Tips to cope with recession anxiety

Source: CNBC

The Big Takeaway: With talk of a recession potentially on its way, stress levels are at an all-time high. In this article, financial and behavioral experts offer five different strategies to help you cope with some of the recession anxiety before you take any actions that could hurt your long-term financial health.

The Details:

Nobody likes feeling uncertain. We always like to know exactly what’s coming so we can determine the best course of action. But this is life, so that’s not always (or even often) the case. When we don’t know what’s coming, like when there’s talk of a recession looming, it leads to increased levels of stress and anxiety.

Anxiety can have a direct effect on your physical and mental well-being. Not only does it increase your blood pressure and create feelings of tension, dread, and worry, it can also adversely impact your decision-making abilities.

If you’re anxious about a potential recession, you might be more likely to withdraw cash from your retirement account or take out a high-cost loan to serve as a buffer — both of which would adversely impact your financial future.

When it gets scary in the markets, we seek to cut through our emotions and focus on what we know to be true. Learn the 6 Reasons Erik Garcia, CFP®, BFA & Xavier Angel, CFP®, ChFC, CLTC  Stay Invested Even When It’s Scary Out There.

According to financial and behavioral experts, here are five strategies you can use to cope with recession anxiety before it impacts your financial or mental health:

Narrow your focus

Recession is a big word. It’s broad, sweeping strokes that impact entire countries, and that can be scary. But if you focus more on your individual situation instead of the macroeconomics (even if you didn’t know that was what you were doing) you can save about 75% of the stress, according to financial psychologist Brad Klontz. Observe the recession news but don’t absorb it. Think more in terms of your situation rather than the entire country or other large population.

Meet with a financial advisor

Uncertainty about future events is the main cause of anxiety. By meeting with a financial advisor, you can learn healthy methods to prepare for a potential recession and take away some of that uncertainty.

Perform a “worst-case scenario” exercise

Think about the worst possible thing that could happen and consider what you would do about it. Then, keep digging deeper. For example, imagine a recession does hit. What would happen? If you say “I’d lose my investment savings,” follow up by asking again “then what would happen.” Keep going until you consider all the potential scenarios. It might be an emotional rollercoaster, but by the end, the uncertainty wouldn’t feel so bad because you’re prepared for everything.

Take a moment

A few deep breaths can do wonders for your emotional state. Anxiety is an emotional experience, and that can hurt your ability to make rational decisions. If you take a minute to relax, calm down, and reduce negative emotions, it could prevent you from making poor financial decisions, like withdrawing money from your retirement fund.

Expand your frame of reference

It’s never fun to watch your stocks drop, but it’s important to remember that bear markets happen. In the grand scheme, you’re still climbing. When you expand your frame of reference to 10 or 15 years, that “steep drop” you thought you saw looks more like a tiny blip. This can help to ease your anxiety and prevent panic selling.

In this episode of the Stuff About Money podcast, Erik Garcia, CFP® and Xavier Angel, CFP®, ChFC, CLTC, discuss with Dr. John Grable, Ph.D., CFP®, of the Financial Planning Performance Labat the University of Georgia, what risk is and how to manage it.

You can learn about your current financial wellness with this quick quiz.