Watching the gyrations in the market this past month makes anyone dizzy. And nervous. After years of long-term rising stock-market values
we are faced with rising inflation and rising interest rates
—a financial situation not seen in 40 years.
No matter how much you worry about your investments, you cannot create a better global financial market. What is one to do? First, take care of yourself, then your finances, then do what you can to help your situation and others.
Take these three steps to improve your financial wellness now:
1. De-stress Yourself: Before you discount this suggest, listen to the science. Why give attention to your mind and de-stress first? Otherwise, the fear takes away our power and limits our clear thinking. Studies have shown that stress impairs decision-making. From Harvard to the National Institutes of Health to MIT, the research shows that humans are poor decision makers under duress.
Our brains are wired to be reactionary under stress. Our tendency to take action when watching the stock market dips will lead to acting with our inherent “fight or flight” response. This is enacted by selling all investments or trying to time the market, neither approach has worked for a sound long-term investing strategy.
Instead, consider lowering your stress. Options include free activities like going for a walk, taking deep breaths, taking a yoga class online, playing with a child or your pet. From a more relaxed place you will be better prepared to improve your decision making.
2. Organize Your Finances: Most people talk about streamlining paperwork and digital statements, whether to prepare for a natural disaster or just to find things on their own quicker. By focusing on what you can improve and doing it now, you develop an outlet for nervous energy and keep you off the constant stock-market monitoring. The bonus? You may just have more money.
After extensive research, Jean Chatzky, author, and journalist, shared in her book, “You Don’t Have to Be Rich,” that 72% of the organized are financially well-off compared with 23% of the unorganized. Your investment in time, despite the financial markets, may lead you to be better financially prepared for everything in life.
Knowing what you have now and where the information can be found is one step. The second is to manage your expenses. There are many moving pieces and creating reminders for open enrollments for insurance and recurring bills will train you to be attentive and not have late fees.
If you need to save some money in these inflationary times, make changes in your spending by decreasing your ongoing expenses. Have three video streaming services? Reduce them to two. Have a monthly coaching service you have not used for months? Cancel it. Have a gym membership? Think twice before canceling that, instead, use it. (See #1)
These steps will help you gain control and understanding of where you are at financially. By taking control of what you can, your action is serving you in the long run, without the focused anxiety of the daily stock market.
3. Be ProActive, Not Responsive: Taking care of the basics in your financial life creates a soft-landing pad when there is financial stress brewing. First, be sure you have cash on hand: Yes, even with rising inflation and low bank interest rates, having cash on hand prevents you from borrowing money. You cannot change the interest rates, but you can stop yourself from paying them. That safety account is more important now than ever to be self-sufficient.
Second, pay off as much debt as possible. If you cut some monthly expenses when organizing, use that cash to pay off debt quicker. The less you owe others, the more flexibility you will have to ride out the gyrations of the market, whether you are living off your investments or planning for retirement. Creating a detailed plan is empowering.
Finally, give to charity. Helping others is still important, especially now. Think you have nothing to give? Charities take donations of as little as $5 or $10. Your payoff may be more than a thank you or tax write-off, you will be increasing your happiness as proven by researchers in Canada and the U.S.
Or consider giving your time. Your generosity will change your brain for the better, according to researchers. So consider giving time and money to a local charity or a national one near and dear to your heart.
Letting go of what you cannot change, like the price of fuel
the stock market, and the interest rates, one can see where they can make changes despite the news cycle and stress in the world.
Remembering to de-stress first and foremost is critical but not always cited in financial education.
Because fear takes away our power and limits our clear thinking, without this step the others will be harder to handle. Do that first and then change what you can. Accept that you cannot fix the whole financial world.
CD Moriarty is a certified financial planner, a columnist for MarketWatch and a personal-finance speaker. She blogs at MoneyPeace.