Fearing the Financial Future? Here's How You Can Cope
The future may look bleak, but it's not forever.
For anyone who all-too-clearly remembers past financial crashes—and anyone who doesn’t—the current economic crisis may feel like an unknown beast, looming over us all, even while we battle a health crisis, and turning certainties into uncertainties. Will you be able to pay your rent or mortgage next month? Will you still have your job next year? Will your home be worth more when you want to sell it than it is now? Will the local businesses you know and love be open in five years, or 10?
It’s fair to say that the current pandemic and resulting economic crash is unprecedented. The current unemployment rate—14.7 percent as of May 8, according to the U.S. Bureau of Labor Statistics—is the highest seen in the U.S. since the Great Depression, and many experts expect it to continue to rise. Global markets are unstable; investments across the board are losing value.
In short, things don’t look good. But financial experts aren’t without hope.
“We’re in this weird wait-and-see mode,” says Lindsey Bell, chief investment strategist at Ally Invest.
The U.S. government has contributed a significant amount of money to supporting residents and businesses through the shutdown, Bell says, and experts are still assessing how the various forms of economic aid will help or hurt the economy overall. Still, the level of government support we’re seeing now is unprecedented, says Nikki Stokes, ChFC, a Northwestern Mutual managing director based in Tampa, Fla., and that could lead to a more positive outcome.
It’s difficult to say what things will look like in the coming months, Bell says, but she does know one thing: “We will come out of this. We’ve always come out. The stock market has always returned.”
Stokes agrees that similar financial crises have arisen in the past, but it’s important to stay focused on the long-term. “If you don’t touch [the money you have invested], it will come back,” she says. “It always does, historically.”
The ambiguity of when this current crisis will end can shake even the hardiest investor, though, and Stokes says that factor may make this crisis feel different than past ones. That ambiguity can lead to fear and uncertainty, which in turn can compel people to make emotional decisions with their money.
The key to riding out this crisis is avoiding those emotional decisions, though. Instead, Bell urges investors (and money-worriers) to be patient, even if it seems like economic conditions are not improving.
“We could see the slow chugging along in the more near-term,” she says. It could be up to companies and individuals to determine how quickly and to what extent things recover, but “we’ll get through,” she says.
In the meantime, stick to what you can control, such as where your money is going. (If you’ve experienced a job or income loss, this is especially important.) “We’re going to see more people pay attention to their finances,” Stokes predicts.
Join the trend by adjusting your budget so that your money (after bills) goes toward the things you most value. Reassess your discretionary spending, pay attention to where your money goes, increase your emergency savings, and tackle other financial efforts that can help create a financial sense of security, Stokes suggests. By setting aside savings to support you through future rough patches and ensuring the money you are spending goes toward items or experiences you really value (or injects money into your local economy), you’ll feel more confident in your household’s ability to ride out whatever economic turbulence is to come.
Panicking over the economy is understandable, but it’s important to remember, again, that economic downturns have happened in the past. Even if aspects of this decline are different—the global economy has shut down all at once, which has never happened before, Bell says—plunges and recessions are nothing new. You may have lost your job or experienced income loss in the last recession and ride this one out fine; the opposite could also be true. Either way, the economy will improve, and the thing to focus on now is outlasting this challenging time as well as you can.
If you’ve lost your job or income, concentrate on the near-term; file for unemployment, seek aid or forgiveness from lenders, utility providers, and landlords, and cut unnecessary spending. When conditions improve, you’ll likely be able to get your job back or find a new one, and then you can focus on your financial goals again.
If your finances have been relatively unaffected but you’re still stricken with worry about the economy as a whole, stay calm, try financial moves you can make during quarantine (think finally figuring out how to freeze your credit), and stay patient. (If you’re struggling to stay positive, these positive quotes could help.)
However you’re feeling, know that it won’t last.
“People think that this time feels so much worse and so much different than the last time,” Bell says. “The reality is that it feels different because it’s been a really long time since you’ve had to feel this way.”