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Hello, my name is Riley Moore. My padlet is about financial crises. I hope you can get a better understanding of what defines a financial crisis, how to get out of them, and many other aspects.

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This website holds lots of information about financial crises. It summarizes what a financial crisis is, what causes this crisis, examples, frequently asked questions, and more basic information for people just learning about financial crises.

I picked this website for a number of reasons. As I said, it covers many of the basic topics of financial crisis. I also put it as the very first post so that people who are viewing this wall can visit this website first and get a basic understanding about what they are going to learn about. As well, it is one of the only websites that educates on what a financial crisis is.

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What Is a Financial Crisis?

In a financial crisis, asset prices see a steep decline in value, businesses and consumers are unable to pay their debts, and financial institutions experience liquidity shortages. A financial crisis is often associated with a panic or a bank run during which investors sell off assets or withdraw money from savings accounts because they fear that the value of those assets will drop if they remain in a financial institution.

Other situations that may be labeled a financial crisis include the bursting of a speculative financial bubble, a stock market crash, a sovereign default, or a currency crisis. A financial crisis may be limited to banks or spread throughout a single economy, the economy of a region, or economies worldwide.

What Causes a Financial Crisis?

A financial crisis may have multiple causes. Generally, a crisis can occur if institutions or assets are overvalued, and can be exacerbated by irrational or herd-like investor behavior. For example, a rapid string of selloffs can result in lower asset prices, prompting individuals to dump assets or make huge savings withdrawals when a bank failure is rumored.

Contributing factors to a financial crisis include systemic failures, unanticipated or uncontrollable human behavior, incentives to take too much risk, regulatory absence or failures, or contagions that amount to a virus-like spread of problems from one institution or country to the next. If left unchecked, a crisis can cause an economy to go into a recession or depression. Even when measures are taken to avert a financial crisis, they can still happen, accelerate, or deepen.

Financial Crisis Examples

Financial crises are not uncommon; they have happened for as long as the world has had currency. Some well-known financial crises include:

Tulip Mania (1637). Though some historians argue that this mania did not have so much impact on the Dutch economy, and therefore shouldn't be considered a financial crisis, it did coincide with an outbreak of bubonic plague which had a significant impact on the country. With this in mind, it is difficult to tell if the crisis was precipitated by over-speculation or by the pandemic.

Credit Crisis of 1772. After a period of rapidly expanding credit, this crisis started in March/April in London. Alexander Fordyce, a partner in a large bank, lost a huge sum shorting shares of the East India Company and fled to France to avoid repayment. Panic led to a run on English banks that left more than 20 large banking houses either bankrupt or stopping payments to depositors and creditors. The crisis quickly spread to much of Europe. Historians draw a line from this crisis to the cause of the Boston Tea Party-unpopular tax legislation in the 13 colonies-and the resulting unrest that gave birth to the American Revolution.

Stock Crash of 1929. This crash, starting on Oct. 24, 1929, saw share prices collapse after a period of wild speculation and borrowing to buy shares. It led to the Great Depression, which was felt worldwide for over a dozen years. Its social impact lasted far longer. One trigger of the crash was a drastic oversupply of commodity crops, which led to a steep decline in prices. A wide range of regulations and market-managing tools were introduced as a result of the crash.

1973 OPEC Oil Crisis. OPEC members started an oil embargo in October 1973 targeting countries that backed Israel in the Yom Kippur War. By the end of the embargo, a barrel of oil stood at $12, up from $3. Given that modern economies depend on oil, the higher prices and uncertainty led to the stock market crash of 1973-74, when a bear market persisted from January 1973 to December 1974 and the Dow Jones Industrial Average lost 45% of its value.

Asian Crisis of 1997-1998. This crisis started in July 1997 with the collapse of the Thai baht. Lacking foreign currency, the Thai government was forced to abandon its U.S. dollar peg and let the baht float. The result was a huge devaluation that spread to much of East Asia, also hitting Japan, as well as a huge rise in debt-to-GDP ratios. In its wake, the crisis led to better financial regulation and supervision.

The 2007-2008 Global Financial Crisis. This financial crisis was the worst economic disaster since the Stock Market Crash of 1929. It started with a subprime mortgage lending crisis in 2007 and expanded into a global banking crisis with the failure of investment bank Lehman Brothers in September 2008. Huge bailouts and other measures meant to limit the spread of the damage failed and the global economy fell into recession.

The Global Financial Crisis

As the most recent and most damaging financial crisis event, the Global Financial Crisis, deserves special attention, as its causes, effects, response, and lessons are most applicable to the current financial system.

Loosened Lending Standards

The crisis was the result of a sequence of events, each with its own trigger and culminating in the near-collapse of the banking system. It has been argued that the seeds of the crisis were sown as far back as the 1970s with the Community Development Act, which required banks to loosen their credit requirements for lower-income consumers, creating a market for subprime mortgages.

The amount of subprime mortgage debt, which was guaranteed by Freddie Mac and Fannie Mae, continued to expand into the early 2000s when the Federal Reserve Board began to cut interest rates drastically to avoid a recession. The combination of loose credit requirements and cheap money spurred a housing boom, which drove speculation, pushing up housing prices and creating a real estate bubble.

Complex Financial Instruments

In the meantime, the investment banks, looking for easy profits in the wake of the dot-com bust and 2001 recession, created collateralized debt obligations (CDOs) from the mortgages purchased on the secondary market. Because subprime mortgages were bundled with prime mortgages, there was no way for investors to understand the risks associated with the product. When the market for CDOs began to heat up, the housing bubble that had been building for several years had finally burst. As housing prices fell, subprime borrowers began to default on loans that were worth more than their homes, accelerating the decline in prices.

Failures Begin, Contagion Spreads

When investors realized the CDOs were worthless due to the toxic debt they represented, they attempted to unload the obligations. However, there was no market for the CDOs. The subsequent cascade of subprime lender failures created liquidity contagion that reached the upper tiers of the banking system. Two major investment banks, Lehman Brothers and Bear Stearns, collapsed under the weight of their exposure to subprime debt, and more than 450 banks failed over the next five years. Several of the major banks were on the brink of failure and were rescued by a taxpayer-funded bailout.

The U.S. Government responded to the Financial Crisis by lowering interest rates to nearly zero, buying back mortgage and government debt, and bailing out some struggling financial institutions. With rates so low, bond yields became far less attractive to investors when compared to stocks. The government response ignited the stock market, which went on a 10-year bull run with the S&P 500 returning 250% over that time. The U.S. housing market recovered in most major cities, and the unemployment rate fell as businesses began to hire and make more investments.

New Regulations

One big upshot of the crisis was the adoption of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a massive piece of financial reform legislation passed by the Obama administration in 2010. Dodd-Frank brought wholesale changes to every aspect of the U.S. financial regulatory environment, which touched every regulatory body and every financial services business. Notably, Dodd-Frank had the following effects:

More comprehensive regulation of financial markets, including more oversight of derivatives, which were brought into exchanges.

Regulatory agencies, which had been numerous and sometimes redundant, were consolidated.

A new body, the Financial Stability Oversight Council, was devised to monitor systemic risk.

Greater investor protections were introduced, including a new consumer protection agency (the Consumer Financial Protection Bureau) and standards for "plain-vanilla" products.

The introduction of processes and tools (such as cash infusions) is meant to help with the winding down of failed financial institutions.

Measures meant to improve standards, accounting, and regulation of credit rating agencies.

Financial Crisis FAQs

What Is a Financial Crisis?

A financial crisis is when financial instruments and assets decrease significantly in value. As a result, businesses have trouble meeting their financial obligations, and financial institutions lack sufficient cash or convertible assets to fund projects and meet immediate needs. Investors lose confidence in the value of their assets and consumers' incomes and assets are compromised, making it difficult for them to pay their debts.

What Causes a Financial Crisis?

A financial crisis can be caused by many factors, maybe too many to name. However, often a financial crisis is caused by overvalued assets, systemic and regulatory failures, and resulting consumer panic, such as a large number of customers withdrawing funds from a bank after learning of the institution's financial troubles.

What Are the Stages of a Financial Crisis?

The financial crisis can be segmented into three stages, beginning with the launch of the crisis. Financial systems fail, generally caused by system and regulatory failures, institutional mismanagement of finances, and more. The next stage involves the breakdown of the financial system, with financial institutions, businesses, and consumers unable to meet obligations. Finally, assets decrease in value, and the overall level of debt increases.

What Was the Cause of the 2008 Financial Crisis?

Although the crisis was attributed to many breakdowns, it was largely due to the bountiful issuance of sub-prime mortgages, which were frequently sold to investors on the secondary market. Bad debt increased as sub-prime mortgagors defaulted on their loans, leaving secondary market investors scrambling. Investment firms, insurance companies, and financial institutions slaughtered by their involvement with these mortgages required government bailouts as they neared insolvency. The bailouts adversely affected the market, sending stocks plummeting. Other markets responded in tow, creating global panic and an unstable market.

What Was the Worst Financial Crisis Ever?

Arguably, the worst financial crisis in the last 90 years was the 2008 Global Financial Crisis, which sent stock markets crashing, financial institutions into ruin, and consumers scrambling.

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In a financial crisis, asset prices see a steep decline in value, businesses and consumers are unable to pay their debts, and financial institutions experience liquidity shortages. A financial crisis is often associated with a panic or a bank run during which investors sell off assets or withdraw money from savings accounts because they fear that the value of those assets will drop if they remain in a financial institution.

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This website holds all of the information to do with the 2008 global financial crisis. It talks about the causes of the crisis, the costs (money-wise and among many other ways), and whether it could happen again. They also back up all of their information with statistics, which makes it easy to look at and understand.

I picked this because I thought it would be good to include examples of financial crises in our society. The 2008 Global crisis is the most recent devastating one, and the lessons that can be learned can be applied more easily as it is modern.

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The 2008 financial crisis was the worst economic disaster since the Great Depression of 1929. It occurred despite the efforts of the Federal Reserve and the U.S. Department of the Treasury. The crisis led to the Great Recession, where housing prices dropped more than the price plunge during the Great Depression. Two years after the recession ended, unemployment was still above 9%. That doesn't count those discouraged workers who had given up looking for a job.﻿ ﻿﻿

Causes of the Crisis

In 2006, housing prices started to fall for the first time in decades.﻿﻿ At first, realtors applauded. They thought the overheated real estate market would return to a more sustainable level. They didn't factor in a number of factors, such as too many homeowners with questionable credit being approved for mortgage loans, even some for 100% or more of the home's value.

Some blamed the Community Reinvestment Act, which pushed banks to make investments in subprime areas. Several studies by the Federal Reserve found it did not increase risky lending.﻿﻿

Others blamed Fannie Mae and Freddie Mac for the entire crisis. To them, the solution is to close or privatize the two agencies. If they were shut down, the housing market would collapse because they guarantee the majority of mortgages.

Two laws deregulated the financial system. They allowed banks to invest in housing-related derivatives. These complicated financial products were so profitable they encouraged banks to lend to ever-riskier borrowers. This instability led to the crisis.

The Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley Act) allowed banks to use deposits to invest in derivatives.﻿﻿ Bank lobbyists said they needed this change to compete with foreign firms. They promised to only invest in low-risk securities to protect their customers.﻿﻿ As banks chased the profitable derivative market, they didn't keep this promise.

The Commodity Futures Modernization Act exempted derivatives from regulatory oversight.﻿﻿ It also overruled any state regulations. Big banks had the resources to manage these complicated derivatives.﻿﻿

Among these products, mortgage-backed securities (MBS) had the most impact on the housing market. The profitability of MBS created more demand for the mortgages they were based upon.

Hedge funds and other financial institutions around the world owned the mortgage-backed securities, but they were also in mutual funds, corporate assets, and pension funds.﻿﻿

Stodgy pension funds bought these risky assets because they thought an insurance product called credit default swaps protected them. Insurance company American Insurance Group (AIG) sold these swaps, and when the derivatives lost value, they didn't have enough cash flow to honor all the swaps.﻿﻿ ﻿﻿

In 2007, banks began to panic once they realized they would have to absorb the losses, and they stopped lending to each other. They didn't want other banks to give them worthless mortgages as collateral, and as a result, interbank borrowing costs, called Libor, rose. The Federal Reserve began pumping liquidity into the banking system via the Term Auction Facility, but that wasn't enough.﻿﻿

Cost of the Crisis

The chart below shows a breakdown of how much the 2008 financial crisis cost.

The 2008 financial crisis timeline began in March 2008, when investors sold off their shares of investment bank Bear Stearns because it had too many of the toxic assets. Bear approached JP Morgan Chase to bail it out, but the Fed had to sweeten the deal with a $30 billion guarantee. The situation on Wall Street deteriorated throughout the summer of 2008.﻿﻿

Congress authorized the Treasury Secretary to take over mortgage companies Fannie Mae and Freddie Mac-which cost it $187 billion at the time. On September 16, 2008, the Fed loaned $85 billion to AIG as a bailout. In October and November, the Fed and Treasury restructured the bailout, bringing the total amount to $182 billion. By 2012, the government made a $22.7 billion profit when the Treasury sold its last AIG shares.﻿﻿ ﻿﻿

On September 17, 2008, the crisis created a run on money market funds where companies parked excess cash to earn interest on it overnight, and banks then used those funds to make short-term loans. During the run, companies moved a record $172 billion out of their money market accounts into even safer Treasury bonds.﻿﻿

Three days later, Treasury Secretary Henry Paulson and Fed Chair Ben Bernanke submitted a $700 billion bailout package to Congress. Their fast response helped stopped the run, but Republicans blocked the bill for two weeks because they didn't want to bail out banks. They only approved the bill on Oct.1, 2008, after global stock markets almost collapsed.﻿﻿ ﻿﻿

Troubled Asset Relief Program

The bailout package never cost taxpayers the full $700 billion. The Treasury disbursed $441.8 billion from the Troubled Asset Relief Program (TARP), and by 2018, it had put $442.7 billion back into the fund, making $900 million in profit. It did this by buying shares of the companies it bailed out when prices were low and wisely selling them when prices were high.

The TARP funds helped in five areas:﻿﻿

$245.1 billion was used to buy bank preferred stocks as a way to give them cash

$79.7 billion bailed out auto companies

$67.8 billion went to the $182 billion bailout of AIG﻿﻿ ﻿﻿

$19.1 billion went to shore up credit markets. The banks repaid $23.6 billion, creating a $4.5 billion profit

The Homeowner Affordability and Stability Plan disbursed $30.1 billion to modify mortgages﻿﻿ ﻿﻿

President Barack Obama didn't use the remaining $700 billion allocated for TARP because he didn't want to bail out any more businesses. Instead, he asked Congress for an economic stimulus package. On February 17, 2009, he signed the American Recovery and Reinvestment Act, which included tax cuts, stimulus checks, and public works spending. By 2011, it put $831 billion directly into the pockets of consumers and small businesses-enough to end the financial crisis by July 2009.﻿﻿ ﻿﻿

How It Could Happen Again

Congress passed the Dodd-Frank Wall Street Reform Act to prevent banks from taking on too much risk. It also allows the Fed to reduce bank size for those that become too big to fail.

Meanwhile, banks keep getting bigger and are pushing to minimize or get rid of even this regulation. The financial crisis of 2008 proved that banks could not regulate themselves. Without government oversight like Dodd-Frank, they could create another global crisis.﻿﻿ ﻿﻿

Securitization, or the bundling and reselling of loans, has spread to more than just housing. To prevent further destabilization, stronger regulations of these derivatives should be considered.﻿﻿

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2008 Financial Crisis Causes, Costs, and Could It Happen Again?

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The 2008 financial crisis was the worst economic disaster since the Great Depression of 1929. It occurred despite the efforts of the Federal Reserve and the U.S. Department of the Treasury. The crisis led to the Great Recession, where housing prices dropped more than the price plunge during the Great Depression.

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This video talks about the 2008 crisis in a quick video. It gives a little bit of history as well. It talks about people attempting to buy houses in the early 2000s, and also how the interest rates grew higher in 2007 and people could not keep up.

I picked this video because it goes along with a website I chose. It holds some different information, and is also a lot easier to listen to and is faster, as it is only a two minute video. This video provides a little bit of history which I feel the websites did not, and I think that is important.

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This video talks about the basics of bankruptcy. They talk about what it is, how it happens, and clear up a lot of myths surrounding it, as well as providing some statistics. Also, they do it in a fun way by providing animations and other visuals.

I picked this video because it goes along with the idea of a personal financial crisis, something I have not talked about much. This video provides lots of useful information about declaring bankruptcy, such as how you must pay to do so, what the different kinds of bankruptcies are, and how you can find out if you are applicable.

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As it says, this website tells you how to prepare for a financial crisis. It provides you with ten different steps you can take. These range from simply budgeting to getting a better credit card deal.

I picked this website because I feel it is very important in learning about financial crises. If you do not learn to prepare for something like this then there could be serious consequences. Not all of these tips are necessarily groundbreaking, but they provide the framework to possibly help you feel more comfortable if this ever did happen. As well, it is organized and nice to look at.

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The thought of being hit with a major negative event that could affect your finances, such as a job loss, an illness, a car accident-or a pandemic-can keep anyone awake at night. However, the prospect of something expensive and beyond your control happening becomes less threatening if you're properly prepared. Here are 10 steps for how to deal with an economic crisis.

Key Takeaways

1. Maximize Your Liquid Savings

Cash accounts, such as checking, savings, and money market accounts-as well as certificates of deposit (CDs) and short-term government investments-will help you the most in a crisis. You'll want to turn to these resources first because their value doesn't fluctuate with market conditions, unlike stocks, index funds, exchange-traded funds (ETFs), and other financial instruments in which you might have invested.

This means you can take your money out at any time without incurring a financial loss. Also, unlike retirement accounts, you won't face early withdrawal penalties or incur tax penalties when you withdraw your money, except for CDs, which usually require you to forfeit some of the interest you've earned if you close them early.

Don't invest in stocks or other higher-risk investments until you have several months' worth of cash in liquid accounts. How many months' worth of cash do you need? It depends on your financial obligations and risk tolerance.

If you have a major obligation, such as a mortgage or a child's ongoing tuition payments, you might want to have more months' worth of expenses saved up than if you're single and renting an apartment. A three-month expense cushion is considered a bare minimum, but some folks like to keep six months or even up to two years' worth of expenses in liquid savings to guard against a long bout of unemployment.

2. Make a Budget

If you don't know exactly how much money you have coming in and going out each month, you won't know how much money you need for your emergency fund. And if you aren't keeping a budget, you also have no idea whether you're currently living below your means or overextending yourself. A budget is not a parent-it can't and won't force you to change your behavior-but it is a useful tool that can help you decide if you're happy with where your money is going and where you stand financially.

3. Prepare to Minimize Your Monthly Bills

You might not have to do it now, but be ready to start cutting out anything that is not a necessity. If you can get your recurring monthly expenses as low as they can be, you'll have less difficulty paying your bills when money is tight.

Start by looking at your budget to see where you might currently be spending more money than necessary. For example, are you paying a monthly fee for your checking account? Explore how to switch to a bank that offers free checking. Are you paying $40 a month for a landline you rarely use? Learn how you might cancel it or switch to a lower rate emergency-only plan. You might find ways you can start cutting your costs now just to save money.

Maybe you're in the habit of letting the heater or air conditioner run when you're not home or leaving lights on in rooms you aren't using. You may be able to trim your utility bills. Now might also be a good time to shop around for lower insurance rates and find out if you can cancel certain types of insurance, such as car insurance, in the event of an emergency. Some insurance companies might give you an extension, so look for the steps involved and be prepared.

4. Closely Manage Your Bills

There's no reason to waste money on late fees or finance charges, yet families do it all the time. During a job loss crisis, you should be extra studious in this area. Simply being organized can save you a lot of money when it comes to your monthly bills. One late credit card payment per month could set you back $300 over the course of a year. It could even get your card canceled at a time when you might need it as a last resort.

Set a date twice a month to review all your accounts, so you don't miss any due dates. Schedule electronic payments or mail checks so that your payment arrives several days before it's due. This way, if a delay occurs, your payment will probably still arrive on time. If you're having trouble keeping track of all your accounts, start compiling a list. When your list is complete, you can use it to make sure you're on top of all your accounts and to see if there are any you can combine or close.

5. Take Stock of Your Non-Cash Assets and Maximize Their Value

Being prepared might include identifying all of your options. Do you have frequent flyer miles you can use if you need to travel? Do you have extra food in your house that you can plan meals around to lower your grocery bills? Do you have any gift cards you can put toward entertainment or sell for cash? Do you have rewards from a credit card that you can convert to gift cards? All these assets can help you lower your monthly expenses, but only if you know what you have and use it wisely. Knowing what you have can also prevent you from buying things you don't need.

6. Pay Down Your Credit Card Debt

If you have credit card debt, the interest charges you're paying every month probably take up a significant portion of your monthly budget. If you make it a point to pay down your credit card debt, you will reduce your monthly financial obligations and put yourself in a position to start building a better nest egg. Getting rid of interest payments frees you to put your money toward more important things.

7. Get a Better Credit Card Deal

If you're currently carrying a balance, it could really help you to transfer that balance to another card with a lower rate. Paying less interest means that you can pay off your total debt faster and/or gain some breathing room in your monthly budget. Just make sure that what you save from the lower interest rate is greater than the balance transfer fee. If you're transferring your balance to a new card with a low introductory annual percentage rate (APR), aim to pay off your balance during the introductory period, before your rate goes up.

It's also worth asking if your current credit card company will lower your monthly interest rate. Sometimes companies will do this to keep you as a customer; it's cheaper for them to keep an existing customer than it is to recruit a new one.

8. Look for Ways to Earn Extra Cash

Everyone has something they can do to earn extra money, whether it's selling possessions you no longer use (either online or in a garage sale), babysitting, chasing credit card and bank account opening bonuses, freelancing, or getting a second job. The money you earn from these activities may seem insignificant compared to what you earn at your primary job, but even small amounts can add up to something meaningful over time. Besides, many of these activities have side benefits: You might end up with a less cluttered house or discover that you enjoy your side job enough to make it your career.

9. Check Your Insurance Coverage

In step three, we recommended shopping around for lower insurance rates. If you're carrying too much insurance-or could be getting the same coverage from another provider for a better price-these are obvious changes you can make to lower your monthly bills.

That being said, having excellent insurance coverage can prevent one crisis from piling on top of another. It's also worth making sure that you have the coverage you really need and not just a bare minimum. This applies to policies you already have, as well as to policies you may need to purchase. A disability insurance policy can be indispensable if you sustain a significant illness or an injury that prevents you from working, and an umbrella policy can provide coverage where your other policies fall short.

10. Keep Up With Routine Maintenance

If you keep the components of your car, home, and physical health in top condition, you can catch problems while they're small and avoid expensive repairs and medical bills later. It's cheaper to have a cavity filled than to get a root canal, easier to replace a couple of pieces of wood than to have your house tented for termites, and better to eat healthy and exercise than end up needing expensive treatments for diabetes or heart disease. You might think you don't have the time or money to deal with these things on a regular basis, but they can create much larger disruptions of your time and finances if you ignore them.

The Bottom Line

Life is unpredictable, but if there's anything you can do to stave off disaster, it's to be prepared and careful. With the right preparation, you can turn a potential financial tragedy into a merely temporary setback.

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10 Ways to Prepare for a Personal Financial Crisis

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The thought of being hit with a major negative event that could affect your finances, such as a job loss, an illness, a car accident-or a pandemic-can keep anyone awake at night. However, the prospect of something expensive and beyond your control happening becomes less threatening if you're properly prepared.

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This website is the first one that talks about personal financial crisis rather than a global crisis. This website specifically is about surviving a personal finance crisis during the pandemic, in about 7 steps. These include setting financial goals and simply understanding the bigger picture.

I picked this website because I wanted to introduce information on personal financial crises as well, as the vast majority of things I find are on global crises. As well, this website educates specifically about the pandemic, which I believe is very applicable right now. A unique piece of information that this website provides is understanding the bigger picture, which not many other websites do.

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The Coronavirus Health Crisis is also rapidly morphing into a Personal Financial Crisis for many people. It is seriously scary out there. We are almost certainly heading for our first economic recession in 29 years.

But a generation of Aussies have no idea what that means. No Australian under the age of 47 has experienced an economic recession as a responsible adult.

Overnight was the biggest one-day fall on the US sharemarket since the Crash of 1987.

In the last month the sharemarket has lost 30 per cent of its value.

That means your superannuation has dropped close to that as well... in a month.

The Reserve Bank is about to cut official interest rates two weeks after the last cut. The Federal Government is set to unveil a second major economic stimulus package...10 days after the last one which hasn't been enough.

We've locked our borders, mass retrenchments are set to follow, and the unemployment rate will skyrocket, as businesses shed staff as the health lockdown throttles sales.

It is time to get prepared.

An economic recession, and the personal financial crisis it triggers, can be so debilitating across your entire being. It can feel as though your whole life is about to come crashing down like a house of cards. It puts enormous pressure on relationships and your ability to function.

You frankly don't wish this on anyone.

So here's my seven-step guide on how to handle a PFC, to survive a Recession and turn things around as quickly as possible.

1. Understand the big picture

Before anything else, draw up a list of all your assets and debts to get a bird's eye view of where you're at financially. Then, build a budget to work out where your money actually goes.

It's simple to do. In one column list your income and in another pull together all of your regular and irregular monthly expenses.

Run a fine-toothed comb through last month's receipts and bank statements to make sure you've listed expenses accurately.

2. Set smart financial goals

If you're in a sticky financial situation, your main goal is probably to get out of it as quickly as possible, which is perfectly reasonable.

But it's not a good financial goal.

A good financial goal has a definite deadline and can be broken down into smaller, more manageable steps

For example, it's much better to say, "I want to get rid of my credit card debt by June, which means I need to repay $150 a week for the next three months."

Or "I need to find $500 a month to live on now."

3. Take control of your spending...

With a budget and some well-defined goals to work towards, it's time to take control.

Think about your spending in terms of wants and needs. Needs are non-negotiable, for example you'll always need to make room in your budget for groceries.

Wants are nice to haves such as gym memberships, new clothes or eating out, and if you're in the midst of a PFC these should be the first things to go.

4. ... And your debts

First, look at whether you can minimise the interest you're paying. For example through a credit card balance transfer or by consolidating multiple debts to reduce the overall interest you pay.

And in this era of intense banking competition look for better deals from the new breed of digital lenders and don't be afraid to negotiate a better interest rate on your existing loans. Ring the bank up and ask for a discount.

Go to www.getcreditscore.com.au , find out your credit score then either go to your bank and get a better deal on consolidating debts into a personal loan or use an alternative like a peer-to-peer lender.

Next, try to channel all of your additional money into making extra repayments, which will save interest and help you pay off the debts faster. On many home loans you redraw those extra payments if you need the cash for an emergency in the future.

(A quick note: Don't be afraid to use your savings to make extra repayments. Money in the bank only earns around one per cent these days, while credit cards or personal loans still charge interest rates in the double digits.)

Finally, if you're having trouble repaying a debt or bill, speak to your lender or biller immediately. They may be willing to negotiate more favourable terms and you could avoid a black mark on your credit report.

5. ... and your insurances

Make sure to do a full review of your insurances, both for your things (think home, contents and car for starters) and for you and your family (life, income protection, health insurance and total and permanent disability).

Never automatically renew a policy. Go to one of the comparison websites like www.iselect.com.au , www.canstar.com.au , or www.comparethemarket.com.au

and see whether you're getting the best deal. If not, ring your provider to see if they'll match the best deal you've found... otherwise switch.

6. Don't go it alone

If you're drowning in debt or simply don't see a way out, there is help available.

Financial counselling is a free service provided by many organisations and is aimed at helping you get back in control of your money.

Contact Financial Counselling Australia ( www.financialcounsellingaustralia.org.au ) to find a counsellor near you.

7. Plan for the next PFC

Hopefully, the steps I've outlined help you take control and get through your PFC (and improve daily financial habits too).

But a PFC could happen again, so make sure you're prepared.

Start setting aside money in an emergency account for the purpose of covering unexpected expenses.

This will ensure you can weather the next PFC if it comes along.

4 things you can do right now to save money:

1. If you can't pay your outstanding credit card balance, transfer the amount to a new credit card offering 0% interest. Remember this 0% interest rate offer will only last for a fixed period (12-24 months) on that transferred balance, but it could give you a financial breather to get through tough times.

Just be careful once the offer ends, or you make new purchases on the card, that the normal interest rate and fees are reasonable.

2. Go to the comparison sites I've listed above and compare your loans and insurances with others in the market. If you find a better deal ask your provider to match it or take your business elsewhere. You can save up to $6,000 a year in repayments by switching from a Big Four bank variable home loan to the lowest rate home loan on the market.

There's a $600 per year premium difference between the highest and lowest priced health insurance policies.

3. Do that household budget now. List expenses, categorise them into essential and non-essential, look what you can cut of the latter.

4. What extra cash can you earn? Is there a casual job you can earn extra bucks... Coles supermarkets, for example, are employing an extra 5000 casuals right now. Do you have talents you can hire out (cooking, music teacher, tutoring, household jobs etc). Have a garage sale and sell your junk for cash.

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Coronavirus and handling your Personal Financial Crisis - Your Money & Your Life

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The Coronavirus Health Crisis is also rapidly morphing into a Personal Financial Crisis for many people. It is seriously scary out there. We are almost certainly heading for our first economic recession in 29 years. But a generation of Aussies have no idea what that means.

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This video shows the economic collapse of Venezuela recently. This country used to be one of the richest countries in South America, but that has changed. Venezuela's inflation rate has increased by over 900%, and this video helps explain why. It also showcases the effect it is having on the citizens of the country.

I picked this video because I wanted to showcase a financial crisis of a whole country. The past websites and videos have mostly been globally, but I think it is interesting to provide a crisis from a single country, to show a different cause. Something that shocked me in this video was that the whole country went downhill simply by electing one man, who made some bad decisions.

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This video asks the question, will a global debt crisis happen soon? The video says it is a good possibility, and that it would not be a bad idea to prepare for it. The average debt per person is increasing every single year. We are currently in a wave of large country debt accumulation, and that historically has never ended well.

I picked this video because it really outlines the possibility of another global crisis. I think some people like to think that our government has everything under control but that is not always the case. This video shows that it is possible. The fact that shocked me was when it showed the last 4 global debt waves and their outcomes, and how we should be coming to the end of this current wave; which is a scary fact.

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Is a global debt crisis coming? | CNBC Explains

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I provided this picture because it shows many of the effects of a finance crisis. This is the crisis in 2008. The government handled it fairly well and had mostly recovered over 2 years.

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I used this as my 2nd image because it shows an extremely simple version of what caused the crisis. These are not necessarily all in order either, but just ways that, put together, led to the downfall of the economy.

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What did I learn that surprised me most?

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What did I learn that surprised me most?

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I think the thing that surprised me most was how close we are to the possibility of another global financial crisis. Looking at the statistics, it would not be surprising if we had a recession in the next couple of years, which is quite scary.

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I think this is relevant and interesting to me because I am at a point in my life where it would not be a bad idea to start looking at loans, whether that be student or mortgage or anything, and who knows how that will go or how the interest rates will be if we are in a global crisis. Another aspect is housing and the prices of that, which I also may be looking into in 5-10 years.

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I would say I would just educate people that it would not be crazy for another crisis to happen sometime soon, so to maybe not make any risky financial decisions as interest rates may go up, etc.