How long will our collective financial instability last? Do you have enough money to get through it? Stress! Financial anxiety threatens your foundation - your survival. Feelings of helplessness increase with rising debt. You may obsessively worry, lose sleep, or self-medicate with alcohol or drugs.America's financial distress has been palpable since 2008, qualifying it as chronic stress for those affected.
Even if you aren't personally suffering you probably know others who are. And it's the negative consequences of chronic stress that should concern you. Some will physically suffer, which happened after 9/11 as reported by Tony Barboza of the LA Times (January 8, 2008).
After the 9/11 attacks UC Irvine tracked fifteen hundred people over three years. Researchers found a 53% increase in heart problems, including high blood pressure and stroke, in the following three years. Chronic worriers were the most at risk and three to four times more likely to report doctor-diagnosed heart problems two to three years after the attacks. (Do you chronically worry about economic ruin?) To manage financial anxiety:
- Protect your well-being. If you've lost income and have extra time on your hands along with looking for new work do health-enhancing activities like exercising, spending more time with your family or volunteering versus channel surfing with a beer in your hand and depressed thoughts rumbling around your brain.
- Identify what's within and beyond your control regarding your stressors.
Concerning the state of the world economy and your place in it what's:
- Beyond your control?
- the direction and duration of the financial pain, including the stock market;
- your employer's and everyone else's response to it;
- job losses;
- Within your control?
- your reaction to the above including your spending and savings habits, how aggressively (or not) you look for income, how you spend newly found time;
- reaction to a probable increased workload if you still have your job;
- worrying and its resulting stress symptoms like insomnia;
Put your energy into problem-solving what's within your control and coping with what's beyond.
Take control of your internal world
For survival reasons, the unoccupied human mind drifts to the negative, often to what's beyond your control. Rein it in by staying engaged and challenging stressful thinking, which facilitates problem-solving.
For instance, I've personally checked our monthly investment statements throughout the financial freefall but set a limit that if I started losing sleep over it (worrying) I'd stop. Wall Street is beyond my control so why obsess about it? What's within my control is to establish a stop-loss for our investments. So I weekly track our holdings and if any fall by 10% we'll sell.
Challenge anger/fear-based thinking that lead to stress
Anger and fear are Mother Nature's survival emotions intended to motivate you to take positive action to solve whatever is triggering them. Regarding what you worry about, what positive action should you take? Like worrying about paying the mortgage: talk to your bank, get financial advice, check out assistance programs, etc. Also:
- Challenge catastrophizing words like, "always, never, no one, everyone":
- E.g., "I'll never get out of this financial hole!"
- Challenge your use of "never" by finding evidence that it's an exaggeration. Have you "never" resolved big challenges? Be careful as your perceptions become your reality.
- Pessimistic thinking suggests that your present financial situation:
- Will never end versus it's a temporary setback;
- Is affecting every aspect of your life including your family and professional life, not just your financial life;
- completely your fault;
- Pessimism can be more realistic than optimism, however, it depresses, therefore stresses you, thus inhibiting problem-solving. Challenge pessimistic interpretations.
- "I'll never get out of this hole. I'm such a loser."
- Will you really go to your grave in this same financial state?
- "I'm such a loser," suggests that you're a loser in finances and in life in general. Instead, remind yourself of your varied life successes.
- Affirm how you need to be: Consistently replace rigid and pessimistic thinking with affirmations stating how you need to be to restore financial health.
- "I'm frugal, financially responsible, and patient in getting out of debt."
- Worry efficiently: stop fussing over what's beyond your control.
- Challenge stressful thoughts:
- Thought stopping: repeat to yourself, "Stop!" until you successfully stop the undesired thoughts.
- Replace with affirmations, thoughts that carry you toward your positive goal. E.g., for finding additional income think, "I'm finding financial opportunities." Habitually replacing stressful thoughts with affirmations, over time, increases your control while directing your mind to look for (and find) opportunities.
- Focus on the lessons to learn to avoid such monetary stress in the future.
The economy will do what it's going to do. It's beyond your control. How you handle it is within your control. Even though these ideas change nothing in the tangible world, they change your internal world, which determines how you handle the situation, therefore its possibilities, positive and negative.
Get your financial house in order
Do any of these spending habits identified by LaToya Irby cause you burdensome debt?
- Spend more than you make so you use savings, home equity, or make minimum payments on credit cards. As an ongoing pattern it'll dig an increasingly deeper debt hole making it difficult to escape.
- Use credit cards for everyday purchases, which facilitates the first habit. My husband and I do this for frequent flier miles but we pay off our balance monthly, a good habit since 1986. If you don't pay yours off monthly consider using cash only for weekly purchases like groceries and gas. It's less convenient but helps stick to your budget.
- Shopaholism: disarm this habit by leaving credit cards at home and carry only as much cash as you can truthfully afford to spend. To buy something costing $200 when you're carrying only $60 you'd have to return home to get your credit card then all the way back to buy it, leaving you plenty of time to rethink the acquisition. Or postpone some purchases and sleep on them.
- Use new credit cards to pay off old ones, which shuffles debt around, incurring more expenses each time you do it. Don't be fooled, transferring a balance from one credit card to another involves transaction fees, leaving you worse off than before you began.
- Spend money you don't have, which is the essence of the previous habits. The obvious solution is to create and live by a budget that your income can handle.
Live within a budget
How do you presently spend money? For four months fill out a monthly spending record and list every cent you spend:
Track where your money goes the first month. Also:
- Study your spending habits;
- Where can you decrease expenses?
- Where are you spending more than you expected?
- Identify and avoid what keeps you overspending;
For additional months, create and stay on a budget that honors your priorities. Next, compare your expenses to your income. If necessary, to live within your income, debt restructuring can typically be arranged by talking to your creditors (before you miss payments preferably.)
Your income minus your essential expenses is what you have left to divide among your creditors. Call them. It's better than filing for bankruptcy, which 2005 legislation made more difficult. You don't have to be 100% disciplined. Debtors Anonymous recommends that you not totally deprive yourself. Monthly, set aside a small amount of money, within your new budget, for special things for yourself and family.
Last year the average American household's credit card balance was over $16,000 at an 18% interest rate! Racking up credit card debt is the most common way to get into a financial pickle. Charging is painless. Paying the bill is painful. The best strategy for getting back to financial security is to pay off your debt. Also:
- The bottom line rule: spend less than you earn (duh!).
- Consolidate high credit card debt.
- Distinguish between what you want and what you need. You may need a cup of coffee but you want a latte. Buy the regular coffee and put the difference into a kitty to pay off credit cards. Avoid buying what you want to afford what you need.
- Don't buy anything to feel good because shortly after buying it you'll habituate to it and it'll stop bringing you pleasure. Prove this to yourself. What have you bought that you just had to have at the time that you now barely notice?
- Sell things you haven't used for a year, and put the proceeds toward credit card debt.
- Find ways to make more money.
- Refinance mortgage, car and other loans at a lower rate. Read the fine print and know what you're getting into.
- Find less expensive insurance; lower your telephone and cable bills.
- Drive older cars.
- Give up unnecessary purchases to save $100 a month, or whatever you can afford. As soon as possible, increase the amount you save monthly. Teach your children to start this early and to understand the power of compound interest.
- Don't buy something simply because it's on sale.
- Don't spend money because you have it.
- Get involved with an inexpensive hobby or volunteering to avoid the boredom that can fuel impulse buying.
- Shop with coupons (www.coupons.com), Entertainment books, and buy things you "need" when they're on sale.
- Buy generic and off-brand products that you're satisfied with.
- Be valuable at work by being easy to work with and keeping your skills current. Volunteer for jobs, especially ones that no one else wants.
- Get educated on budgeting and saving.
- Realign your expectations to match present day reality:
- Price your home to sell if you're under pressure;
- If you need a job take any vs. waiting for one that's commensurate to the one you lost;
Create an emergency fund
Recently, Americans' annual savings rate was .4%, versus Germany's 10.4% and France's 12.8%, leaving many Americans financially vulnerable. One bright light from this financial meltdown is that we're now saving more. Lower your stress by creating an emergency fund. Set aside enough cash to cover three to six months of expenses.
For monthly expenses of $4000 that equals $12,000 to $24,000, a lot of money. Difficult as this is, it's worth it because of the freedom it subsidizes. For example, if you hate your job but feel powerless to leave because of financial limitations, having this cash gives you options. To successfully create an emergency fund you must:
- Save money regularly like a bill that you must pay.
- Use it only for emergencies.
To get started:
- Pay off all credit cards and never carry a balance again since they charge a minimum of 18% interest, while savings pay only 3%.
- Saving $12,000 could take years so start by putting aside at least $1,000 as a cushion to help break your dependence on credit cards. Use it versus credit to cover unexpected expenses.
- Save extra money. E.g., Put any pay raise into savings versus spend it. Once you've paid off monthly bills in full, put that money into your savings account.
- Get started saving something soon, no matter how little it is.
Set a goal of financial health
There are only two ways to have more money:
- Earn more
- Spend less
What are you willing to give up to increase savings? How can you earn more? Perhaps this meltdown will ultimately be good for us by returning us to spending less than we make. In the meantime, learn from your mistakes and prepare for the next inevitable slump. Get into financial shape and watch your stress melt away.
Brief Bio of Jacquelyn Ferguson, M.S.
In 1976, after returning from 2 years in the Peace Corps in Colombia, South America, Jackie earned her Master's degree in Community Counseling/Psychology from her home state of Minnesota. She then worked for several years as a Program Director at a mental health center.
In 1982 she founded InterAction Associates, her management development, coaching and training firm. For over 25 years Jackie has designed and presented keynotes and workshops on stress management, diversity, customer-service and communication skills.
Her mission is to inspire you to live a conscious life of personal responsibility in your relations with yourself and others, which she weaves into every presentation to help you "wake up" to your responsibility in making your desired changes.
Literally hundreds-of-thousands of people throughout North America, the United Kingdom, Australia and points in between have benefitted from her programs. Look for her recently published book, Let Your Body Win: Stress Management Plain & Simple, at www.letyourbodywin.com. Jackie is also a Professional & Stress Coach helping people achieve more success with less stress.You can request her weekly emailed column, Stress for Success, published in a Gannett Newspaper.