How to navigate financial emergencies and come back out on top

Estimated reading time
 5 min

Learn all about

• Your options after being made redundant
• How to be prepared for an emergency expense
• What you can do after experiencing a scam
• Why building financial resilience is important

A financial emergency can happen to anyone. While it might feel like things are falling apart when they happen, you can come back stronger than before to weather any financial storm.

Financial emergencies can look different depending on your current income and spending levels, and perhaps most importantly, how much you have in savings as a buffer. For some, it’s when you need to make an unplanned expense (like a medical or vet bill, getting your car fixed, or replacing an appliance) or have a sudden loss of income or money (like being made redundant or losing money to a scam). Basically, you can feel like you’re experiencing a financial emergency any time you need to touch your hard-earned savings or you’re relying on credit.

So, what can you do if you experience a financial emergency?

We’ve got some tips to help you come back better than ever after experiencing different types of financial roadblocks.

How to be prepared for an emergency expense

Whether it’s an unexpected trip to the vet or you need to repair your car after a damage, emergency expenses can happen when you least expect it. Though they can catch you (or anyone) off guard, saving for an emergency fund, which can help cover you for those ‘just in case’ situations can make a world of difference when the unexpected happens.

So how can you plan for an emergency expense? Here are some simple tips to get you started:

• Make a budget and stick to it – you’ll be surprised at how much you can save and put towards your emergency fund.
• Have a dedicated savings account for your emergency buffer to avoid the temptation to dip into your funds and buy something you don’t need. Bonus points if your account has high interest rates!
• Set a goal for your emergency savings. Your goal should be based on what’s realistic for your financial situation, like saving up for $10k or enough to get you by for a few months.

Navigating redundancy

Being made redundant and losing your income can knock the confidence out of anyone. You might be thinking about how to pay for everyday essentials, cover monthly bills, or put your financial goals on hold. But redundancy can also be an opportunity for you to have a fresh start, change careers or take a break from work.

Here’s how you can navigate this major crossroad:

• Make a budget that reflects the new changes to your household’s income. Our 50/30/20 budget planner can help you map out how this change will affect your expenses and savings goals.
• Don’t neglect your debt. It might be easier to sweep it under a rug, but it can quickly snowball if you don’t continue managing it. There are different debt strategies you can adopt to stay on top of things, like starting with the smallest debt and working your way up.
• Refinance your home loan to secure a better rate and deal on your mortgage. The slightest change in your interest rate could help you save big.
• Spend within your means, even if that involves setting a spending cap on your credit and debit cards (or cancelling your credit card altogether if you don’t need it).
• Pause or swap the things you enjoy doing with low- or no-cost alternatives. For example, you can pause your gym membership for a few months and do free, online workouts until you find a new job.

What to do after experiencing a scam

As scams are becoming more sophisticated and harder to identify, it can be easy to think a message from your ‘bank’, ‘mum’, or ‘toll company’ is real. If you’ve fallen for a scam, especially one that affects your finances, it might feel like climbing a mountain to get back on your feet.

While you might not recover all the money you lost in a scam, here’s what you can do to help minimise the damage:

• Cancel any credit cards you have or freeze your accounts so the scammer can’t take any more money. You can contact your bank to do this.
• Talk to a free financial counsellor for advice on how you can manage your finances in wake of a scam.
• Get support for your mental health and wellbeing from IDCare if you need that extra help.
• Report the scam to Scamwatch and the platform the cybercriminal contacted you on to help prevent further scams from happening.
• Consider putting a block on your credit report which can stop any requests for the immediate future.

Building financial resilience

Financial resilience is the key to weathering any financial storm. It’s essentially how you cope when you experience a financial shock and your ability to bounce back from hard times. Plus, financial resilience can help you regain confidence after experiencing something that impacted your money, like being made redundant or having a medical emergency.

Here’s how you can kick-start your journey towards being financially resilient:

• Start saving now. Not tomorrow, not next week or even next month – now. One of the great things about saving is that you can start with as little as a dollar a day or on a schedule that works for your finances, like every fortnight. You can only go up from there!
• Budget now so that when those emergencies happen you can be smart about adapting your spending habits.
• Always check your insurance policies to see if there’s anything you can claim to have some money in your back pocket. For example, your home and contents insurance might cover the costs of damage repairs if your home got flooded.
• Prioritise your financial literacy so you can learn to manage any unexpected situations and, ultimately, improve your financial wellbeing. You can sign up to our six-week Financial Wellbeing Challenge, which will give you tips, advice and challenges to help improve your financial literacy and wellbeing.

Read more about what to do after being scammed