We conduct the first study of the dynamic process of household financial hardship, distinguishing seven forms of hardship, and accommodating complexity of hardship trajectory and state transitions. Using data from the annual Household, Income and Labour Dynamics in Australia (HILDA) Survey covering the period 2001–2022, we employ a multi-level competing risks survival framework to study the landing/entry, recurrence/transition/path, spell duration, and exit of financial hardship. The results reveal that inability to pay bills is the primary gateway into hardship, accounting for 49.6% of the first hardship episodes. Public housing is the dominant risk factor, followed by property ownership with mortgage, private renting, being a female and having death or family member in jail. We document substantial path dependence: households experiencing initial hardship have 51.7% probability of having hardship the following year, which is 160% higher than that of the other households. Exit rates decline sharply with hardship accumulation as the first-hardship entries account for 61.95% of total hardship counts while the third and the fourth entries account for 9.97% and 4.31%, respectively. These results underscore the importance of early intervention in reducing hardship length and severity. We contribute to household finance and poverty research and highlights why early and timely intervention is likely to be more effective than policy responses focused on entrenched hardship.