Finding your financial zen
The world feels particularly financially frenetic right now. Every day there’s more bad news. You’re constantly reminded that your KiwiSaver has taken a hit, your house is worth less, inflation is rampant, fuel prices are eyewatering, interest rates are rising and the economy is slowing.
Is it any wonder that business and consumer confidence is in the doldrums?
While they say necessity is the mother of invention, stress and panic are seldom the genesis of sound financial decisions.
Sure, they can prompt you to make changes, but they make it harder to have the confidence and clarity to make the right ones.
So, if everything feels overwhelmingly grim and you’re paralysed about what to do next, your first step is to find your financial zen.
That might sound a bit ‘‘woo woo’’, but stick with me.
The idea is to allow you to make decisions from a place of calm.
Clean house
Psychological studies suggest clutter around the home results in higher levels of the stress hormone cortisol, which is likely why creating order can be incredibly cathartic for an anxious mind.
The same concept can be applied to your finances.
If you’re feeling overwhelmed, it’s time to clean your financial house.
Get through that pile of paperwork that’s in the too-hard basket, check when fixed interest rates expire, and diarise them.
Then review likely upcoming big expenses, cancel unused subscriptions, repay the credit card before the end of the month, review your insurances, and make sure you have a will.
Don’t make big decisions, just clear the clutter, and create order.
Determine the worst that can happen
I’m not suggesting you freak yourself out with doomsday scenarios, but rather than letting your mind run you ragged all night long fretting over the ‘‘what ifs’’, put likely scenarios down on paper.
That allows you to determine the chances of that actually eventuating, and crucially, what you could do about it if it did. This is where you can really benefit from a bit of professional guidance.
What would the impact be, can you live with it and what are your options to limit or offset that impact?
Knowing what those options are can help you make peace with them, and knowing you actually have options at all can be calming in itself.
The idea of this exercise is to get you to a place where you can more rationally plan your next step, rather than being reactive in the moment.
Remind yourself: This too shall pass
The conditions that exist right now are but a moment in time. There have been recessions and bear markets and volatility before and eventually they all come to an end.
The important bit is that you’re working to a plan that allows you to, at the very least, hold your line while times are tough, but ideally, position yourself to thrive as conditions improve.
If you don’t have the solace of a long-term financial plan, now is the time to invest some time in creating one.
Work on your habits
Making measurable progress generates momentum, which is a powerful, motivating, and very reassuring force.
Often it doesn’t come easy, especially when conditions are tough, but remember that even small steps count as long as you’re heading in the right direction.
However, often it’s not the conditions but your own actions that are thwarting your progress.
People tend to put the onus entirely on their investment strategy, which is often influenced by factors beyond your control. But your financial behaviour can either undermine or amplify your progress.
So don’t neglect to work on your habits.
Read James Clear’s Atomic Habits. Create systems to help force the desired result, rather than relying on willpower.
Find someone to hold you accountable. It’s harder to be your own handbrake when someone is calling you out on it.
Tune out the noise
It’s important to stay informed, but not every opinion you come across is one that’s worth listening to.
Everywhere you turn there will be someone with a strongly held opinion on what will or won’t happen and what you should or shouldn’t do about it.
If they’re not clairvoyant or an expert, it pays to not put too much store in their predictions.
Tuning out even the loudest naysayer becomes much easier when you’ve created yourself a little bit of financial zen.
This column is informational only and does not constitute individual financial advice.