Essential Conversations When Your Financial Reality Has Changed

A financial shock can lead to the departure of normal financial behaviors, experiences, and expectations. Financial shocks are out-of-the-ordinary expenses and unexpected events that can harm your finances. Job losses, cutbacks, and other work-related events that disrupt your income security, as well as emergency repairs (and the like), are described as financial shocks. These shocks can last a few weeks, or months, and the repercussions can be long-lasting. A financial shock can easily become a seismic event and cause fundamental shifts in your well-being. A curb on holiday gift giving, celebrations, discretionary spending, and footing the bill are examples of once normal activities that will likely require change when financial shocks occur. How we manage and adapt to such changes sets the stage for our recovery from a financial shock.

There are practical first steps and considerations to explore when things change financially. Sometimes a pause, a moment, some peace - is first needed to acknowledge that the unexpected has happened. As most of our human decisions are based on emotion, you may need to address strong feelings surrounding the thing that has happened. Being open to finding support in trusted allies such as a spouse/partner friend or professional counselor can be a lifegiving and refreshing step towards bearing the brunt of what’s to follow. In short, your mental and emotional well-being may be more at risk at the onset of a financial shock. Pausing and finding support will allow you to find clarity and purpose in your next action steps and plans.

Financially, the shift to operating on a bare-bones budgeting system may need to be immediately implemented. This means performing a spending inspection, altering or canceling certain services, and reducing expenses to the bare minimum. Additionally, reach out to creditors to discuss your accounts, understand your repayment terms, and any graces that may be allowed. Keep track of your actions and any required steps you must complete to necessitate any changes.

Personal changes due to financial restructuring must also be addressed. This could be adjusting to a new daily routine. Have a plan to get enough rest, wake up and pursue the day with intention and a sense of urgency. Contending with the new realities of a loss or reduced income or new expenses requires fortitude of the mind. Making plans with an accountability partner will help keep you on task. 

What to tell others about your new situation may or may not feel necessary. If you have made voluntary financial commitments you may need to skim back on executing those until certainty about your financial stability returns. Holiday gifts, travel, vacations, and other discretionary expenses should be evaluated from both a financial and well-being perspective. You will need an objective voice to navigate through parts of this process. Here are some thoughtful questions that can help, add to this list as needed:

• What can I afford? 
• What are the consequences if I step back from this commitment?
• Can I give or contribute in a different way and preserve my cash?
• How else can I celebrate in a meaningful way and what are my true values?
• How can I embrace my community to help me during this season?

You may need to openly practice having these conversations, particularly if they are a sore point for you. You will need to acknowledge any shame you feel and find a way to move beyond what you feel others may think. Scripting out your language for what could be a difficult conversation can help you stick to the main talking points, trim unnecessary details and move on to the next hurdle you have to face. Make a list of people you need to speak with about your new financial reality and how that changes your immediate reality and near future:

• Partners and spouses
• Children
• Other family and relatives
• Close connections

Setting clear boundaries and limits is essential to protect yourself, your family, and your future. 

Our Financial Guide team is here to serve your employees and help them navigate the inevitable financial shocks that will happen throughout their lifetime.