protection insurance through their super.
If the situation calls for it, reach out to your insurance provider so you can start the claims process. Make sure you have all the relevant documents handy and take care when filling out the paperwork to keep delays to a minimum. If your situation is urgent, make sure you explain this to your insurer as they may be able to prioritise your claim.
Take stock of your finances
Next, give your finances a health check by calculating how much money is coming in, how much you have saved up (and can readily access), and how much you expect to spend. If you have an emergency fund, now might be the time to draw on it to help cover your day-to-day expenses. You might also be able to raise cash in a jiffy by selling any unused or unwanted items.
Cut back your spending
While you work your way up to baseline, it can be a good idea to trim back your spending and focus on building up your emergency savings. Pull up your bank statements or banking app for an overview of where your money is going each month, and try to identify the areas where you’re willing to make sacrifices.
It’s by no means a ticket to financial prosperity, but doing things like cancelling unused subscriptions and putting any new clothing purchases on hold can help put you on stronger financial footing and keep you from resorting to debt to get by.
See if support is available
If you have loans or credit card debt and are worried you won’t be able to keep up with your repayments, contact your bank or lender to see if you’re eligible for any hardship provisions. You might find they’re willing to make alternative arrangements to help you ride out this difficult period.
That might involve temporarily reducing or postponing your repayments, extending your loan term so you pay a lower amount each month, or allowing you to switch to interest only payments while you get back on your feet. Just keep in mind that these kinds of repayment adjustments might cost you more interest in the long run.
You can also reach out to your utility providers (electricity, gas, water, phone and internet) to let them know about your situation. Many have assistance programs specifically for people experiencing hardship or crisis.
Keep your wits about you to avoid scams
Vulnerable people are often prime targets for fraudsters, and we can look no further than the scams that crop up in the wake of bushfires or floods for evidence of that. But scammers don’t need pretexts like natural disasters to try to swindle people — they can strike at any time.
Be suspicious of anyone who contacts you out of the blue, especially if they’re promising ‘once-in-a-lifetime’ investment opportunities or claiming you need to act fast to prevent financial loss.
It also pays to remember that cybercriminals can hijack phone numbers to make messages appear to come from legitimate organisations. So if you get an urgent-sounding text from your bank, avoid clicking on any links and call your bank directly (using a number you’ve sourced yourself) to find out if it’s legitimate.
Look into early release of super
Lastly, if your predicament is particularly serious, you can look into accessing your super early. This is allowed in very limited circumstances, including to pay certain expenses on compassionate grounds, as well as terminal illness, incapacity and severe financial hardship.
Applications for early release on compassionate grounds can be made online via the ATO website, or on a paper form where internet access isn’t available. Meanwhile, applications for early release in other circumstances are made directly to your super fund.
While this might seem like a necessary move in the moment, you’ll have to be mindful that payments from your super may be subject to lump sum tax and anything you withdraw now may impact your lifestyle in retirement.
Once you’re confident you’ve put out the financial fires you were facing, you can start to think about goals for your future. As you draw up a plan to achieve them, don’t forget to take care of yourself and take things one step at a time.
