Got Depression and Economic blues? To say you’re not alone would be an understatement. People are radically pulling back on their spending, scared to open their 401k statements, and simply shaking in their boots.
In these hard times, people panic, especially when they don’t understand what exactly is going on.
For the next few weeks I’m going to be writing a series of articles on entrepreneurship during a recession. I’m hoping by the end of the series, you’re going to end up a little wiser, a little calmer, and a lot more aware of the opportunities that exist in down economies. And there are plenty of opportunities.
Before we get into how to succeed in a recession, we first have to get you into the right mindset. That means not panicking, making hasty decisions, and or forgetting to think things through.
So here’s 13 quick tips on how you can hold back your panic and think things through:
1) Open that 401k Statement!
The first step in your quest to hold back the panic is to face reality. Yes, that 401k statement letter on the counter needs to be opened, read, and examined. You need to know your position before you can act. Not knowing will only preoccupy your thoughts. If you can’t do it, get a significant other or close friend to open it and read it to you.
2) Calmly Assess Your Current Assets
Request statements from ALL of your accounts. Assess your investments, loans, and cash on hand. Know how much you pay out each month and what it will do in the next year. Know how much your investments have fallen and how that relates to your cash standing. If you’re not a financial-minded person, bring in a friend who invests to help you sort it out.
3) Understand your Risk Tolerance
This type of market is a true test of your risk tolerance. If you were screaming at 2% drops, how will you react to 40% tumbles? Truly ask yourself if you’re high risk or low risk. Treasury bills, money market accounts, and CDs are all fine investments for your money during these risky times. If you’re a person who can stomach the downturn and enjoys options, futures, and short positions, then that’s fine as well. Know your tolerance, though.
4) Take a look at the Big Picture
This is the big picture. Since the Dow Jones Industrial Average stock index was created, stocks have increased in value over time. Even after the crash, stocks rose again over the long haul. And we have more safeguards than back then to hold back such a fall.
Stocks WILL go back up in value eventually. Forgetting this can kill your money and your sanity.
5) Set a Consistent Budget and Stick to It
Now that you know all about your current money position, budget based on it. Set strict limits on how much you’re willing to spend on electronics, rent, utilities, groceries, dinner, and more.
Mint.com is a great way to manage finances and set budgets automatically. But once you’ve set a budget, stick to it. If you go over on any item, stop spending, period. And always take some time to think before making an “impulse purchase.” That may even mean banning Woot.com from your browser.
6) Decrease your Dependence on Debt. For Good.
I would say this one is an obvious one, but for many people, it really isn’t. Over reliance on credit cards and mortgages has killed our economy, and it will kill your finances if it has not already.
If you don’t remember anything else from this post, that’s fine, so long as you remember this. I pay off my credit card in full each and every month to avoid the fees and debt. That type of behavior will always make sure you don’t spend beyond your means.
Quickly pay off your debt if you have it. Cut spending, take a hit in your cable or your clothes shopping while you drop the debt down. When you don’t have any debt, you have piece of mind. Peace of mind means you aren’t panicking.
7) Prepare/Expand your Emergency Fund
The emergency fund should be a separate, liquid account that can help you through six months of unemployment. Store six months of rent, groceries, and interview expenses in the fun in case things go south for your career. It can be a savings account, money market, whatever you are comfortable with. But make sure that it is a low-risk account and that it is absolutely NEVER touched unless you face a dire financial emergency. Low Christmas shopping funds IS NOT AN EMERGENCY!
Be prepared, so say the Boy Scouts.
8) Have Action Plans Prepared and in Place
What’s the first thing you would do if you were suddenly fired from your job? Where will your emergency funds come from if you are permanently injured in an accident?
People don’t like asking themselves these questions, and they hate planning for these scenarios even more, but it is necessary and it will help you not panic if the time comes. Have a plan for major injury or being fired. Will you move in with your parents? Have you talked to them about this? How about your girlfriend or wife? Do they have resources backed up? Will you finally move to Chicago like you always talked about?
Put this onto paper and keep it in a safe place. Just knowing you have the plan will put you at ease.
9) Do What You Love
What? What the hell are you talking about?! I have rent to pay, a family to raise, and you’re telling me I should quit this shitty job I’m in and try to be an artist?!
Well, not quite, but close.
If you hate your job, you’re looking over your shoulder, worrying about being fired, worrying about not meeting deadlines and quotas, and simply stressed. You’re panicking, but you don’t even know it. And if you are eventually fired, you’re just going to get worse.
Stop the cycle now. There are still plenty of job opportunities for people who are motivated and hard-working. Hell, I’m willing to help you find those opportunities, and so are many other people you may not be reaching out to.
If you’re in a job you love, you simply do better, feel happier, come home more refreshed, and don’t dread work the next day. Even if that just means starting a side project, a new business venture, or writing a novel, then do it!
It may be easier said than done, but it will make you panic less.
10) Remember What’s Important in your Life
Is money or family more important? Your happiness or your job? Only when you put these comparisons into direct terms do the answers seem so clear.
Money is important, but money comes and goes and has limited return. Family, friends, life, and love are once-in-a-lifetime events that have unlimited returns.
Corny, yes. True, even more so during tough times. Rely on what’s important when you’re about to panic.
11) Take up a new Hobby; Try Something Different
There’s a reason that people love the phrase “Variety is the spice of life.”
It’s because it’s true.
You’ll go nuts doing the same tasks every day. And that will bleed into fear, panic, and hesitation. So nip it in the butt now. Take up piano lessons to soothe your mind. Or do some Yoga to enhance the body. Or you can be crazy like me, and try to start a business and write a novel at the same time.
Just take a different path. Take a random drive into the unknown or learn swing dancing. Learning something new, trying something new will put your focus on fun and useful tasks rather than the news.
12) Watch and Read the News Less
Tell me now: How many times have you searched the financial news or watched the Dow Jones charts in the last two weeks?
You’ve been adding to your panic.
Checking once a day to get your news and information is good. It’s good to be informed. But four straight hours of financial meltdown news is not good for your psyche. It will cause you to shiver in fear and become addicted to the news.
So do yourself a favor and just close those news tabs and turn off CNN. Watch House, football, or do what I suggested in #11 and start a new hobby.
Just think about the great things you have in life. Take a look outside, think about how you’ve grown. Then smile and pat yourself on the back.