How to recover from a big financial shock

“These things happen once or twice over a financial lifetime,” says Spencer Betts, a certified financial planner and financial consultant with Bickling Financial Services in Lexington, Massachusetts. “They can be pretty big, even for a relatively well-off person.”

To recover from a financial shock and to protect yourself from the impact of one before it happens, consider these guideposts from financial experts:

Turn to your emergency fund or start one

Betts recommends using an emergency fund as a first line of defense against financial shocks. “The general guideline is to have three to six months of your expenses set aside,” he says, adding that the money can be kept in an interest-bearing account so it continues to grow.

If you don’t yet have an emergency fund, then experiencing a financial shock can provide the motivation to start one as soon as you’re able to do so. Barbara O’Neill, author of “Flipping a Switch: Your Guide to Happiness and Financial Security Later in Life,” recommends participating in a savings challenge such as a 30-day, $100 savings goal or trying to save $1,000 by the end of a year to get started.

“You can get a taste of success now that so much has beat you down. You want to turn things around. Starting by saving small amounts at a time can help,” O’Neill says.

Tailor your savings to type of emergency

Mary Carlson, president of the Financial Behavior Keynote Group, a speaking, consulting and teaching firm, says she encourages clients to separate emergency savings accounts into two categories: A “catastrophic emergency” fund for major events such as job loss and death, and a “life happens” fund for things like house repairs and a larger-than-expected tax bill.

“When we start to label things what they really are, then we know what to use the money for,” Carlson says. Otherwise, she adds, it would be easy to empty out your emergency fund for predictable expenses like car maintenance.

Also see: 11 strategies to help you save on your mortgage

Cut back on unnecessary expenses

Immediately scaling back spending on variable expenses such as restaurant meals and retail purchases can help direct funds to recovering from the financial shock. “You can’t change rent easily, but you can adjust how much you spend on going out to eat, travel, entertainment and clothes,” Betts says.

“If you can’t pay for everything, you’ve got to cover the basic needs first — food, shelter, utilities — then the things that will bring consequences, like your car being repossessed,” O’Neill says.

If you are struggling with those basics and looking for local resources to help, such as food banks, the website 211.org can help you find them.

Related: Consumers are still getting shocked by unexpected medical bills, despite new law

Ask about hardship options

If it’s still tough to pay your bills, Betts recommends calling your lender or service provider. “You aren’t going to be the first person to say, ‘Oh no, I overextended myself, can you do anything to help me with these payment options?’” he says. Companies can sometimes offer payment plans or later due dates for bills.

Carlson says that in some cases, banks and credit unions will work with customers on short-term loans with a 0% or low interest rate to help them get through a challenging period or unexpected expense. “Be proactive and say, ‘Look, I can’t make this work.’ They may have options for you to work out a plan,” she says.

Read: Struggling to pay your medical bills? Be careful if you’re offered a ‘medical credit card.’

Create a timeline and find support

Giving yourself a deadline to get through your financial shock, whether it’s paying off a specific expense or finding a new job, can also make it easier to power through a difficult period, Betts says. “If you have a precise timeline, whether it’s 70 weeks or 13 months, then you can say, ‘OK, I’m counting down the months, the weeks, the days. This isn’t something I have to do forever, but for a short period of time, and then I’ll be done with it,’” he says.

Sharing that goal with friends and family members can open new avenues of support as you try to reduce spending during that period, he adds. “If you’re talking to someone you are comfortable with or who might also be going through a crisis, you can go through it together, and it’s easier,” Betts says.

Also see: So you spent $1,000 on Bad Bunny concert tickets. Here’s how to recover.

Don’t forget mental recovery

Research shows that financial recovery takes time and support, both emotionally and financially. In his collaborative research on the psychological effects of life shocks on financial well-being, Jesse B. Jurgenson, assistant professor in the School of Financial Planning at Texas Tech University, has found that stress can influence how we feel about our financial well-being as much as objective measures like the size of our savings account.

“It may be helpful to focus on the mental health side and remind people going through a financial shock that things are going to get better,” he says. “This is just a temporary hiccup.”

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Kimberly Palmer writes for NerdWallet. Email: [email protected]. Twitter: @kimberlypalmer.