I see many people worrying themselves sick over this economic crisis. Their worry is jeopardizing their health and happiness. They can’t sleep or eat (or they eat and sleep too much). They’ve stopped exercising. They aren’t taking care of themselves and their relationships. If their worry were a positive force for change, that would be one thing, but when I talk to most of these people, I find out that they’re worrying about the wrong things and it’s getting them nowhere.
They’re worrying about the bailouts, or the stock market tanking, or whether their employer is about to go belly up or not. It’s not that these things aren’t worth worrying about. They are concerning, no doubt. However, they are things you cannot control. The things you should worry about, if you must worry about something, are the things you can control and act upon. Directing your energy into things you can change is a course of action that ends in results. Worrying over things you cannot change ends in illness and stress that cannot ever be resolved and will ultimately make you sick. During this time of economic trouble, what can you control/fix/change (in other words, what is worth your time and energy to worry about) and what do you need to let go as out of your control?
What you can control: Your spending. During this time of uncertainty, you can control how much you spend. You can cut back on eating out and unnecessary purchases. Christmas doesn’t have to be a big deal this year. You can look for better deals on the items you need and eliminate things you don’t need like cable TV. You can hold off on renovations, delay vacations, and repair/refurbish items to make them last longer. Most major expenses can be deferred until you feel more comfortable. If you’re feeling vulnerable, spending less is likely to make you feel better about your situation because you know you’re looking out for yourself and freeing up cash for the things you need.
What you can’t control: The government’s spending. The government is spending itself into a hole and who knows how long it will take us, the taxpayers, and our kids and grandkids to pay it all off. Unfortunately, there is nothing we can do to stop it. You can vote for the people you think are likely to best handle the situation and you can complain to those who are doing the spending, but on the whole there is nothing you can do about it. Worrying about the national debt won’t help you because it is beyond your control. Worry about your own spending and hope the government doesn’t botch it to badly.
What you can control: Your investment strategy. You can control how much and where you invest in the stock market. You determine how much risk you’re willing to take during volatile times. You can choose safer areas for your money if you’re worried about your current allocations. You can sit down with a qualified financial adviser and ask questions and work together to determine the best way for you to invest right now. Or, if you’re really squeamish, you can get out altogether and move your money out of the market (although I don’t recommend it because once you sell, you’ve realized a loss that, so far, is only on paper). You decide what to do with your money.
What you can’t control: The stock market’s ups and downs. If the market is in free fall, you can’t change it. If it’s a good day, you can’t change that either, but you can enjoy it. One of my coworkers admitted to checking the market over 200 times per day. That’s nuts, especially for a guy who’s not in the financial sector, and it’s no wonder that he could make coffee nervous at this point. If the downs worry you, don’t check your balances because you can’t do anything about it. All you can do is ride it out and take whatever corrective actions you need to on your portfolio.
What you can control: Your debt. If you have no debt, now is not the time to incur some. If you have debt (particularly variable rate debt like credit cards), now is the time to pay it down as fast as you can to free up cash for other things and to dodge the rate increases that will surely come. Do whatever you can to avoid taking on more debt right now. You can control the amount of debt you have and how you deal with it. You can take action to pay it down quickly and get it off your balance sheet. The less debt you have, the more cash you’ll have available in the event of a job loss or other problem and the better you’ll sleep at night.
What you can’t control: Interest rates. The reason it’s so important to get rid of the debt is because you can’t control interest rates. Credit card lenders are jacking rates sky high at the tiniest whiff of a problem on your part. And in some cases they don’t even have to sense a problem, they just want to make more money. Equity lines and mortgages that are adjustable rate may go up, as well. The higher the rate, the higher your monthly payment becomes. In some cases it may become more than you can pay. You can’t control the rate, so you’d better control the debt and get out from under it as fast as you can.
What you can control: Your credit score. You can control your credit score. You can pay down debt, pay your bills on time, have erroneous information removed from your credit report, and use the credit you have wisely in order to boost your score. A good score is critical to obtaining a loan at a favorable rate. With lenders cracking down on lending practices, a good score is going to be essential if you want to get a home or car loan in the near future. If your score needs work, do all that you can to boost that score before you go seeking a loan. You’ll increase your chances of obtaining the credit you need.
What you can’t control: The availability or unavailability of credit. You can’t control whether credit is easy or difficult to get. You cannot control the banks and force them to give you a loan if they aren’t lending. There’s no use staying up at night wondering whether or not you’ll be able to get that car or home loan you want. All you can do is work on your credit score so that you are as attractive as possible to banks.
What you can control: Your status as a valuable, contributing employee. You can control your status as a valuable, innovative, contributing employee at your workplace. You can come to work on time, not take unnecessary leave, be attentive and helpful, come up with new ideas, learn new skills, work overtime, become a specialist in something, make more sales, bring in more clients, and generally increase your usefulness to the company. Become someone that is difficult to replace. If layoffs are necessary, companies tend to trim the dead weight first. By making yourself more valuable, you’ll increase you chances of surviving or at least delaying a layoff. It’s no guarantee, but being proactive is better than waiting idly for the axe to fall. If you are laid off, everything you’ve done and learned at your employer becomes a skill set you can sell to a new employer so the more you learn and do, the more impressive you will be to someone else if that becomes necessary.
If you’re really worried about a layoff, you can control your preparation for that moment, too. Get your resume ready and start networking. Practice interviewing. Get a feeling for where you might start looking for a job if it becomes necessary. Save up some cash to tide you over. If the layoff comes, you’ll be miles ahead of those who didn’t prepare ahead of time.
What you can’t control: Your employer’s future and the job market. Chances are you are not in a position to control whether or not your employer will still be here next year, or whether they will need to institute a round of layoffs. You cannot control the market for its products to ensure that your company has plenty of work. You cannot hope to hide in order to avoid being laid off. You cannot keep your entire industry from tanking and making a job hunt difficult. The only thing you can do is to make yourself versatile and valuable and have your resume polished and ready to go if/when the need arises.
What you can control: The amount you save. You can control how much money you are funneling into your savings. You can choose to forego some unnecessary things in order to boost your savings rate. The larger your savings, the easier it will be to weather any job losses, inflation, and emergencies. If you lie awake at night worrying about not having enough money should you lose your job, get control of your savings and start plowing all your extra money in there in case that rainy day comes.
What you can’t control: The interest you earn. Sadly, you can save all you want and not be rewarded for it. Interest rates are plummeting and it stinks to be a saver right now. You can’t control the amount of interest you earn so you might as well adjust to the fact that, for a while, you might as well be content with just the principal. But even if you’re only earning a tiny bit of interest, having that emergency fund is better than having nothing at all when you really need it.
What you can control: Your mortgage and the upkeep of your home. You are in control of your home. If you have a mortgage you cannot afford, sell the house or rent it out. If refinancing to a fixed mortgage will put you in a better place, look into it. If you are having temporary problems making the payment, don’t hide from the lender. Talk to them and see if you can work a deal. Foreclosure is not a given. There are things you can do to prevent it, but you can’t hide and hope it will go away.
If you aren’t having problems with your mortgage but worry about the value of your home, keep up with the maintenance and make any necessary improvements. Make sure it has nice curb appeal. If you do need to sell, a clean, well-maintained, appealing home will sell faster than a neglected heap. You might not get as much money as you would have a few years ago, but you’ll get more than if you’re pushing a problem property. If you don’t need to sell, enjoy your nice property and wait for prices to stabilize.
What you can’t control: The value of your home. You can’t control home values. Chances are, you’ve lost some value in your home over the last year. There’s nothing you can do about it, even if you are now upside down on the home. If you need to sell, you’ll have to settle for less than you would have gotten before and you might have to get creative to unload the property. If you don’t need to sell, it’s not really a problem because the home’s value is only on paper. You might not have any equity to cash out, but that’s a bad idea anyway right now (see debt, above). All you can do if you have to sell is ask a fair/low price and keep your home in great condition so it stands out from the pack. The market is beyond your control.
What you can control: That you are saving for retirement. You can control how much you put away for retirement. Whether you use a 401K, SEP, IRA or another tax-advantaged plan, you can contribute a bit each week or month to ensure that you have money when you quit working. If you worry about how you will get by in your old age, the answer is to start saving immediately. The sooner you start, the more you can rack up. You can control where you save, how much you save and how you allocate those savings. Taking control of your retirement means that you won’t be at the mercy of the government or family members to see you through your old age.
What you can’t control: Social Security or a pension. You cannot control whether or not Social Security will be around when you need it. Even if you are currently eligible for a pension, you can’t control whether it will be available (or in what form) in your retirement. Employers are eliminating or changing pension benefits regularly so who knows what you might get. The only one you can count on for retirement money is yourself. You might get something from another program, but since you can’t control it it’s best not to count on it.
What you can control: Your income. If you need more money, you can earn more. You can take a second or third job, begin an entrepreneurial activity, send a spouse back to work, or sell some of your junk. Your income is not fixed. There are always ways to make extra money, you just have to apply the effort to find and begin them. It may mean that you are busier than you’d like to be, but if you are having serious money troubles, additional income is a sure solution and one that’s within your control.
What you can’t control: Prices. You can’ control inflation. You can’t control that food is more expensive, that gas prices are rising, or that the cost of heating your home is through the roof. Worrying about rising prices isn’t productive because you can’t stop it. All you can do is earn or save the money necessary to compensate for price increases.
What you can control: Your health and well-being. To a large degree, you can control your own health and mental well-being. You can eat right, sleep enough, and get some exercise. You can get regular checkups and preventative care. You can reduce stress and stop worrying about things that have no solution. You can take action to improve your situation so you aren’t so worried and run down. A healthy mind and body can better withstand trying times than a sick one, so do all you can to keep yourself healthy.
What you can’t control: The health and well-being of everyone else. You might find yourself worrying over the well-being of friends, family, or neighbors during this crisis. You may worry about their financial stability, or their ability to deal with tough times. You may be concerned if you see them wearing down or getting sick. It’s fine to be concerned for them, but you can’t take their problems on yourself. You can’t worry yourself sick about their problems when you have your own to deal with. You can offer support or help if possible, but you can’t fix their problems. Let it go and deal with your own issues.
There are many things that you can control, change, and act upon during this time of economic uncertainty. Yes, the economy may be having problems and things may not be rosy for a while. Yes, there are things you cannot control that will have an impact on you, either now or down the road. Some things are easier to control than others, but all of the items listed above put you in control of your personal financial situation. The more you focus on the things you can control and tune out what you cannot, the happier and healthier you are likely to be. Put your energy into creating the safest financial haven for yourself that you can and then let the rest of it go. If you can’t control it or change it, worrying about it will only make you sick.