The Emotional Benefits of Strong Money Management
Dear Readers: Even in the best of times, money concerns can cause a lot of stress. But according to a recent survey by the National Foundation for Financial Education, nearly 9 in 10 Americans say that COVID-19 is making money a primary cause of anxiety. Add to that the need to juggle working from home, child care, home schooling and health concerns and people are being stretched to the limit.
Understandably, people are worried about their financial future. Equally understandably, they often don't feel like they have the energy to deal with it. But as overwhelming as it can seem, there are strategies to help you cope and stay calm. As I wrote recently, you may have to think differently to get through these times, but there are ways to do it. And it starts with awareness.
Be Aware of What You Can Control
No matter how uncertain you may feel, there are some financial things you can still control. That in itself will help ease your stress. For instance, to a certain extent, you can control your spending. That may mean you have to rethink your budget, but it's in your hands. You can also control the way you prioritize your bills. It may require you to do some negotiating, but it's possible. And you can control how much you save, even if you have to redirect some of your savings to more pressing financial needs for a while.
If you're an investor, while you can't control the markets, you can control the way you respond to market events. Trying to time the market is rarely a good strategy, and bailing out at the wrong time can be a costly mistake. So don't. Rather than overreacting to current volatility, thoughtfully rebalance based on your own goals and timeline.
Smart rebalancing means systematically selling investments that have increased in value and buying those that have decreased in value. In short, rebalancing can help you limit risk by selling high and buying low.
In all these areas, you're still in charge. Try to focus on what you can do proactively rather than reactively.
Understand How Anxiety Affects Financial Decisions
Studies have shown that anxiety has an adverse effect on almost all our financial decisions. Stress can make us spend more, save less and rack up credit card debt. Kind of like stress eating, we think spending will make us feel better. Saving, however, can provide you with peace of mind that you can better handle unexpected expenses, adapt to changes in income or take advantage of new opportunities. The best way to feel better right now might be to put unnecessary purchases on hold and save more.
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