CULTIVATE YOUR INNER ZEN
It’s hard not to be anxious about your finances now, with a constant barrage of news about one or the other worrisome development in the economy and constant reminders of the personal impact of inflation and falling financial markets every time you fill up at the pump, check out at the grocery store or look at the balance on your 401(k).
That mindset, however, is not only bad for your mental health; it can prompt you to make poor decisions about your money, if clear, long-term thinking gets clouded by the emotions of the moment. “When we are emotionally charged we become rationally challenged and we are wired to do everything wrong when it comes to money,” says financial psychologist Brad Klontz, author of Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health. “Typically our financial situation won’t kill us but chronic financial stress can.”
Hiring still occurs in down markets. People who leave need to be replaced, new projects need to be staffed.
Here are some tips for keeping cool when the financial hysteria around you is threatening to heat up.
Adjust Your Point of View ▸ Instead of focusing on what’s happening now or could happen in the economy and your own financial life over the next few months, develop a longer-term point of view. Take the stock market, for example. Says Klontz, “If you are a long-term investor you just hit a pothole. If you have a short-term view you just fell off of a cliff.”
How do you keep the economic turmoil in perspective? Check the facts. Browning of the Popcorn Finance podcast points out that there have been 12 recessions since 1948. Since the ’90s, the typical downturn has lasted less than a year and the period of economic growth that always follows has lasted roughly eight years on average. Not counting 2022, there have been 14 bear markets since 1947 that range anywhere from one month to over a year and a half. But the growth in the stock market that occurs after a bear market is almost always much greater than the drop itself.
For younger people especially, Browning says, “The money that you’re investing into a 401(k) won’t be needed for decades and then needs to last for decades of retirement. The temporary downturns in the stock market today will have no impact on you in the long run.”
Think Through the Worst-case Scenario ▸ Think of all the bad things that could happen in your life if the economy goes south and how you would handle them, mentally working through possible solutions. If stocks don’t bounce back for a few years and you’re close to retirement, could you work a year or two longer to delay tapping your savings and give your account more time to bounce back? If you’re laid off, where could you trim your budget? If you can’t cut back enough to cover your basic bills, would you have to sell your house and downsize to something smaller or move in temporarily with your parents or in laws?
Klontz says that rather than heightening your anxiety, this “what-if ” exercise helps alleviate it, as you develop a longer-term perspective and are prepared with a workable plan if the bad stuff actually happens. He says, “Typically you will land on a temporary uncomfortable setback but something that is nonlife threatening and that you can bounce back from.”
Tune Out the Noise ▸ Once you’ve taken the steps you can to protect yourself from whatever bad economic developments could hurt you, put your blinders on. Shut off CNBC and Fox Business News for a while, take a walk or read a book to distract yourself the next time the market has a meltdown or the government releases another worrisome stat and avoid checking your 401(k) balance for the next several months at least.
As former stock trader turned “fin-fluencer” Vivian Tu, a.k.a. Your Rich BFF, recently told her 1.6 million followers on Tiktok: “You will hurt your own feelings checking your investments right now. Don’t do it.”
That’s sound advice for anyone right now. Focus on what you can do, not on what you can’t control. And if a recession doesn’t materialize anytime soon, all your preplanning—building your emergency fund and retirement savings, taming your personal inflation rate, shoring up your professional network and developing a long-term perspective—will serve you and your family just as well in the good economic times as in the bad ones.
You will hurt Your own feelings checking Your investments right now. Don’t Do it.