With doom and gloom headlines coming out every day about rising interest rates and a likely recession, you’d be forgiven for feeling a little woozy about how this swirl of economic instability will affect you.
The past couple of months have been taxing to say the least – inflation hit a decades-long high of 9.1% in June, the S&P 500 fell into a bear market, and the U.S. economy shrunk for the second quarter in a row, usually a clear sign a recession has hit. The National Bureau of Economic Research still has to officially determine whether this is a recession or not.
Either way, nearly 90% of Americans say they’re anxious about inflation, according to the American Psychiatric Association’s Healthy Minds Monthly Poll.
Financial anxiety is coming from a lot of places, says Nicole Bentley, a licensed therapist at Cityscape Counseling in Chicago.
“Some people are stressed related to current day-to-day expenses, high rent and inflation,” says Bentley. “Others are focused more on the challenging housing market and losing money in their retirement accounts.”
Luckily, there are some things you can do to help if you’re feeling like you might be doom spiraling.
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Recognize forces beyond your control
It’s important to put what’s happening into perspective.
“There is a need to monitor what's happening in the economy, and be aware of that,” says Ed Coambs, a couples therapist specializing in financial therapy based in North Carolina. “But sometimes there are forces that are just out of our control directly.”
That includes the changes in the housing market, inflation, and a possible recession.
“It comes back to ‘what is within our control that we can work on?’”
One of the most helpful things to do, says Bentley, is to accept that.
“Acceptance doesn't mean we like what is happening, it means we understand that it is the current reality, which frees us up to then consider how we can cope with it,” she says. “To practice acceptance is to let go of bargaining or denial perspectives and embrace the current situation for what it is.”
Acknowledge that you’re anxious
Knowing what you can and can’t control is a big part of the battle, says Coambs, and recognizing that you’re struggling with some financial anxiety will allow you to begin to deal with it.
“That awareness often starts that process of asking deeper questions about ‘well, where does that come from?’
Many people who get overly anxious at times like these already struggle with some form of financial stress in their day to day, says Coambs.
“It's trying to help them sort of connect with what they can control and influence around money.”
Take stock of your finances
One of the most helpful tools Coambs uses with his clients is having them organize their finances to understand where they are at.
Try tracking your expenses and spending, and not just imagining how much is coming in and going out.
“Getting that financial clarity is important for knowing ‘where are my resources, what do I have?’
“And for some people, they ultimately recognize they're actually in a better spot than they thought they were,” says Coambs.
And when you lay out your finances you can see what steps you need to take to keep yourself in a good position.
“Cut expenses and work towards saving more where you can,” says Bentley. “These small changes can feel empowering.”
Recognize how anxiety affects you
Acknowledge where you’re feeling your anxiety physically, says Coambs.
“So taking that out of your head and recognizing, feeling that sensation, whether it's tension in your chest, or your neck, or in your shoulders, in your gut – it can show a lot of places in our body,” he says.
Then imagine a time you’ve been successful with your money, when you’ve made good financial decisions and Coambs says more often than not, as you remember your successes, the anxiety will begin to dissipate.
“Because that's another big part of anxiety, it’s often telling people, ‘you're not capable, you're not smart enough, you're not clever enough, you're not good enough’.
“And that in most cases is not true. In most cases, people are far more resourceful than they give themselves credit for. So helping them connect with their resourcefulness is a huge win.”
Don’t make any sudden movements
With rising interest rates, you might feel pressure to buy a house faster, or maybe sell some stocks before they fall even further. But instead, take a step back, says Victor Ricciardi, an instructor in the finance faculty at Tennessee Tech University, who specializes in behavioral finance. He also wrote a book called Financial Behavior.
“We're driven by that emotional response,” says Ricciardi. “And that fear really focuses more on our short term thinking, rather than our long term thinking.”
Stress and anxiety impact your ability to make good decisions, says Ricciardi. He says it’s important to keep the long term in mind during times of uncertainty, and remember your goals and your financial plan of action that hopefully you made during better times with a clear head.
“And a plan of action would say that you want to be rational, you want to have a non-emotional strategy.”
Ricciardi says in many ways that may mean doing nothing but continuing with the plan you already made. If you don’t have a plan, now might be a good time to meet with your adviser and make one.
“Not making decisions in a high emotional time is important.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.