Global financial markets had some people worried on Monday. The S&P 500 fell 3%, sending markets around the world lower. For some, it was a source of anxiety. Whether the day raised your blood pressure or not, few of us are immune to financial stress. It can come in the form of economic news, but it can also come in the form of personal events like job loss or natural disasters.
So where do you turn when something shakes your financial confidence? Let’s look at 12 great options for boosting your confidence when something goes wrong and you need a confidence boost.
1. Understanding Behavioral Finance
When it comes to money, our brains aren’t wired to make good decisions. Fear and greed are strong emotions that tend to take over during times of financial stress, but often they’re not the right emotions to make good financial choices.
Understanding behavioral finance can help you understand the role emotions play in making good financial decisions. Here are some resources to help you learn:
Article: Behavioral Finance: 16 Simple Ways to Use Your Brain Smarter
Books: The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happinessby Morgan Housel
Podcast: Morgan Housel – The Psychology of Money
Podcast: Annie Duke – Thinking About Betting – Poker, Decision Making and Behavioral Finance
Article: The Behavioral Finance Revolution: How Daniel Kahneman Redefined Personal Financial Decision-Making
2. Long-term perspective
Things happen in life. You have good days and bad days. Your finances go through gains and losses. But if you make good decisions, your life and your money will usually move in the “right” direction.
So when it comes to money, it’s important to remember that if you’ve lost something like 3% of your portfolio, you shouldn’t sell and lock in your losses. Markets always recover and are very likely to continue to recover within a period of time.
If you’re worried about short-term losses, we recommend revisiting your projected net worth over the long term. Use the NewRetirement Planner to consider your future net worth in a downturn, rather than your current numbers.
3. Act out your worst fears
Acting out your worst fears when you feel stressed is a psychological technique often referred to as “emotional fear.” Exposure therapy or Defensive PessimismThis strategy involves imagining the worst possible outcome of the situation and then mentally confronting it.
The NewRetirement Planner allows you to predict your worst fears for your current financial situation. By modeling various “what if” scenarios, you can forecast your worst future.
This is useful because it allows you to:
- Confront the source of stress
- Recognize that the worst case scenario is likely to be okay in the long run.
- When you start looking for solutions to the causes of your anxiety, you shift your focus from stress to proactive problem solving.
4. Understand the difference between financial stress and financial problems
There is stress and there are problems. These are two distinct categories, and sometimes stress is a reaction to a problem that doesn’t exist. I saw this meme this week that made me laugh. It’s a good reminder to understand the root causes of stress.
5. Financial Advisor
We happen to Joe Kuhn (one of our favorite retirement gurus on YouTube) was discussing this very subject on Tuesday, the day after the most dramatic market turmoil of the week, and we were discussing that fear, and he mentioned that he thinks having a financial advisor on-hand is a smart way to deal with financial stress.
For now, this summer’s drop seems short-lived, less severe, and more bearable. But are you prepared for a two-year slump? We haven’t seen a prolonged market downturn in a long time, but it is possible, and you need to be prepared to make good financial decisions during prolonged periods of stress.
Ideally, you’ll have someone you trust to answer your questions when things start to go wrong. Kuhn isn’t the only one who recommends having someone you can turn to when emotions get involved. Author Morgan Housel also recommends having an advisor who can help you make difficult decisions when emotions get involved.
Sure, financial advice can be expensive, and with tools like the New Retirement Planner, index funds, and a good knowledge of personal finance, it may seem increasingly unnecessary to some, but it’s definitely worth having access to a financial professional at any time. Valuable During a financially stressful time.
A financial advisor needs to be someone who understands your financial situation and can act as a sounding board to help you make rational choices when you are stressed and upset.
Have you considered professional financial advice from NewRetirement Advisors?
NewRetirement Advisors offers affordable plans: Choose from a fee-only, one-time agreement, on-demand guidance, and an ongoing relationship where your advisor will help you develop a long-term financial strategy and provide support whenever you need it.
To learn more, set up a free discovery session with a NewRetirement CERTIFIED FINANCIAL PLANNER® professional.
6. Friends or family
Getting opinions from people you trust can broaden your perspective and help prevent poor decisions.
More importantly, friends and family can help you absorb the stress you’re experiencing. Even if they don’t offer differing opinions, simply explaining what’s bothering you can quiet the noise that might be leading you astray. Speaking the problem out loud can help guide you to the right answer.
7. Facebook. Yes, Facebook.
Look, I agree that in general you should never believe most of what you read on social media. But, NewRetirement Facebook Group It has proven to be a pretty good source of information. This is a private group and they try to limit spam. Asking a question here is likely to yield a variety of interesting answers from knowledgeable and helpful people.
On Monday, Steve Chen, founder of NewRetirement, posted:
There were 67 reasonable responses that may be helpful to anyone feeling stressed by falling prices.
8. Read! Learn! Read books! Rely on books!
Where do you turn when you’re stressed? Turn to people wiser than you! And the best source of wisdom may be books. Click here to see a big list of our favorite books on retirement, personal finance, and aging that may help you in times of financial stress.
And here’s some wisdom on why reading and learning are such great stress relievers.
“To acquire the habit of reading is to build for oneself a refuge from almost all the miseries of life.” – W. Somerset Maugham
“An investment in knowledge pays the best interest.” –Benjamin Franklin
“Education is the key that unlocks the golden door to freedom.” –George Washington Carver
“A book is a garden, an orchard, a storehouse, a party, a chance companion, an adviser, a multitude of advisers.” – Charles Baudelaire
“Books are a unique form of magic that you can carry with you.” -Stephen King On Writing: A Memoir of the Craft
“Reading any good book is like having a conversation with the greatest minds of the past centuries.” – René Descartes
9. Personal Finance Club
We’re hearing more and more about people joining personal finance clubs — groups of people who meet regularly to discuss the details of their financial situation and get advice from their peers on what to do — and there are plenty of in-person groups and online clubs that meet over Zoom.
We think this is a great idea and a great way to feel supported during times of financial stress.
The club formed organically, NewRetirement Facebook Groupshared among friends, and by moderators.
10. You
Yes, please bear with me for a moment.
Talking to ourselves may not be very comforting. We tend to be pretty hard on ourselves.
But if you talk to yourself as if you were giving advice to a friend, you’ll probably get a better perspective on your problem.
11. Acknowledge and name your feelings.
Labeling an emotion activates the prefrontal cortex of the brain, which is involved in reasoning and decision-making, and calms the amygdala, the emotion center of the brain. This process Influencing labelingNaming your emotions helps you to create a sense of distance from your emotions, making it easier for you to understand, process, and respond to them in a more balanced way. Naming your emotions helps you to take control of them, rather than being controlled by them.
Confidence isn’t the absence of doubt, but the ability to forge ahead despite doubt. True confidence means acknowledging doubt and uncertainty while trusting in your skills, judgment, and resilience to overcome obstacles. It’s believing in your ability to overcome obstacles, even when the road ahead isn’t completely clear.
12. Document your plan and follow it
Whether it’s a plan you maintain within the NewRetirement Planner, a printed report you receive from your financial advisor, an Investment Policy Statement, or your own asset allocation strategy, having a plan, understanding why it’s your plan, and following it is one of the best ways to stay on track and keep emotions from undermining your long-term financial security.
