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As talk about the possibility of a recession heats up, so may your anxiety.
While a downturn is not a foregone conclusion, some experts have recently boosted the odds of a recession happening in the near-term. Citigroup, assessing global economic growth over the next 18 months, sees a 50% probability of a global recession happening, and Goldman Sachs has put the odds of a recession for the U.S. in the next year at 30%.
Others, like UBS, are not convinced one is happening. Either way, just the possibility of a recession occurring is enough to fuel anxiety.
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“When we talk about anxiety, we are talking about uncertainty,” said licensed psychotherapist Bea Arthur, CEO of The Difference, which provides on-demand teletherapy for companies and communities.
“We can’t see how bad a recession will be or if it will come,” she added.
The official definition of anxiety, per the American Psychological Association, is “an emotion characterized by feelings of tension, worried thoughts and physical changes like increased blood pressure.”
That emotion can have a direct impact on your financial life. Those who are anxious or stressed are more likely to engage in costly financial behaviors, including borrowing from high-cost financial services firms and withdrawing cash from retirement accounts, according to a report from the Financial Industry Regulatory Authority Investor Education Foundation and the Global Financial Literacy Excellence Center.
Here are five ways to cope with anxiety before it hurts your mental and financial health, according to psychologists.
1. Narrow your focus
Pay less attention to macroeconomic news and focus more on your particular situation, said financial psychologist and certified financial planner Brad Klontz.
“That will actually save you from about 75% of the stress,” he said.
When you are taking in the news surrounding recession odds or other economic reports, observe them but don’t absorb them, Arthur said. After all, the human brain was designed to only have the capacity to care about those closest to us, she pointed out.
“We are being asked to expand and allow for so many crises, so many stressors to enter our energy field, we have to pull back,” she said. “We have to regain our power.”
2. Meet with a financial advisor
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Since anxiety is really about uncertainty around future events, talking to a financial advisor could ease your mind, said Klontz, an associate professor of practice in financial psychology and behavioral finance at Creighton University Heider College of Business.
Northwestern Mutual’s 2022 Planning & Progress Study bears that out. Some 54% of U.S. adults said they are somewhat or very anxious about their finances, according to the survey, conducted with Harris Poll Feb. 8-17 and based on a sample of nearly 2,500 people.
However, that percentage drops to 46% for people who work with a financial advisor and 47% for those who self-identify as disciplined planners.
3. Do a ‘worst-case scenario’ exercise
This is Klontz’s favorite exercise, which leads you through what would happen in response to a series of events.
Talk about your fears, such as “I’m worried about a recession,” and then ask yourself, “Then what would happen?” Continue on from there, so if the answer to the first question was “I may lose my job,” ask yourself “Then what would happen?” Keep running all the scenarios from there, Klontz said.
“The worst-case scenario exercise is like jumping off an emotional cliff,” he said. “When you run through the scenarios, it is not life-threatening and it is not as bad as they fear it would be.”
On the other hand, the stress that can do real damage.
“Financial stress can kill you but it is rare that our financial situation is life-threatening,” Klontz said.
4. Take a moment
It may sound trite, but taking a moment to pause and take a few deep breaths can really help, according to Klontz.
“When we become emotionally flooded, we become rationally challenged,” he explained. “The key is to calm down your emotional brain before you make any decisions.”
That can stop you from making bad financial decisions, like panic-selling stocks when the market goes down.
5. Expand your frame of reference
When the market sells off and the chart for the week makes it look like it fell off a cliff, that’s a narrow frame of reference, Klontz said. However, as a long-term investor, you want an expanded frame of reference. When you do that, the cliff actually looks more like a pothole, he explained.
“Stretch it out 10 years, 15 years,” Klontz said. “It is a steady climb up a mountain, with a couple potholes along the way.”
Also remember that people are typically invested in more than one asset class, so when you see the market dropping, know that your diversified portfolio may not be sinking as deeply.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.