If you’ve been keeping up with the market in 2022, you know it’s been anything but calm and tranquil. The stock market is dropping as fast as inflation is rising, a deadly combination for many Americans’ wallets. But what exactly can you do about it?
“There’s no question that the current state of the economy is causing a lot of stress and anxiety for people,” Tali Raphaely, the President and Managing Member of Armour Settlement Services, LLC reflected. “Inflation is on the rise, the stock market is volatile, and many people are worried about their financial future. However, it’s important to remember that these economic conditions are beyond our control. What we can control is how we choose to react to them.”
In this article, we’ll dive into the best coping mechanisms, tips, and tricks to deal with the current economic state.
The Current Market and Inflation Rates
Currently, the stock market is in a bear market. But what exactly does that mean? A bear market is one where assets are steadily declining. The opposite is a bull market, where assets are rising in value. We were in a bull market the last couple years, but since the beginning of 2022, most stocks have been depreciating in value and we have entered a bear market.
At the same time, inflation is rising faster than it has over the past 50 years. This means the money in your bank is also depreciating in value. When the money in your bank and your stock portfolio is decreasing in value, it can be easy to panic. This state of stagflation–when inflation is increasing and the economy is shrinking–can be frightening, but there are some practical and self care tips to help you weather the storm.
Stay Informed
During a volatile economic period, it’s important to stay informed on what’s happening in the economy and the potential impact it could have on you and your family.
“This will help you to understand what is driving changes in prices and how it may affect your personal finances,” said Max Benz of Banking Geek.
To stay informed, but not overwhelmed, choose one or two financial media outlets you trust and see what they’re saying about the stock market as well as the greater economy.
Increase Your Cash Flow
“Finding other sources of income is one approach to complement your current income,” advises Sam Willis, financial writer for Rain Catcher.
With the internet, you can start a side hustle and make some extra money on the side without leaving your home. Try to utilize a talent you already have and build a business around it. Great at design? Offer your services as a freelance graphic designer. Love shooting videos? Start a TikTok.
Additionally, you could start a business in your local community. If you’re artistic, you could sell ceramics at the community farmer’s market. The coffee aficionado could set up a coffee stand at the local farmer’s market. If you don’t want to monetize a hobby and have a larger amount of savings, you could get into real estate or start an AirBnB.
Willis added, “If you believe your current income is insufficient, think about diversifying your sources of income. The majority of successful individuals have advised diversifying their sources of income to avoid risk on all levels.”
Create a Stricter Budget
Along with increasing your cashflow, it’s important to have a stricter budget when the economy is not doing well. You can’t control the price of groceries or gas, but you can still control aspects of your income, such as how much you’re spending on unnecessary goods and services.
Jenna Carson, Financial Partner at Money Lucid, recommends people limit their spending where they can. Some of her recommendations to lower your spending include:
- Reducing on treats
- Canceling subscriptions
- Creating money monitoring excels
- Exploring cheaper recipes
“These actions add up and the more positive actions a person takes, the better they will feel emotionally – knowing they are doing everything they can to ensure they don’t have to feel guilty. -Jenna Carson, Financial Partner at Money Lucid, said.
Spend Less
Now is not the time to make a giant purchase or drain your savings unnecessarily. Instead, make sure you have some backup savings in case the economy gets worse, there’s more lay-offs, or for other unexpected emergencies.
“That vacation you had been saving up for or a house upgrade that you dreamed of? Right now is the time to put those plans on hold at least until the picture gets clearer. Spending your savings right now wouldn’t be a great idea and will only lead to more stress. Having some backup savings can help you put your mind to rest,” said Jason Porter of Scottish Heritage.
Practice Self Care
Along with taking a practical look at your spending, the larger economy, and side hustles, it’s also important to take care of your emotional health during this time.
Isla Asibana, a cybersecurity Specialist at Privacy Australia, said, “We need to integrate our lives with calming exercises and practices. Take a portion of your day to let go of the worry for the future and be thankful for your health and ability to earn in the present.”
Here are some calming exercises you could integrate into your daily routine:
- Yoga
- Meditation
- Walks in nature
- Journaling
Develop a Resilient Mindset
Luke Lee, founder and interior designer at Everwallpaper, has three steps he takes in times of economic hardship to develop a resilient mindset and come out stronger on the other side:
“It can be tempting to focus on the negative aspects of our lives and ignore the positive. However, research has shown that this can lead to feelings of depression and anxiety. Instead, it is important to focus on our personal strengths and abilities. This can help us to feel more in control of our lives and better able to cope with difficult situations.
“Additionally, maintaining social connections is crucial during times of economic hardship. These connections can provide support and reassurance during times of financial difficulty.
“Finally, it is important to remember that economic hardships are often temporary,” said Lee.
In the best of times, money can be overwhelming. In the current state, it can be impossible not to feel some panic. However, through acting logically, practicing self care, and building a resilient mindset, you can weather the storm. Remember, at the end of the day, the current economy is temporary and will change again.