How to Mentally Prepare for a Financial Crisis

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Stock market crash

The world financial market is looking pretty shady. Stock markets around the world continue to drop after weeks of losses and many indicators show that we are heading for a major crisis. In this post I want to give you a few ways to mentally prepare for a financial crisis so that if it happens you are better able to cope.

Do we need to prepare ourselves?

There is no way of knowing how bad this financial crisis is going to get. For some people it is already serious. If you had a lot of superannuation in the stock market you might already be hurting. Some indicators are showing that the crisis is easing, while others show us that it is getting worse. I do not know how bad it is going to end up. What I do know, however, is that people who prepare themselves early always come out of a crisis better than those who don’t. That is why I am writing this post for my readers.

How to mentally prepare for a financial crisis

The following tips are designed to help you cope with the cards you are dealt. I am not going to give you any secret stock picks or sound financial advice. What I am going to give you, however, are some practical things that you can do in order to put yourself in a better mental position if and when the worst happens.

1. Don’t panic. Just don’t.
The first thing you need to learn is that panic gets you absolutely no where. I have been in one or two life threatening situations in my life time and I am not sure how well I would have fared if I panicked. Now I am not saying that this economic stuff is going to get life threatening. It’s not. But what I am saying is that in any scary situation you need to know that panic doesn’t help.

Every time you see a little bit of panic creeping in to your mind just repeat “panic doesn’t help anyone”. It doesn’t help you and it doesn’t help others. The first step to dealing with a financial crisis is to learn how to keep your panic under control.

2. Learn your stuff
The people who do well in these times are the people who know their stuff. They know how the stock market works, they know where their money is kept and they know how to react if something bad happens. A relative of mine made many millions of dollars a few months back when he predicted the stock market crash and sold all of his shares. He is now sitting on a big pile of cash instead of worrying about his stock prices. He was able to do this because he knew his stuff.

It would be a good idea to spend a few minutes every day from on learning about the stock market and how to best optimize your money. Look at diversifying your investments. Look at maybe shifting money in to more stable economic climates. Read, read, read. If you learn your stuff you will be better able to react when something bad happens.

The other advantage of study is that it puts your mind at ease. There is a lot less panic in people who are educated on the problem. Look at doctors and nurses in the Emergency Room. If I got presented with a patient who had just had his face cut off by a circular saw I would probably run out of the hospital screaming. But a doctor or nurse would know exactly what to do and be relatively panic free. This is the same for the financial crisis. Learn your stuff.

3. Don’t watch too much mainstream American News
Please don’t get angry with me but American News channels are all about panic. They feed off of it. Their ratings depend on it. If they get you scared you will watch more news because you “need” to know what is going on. It is very sensationalistic.

News from other corners of the globe usually seems to be more moderate. Moderate sometimes means boring as hell but it also means you get less scared. They present the facts and don’t go too much in to the “ratings grabbing” stuff.

Find a news channel that has a good worldwide reputation and is known for fact checking. I like to watch BBC News but there are many other good options out there. People in America might prefer PBS News which also has an excellent reputation.

4. Realize that it is just money
I always feel a bit uneasy when I tell people “it is just money”. The reason I feel uneasy is because for a lot of people “just money” is more important than anything else. They spend their whole life earning it and giving it up is not an easy task.

But it is “just money”. The financial crisis is not going to kidnap your children or cause you to develop a malignant cancer. It is just money. You will be okay. Your family will be okay. When a crisis like this hits it is important to shift your perspective and look at all the positive things that are going on in your life.

I heard news recently that many people have committed suicide because they have lost so much in the stock market crash. This makes me extremely sad. For these people it was not “just money” – it was a part of themselves. Please do not let yourself fall in to the trap of thinking that you are your money. Please do not feel like a a failure if you lose your life savings. You CAN start again. You are NOT alone. The sun will still rise tomorrow. The financial crisis will not last forever.

5. Kick yourself in the mind-butt and toughen up!
Today I went in to get a deep tissue massage. This is a type of massage where the physiotherapist presses so deep in to my muscles and tendons in order to realign my back that I often feel like I am going to vomit. It is the most painful thing I have ever endured.

Today, while he was using his thumb to try and rub my spine through my stomach (or so it seemed!) I yelped, “oh god that hurts” and let out a sound that was half pig snort, half baby cry. I was trying to express how much it hurt but instead of slowing down he looked at me and said, “man up” and proceeded to press harder.

At that point I realized how much pain a human being can take depends on your mental attitude. After he had told me to toughen up I seemed more able to deal with it. The pain hadn’t changed, but my mental attitude had.

If a financial crisis hits and you lose a lot of money your lifestyle is going to change. For some people it already has. If this happens you need to kick yourself in the mind-butt and toughen up. You need to realize that you are an incredibly resilient human being and that you can deal with anything if you need to.

6. Don’t talk about the financial crisis with scared people
The day before I sat my final high school exams my father pulled me aside to give me some advice. He said, “Listen son. When you go to that exam hall don’t go and talk to any of your friends. All they will do is remind you of things you have forgotten to learn and pass their anxieties on to you. Sit by yourself, revise your notes and then go in to the exam alone and strong.”

It was probably the best advice he ever gave me.

People are scared about the economy right now. They are watching American News and they are fearing the worst. If you go and try to talk to them all it is going to do is add water to the whirlpool. It isn’t going to solve any problems. Neither of you have any real answers so the conversation will bear no realistic solutions. It is the same as going in to a final exam and chatting to the kids who spent the study period getting drunk. All it does is bring you down.

7. Discover the law of impermanence
What goes up must come down. What is compounded must eventually break. Nothing lasts forever. Realizing the law of impermanence is a excellent way to mentally prepare yourself for an economic meltdown.

This financial crisis was bound to happen. Rapid growth cannot occur forever. There is always going to be a trough after a peak. Nothing lasts forever. Assets included.

But the same is also true of the crisis itself. Whatever downturn we are about to experience will not last forever. It can’t. We might have a few years of tough times but things will surely pick up again as they have in the past and will do so in the future. Anytime you think that your are having a really hard time because of the financial crisis remember the law of impermanence – it won’t last.

Conclusion

I truly believe that we all have the ability to deal with difficult circumstances. Throughout history there are examples of humans who have endured terrible hardships – wars, torture, disease, famine – what is a little financial crisis compared with that? I hope the points in this article help some of you prepare for any difficult times that might be ahead.

If anyone has any other pointers please leave a comment because it might really help someone.

9 thoughts on “How to Mentally Prepare for a Financial Crisis

  1. Great post, thanks. I’m in the U.S. and you are absolutely right about the American news. I’ve made a point of not listening to the financial news and not checking my 401(k) balances. I have about 25 years until retirement, so I should be okay in the long run. The other points you made here are really good. It is important to learn as much as possible. I also liked the idea of not talking about the situation with people who are scared. It seems that this is all anyone is talking about these days and I wonder if we don’t just fuel the fire with all this fear-based talk.

  2. I would say that while the BBC and other UK / European media outlets might seem less sensationalist in comparison, watching / listening to them still fills your mind with unhelpful content most of the time. Even if the news reports are apparently more factual, do we really need to know the facts they (selectively) broadcast? Do they truly have relevance to our life and our circumstances?

    Related to this and in terms of other useful pointers I recommend reading the excellent post by Bruce Muzik on his Designer Life Blog called

    All the best!

  3. Hi Beth.

    I imagine checking your 401(k) balance all the time could be quite anxiety producing. I think it is a good idea not to do that!

    The fear certainly is fuel for the fire, and not just metaphorically. Much of the crisis is centered around people taking their money out of the stock market because they are afraid something bad is going to happen. Fear has made it much worse.

    TDM

  4. Puerhan,

    I think you are probably right, it is so hard to tell whether news stations are presenting the unbiased facts these days. Unfortunately I think it is important that we watch the news because we need to know what is happening in the world. But, we should do what we can not to support channels like Fox News who are blatantly sensationalistic and biased.

    Thanks for commenting.

    TDM

  5. Another vote against American news. John Stewart, or Stephen Colbert, one of them said that the problem now is that we’re on a “24 hour news cycle” yet there is no more news than there was 20 years ago when people got all they needed at 6:00. So they’re hyping everything to ridiculous extremes to sell ad space. What’s worse is that you almost can’t get away from it. It seems like every “mid-low range” eating establishment or hang out place has a TV in every corner, and they are almost always turned to some 24 hour news channel. Its crazy. I’m a NPR listener which is pretty much the same as PBS news, its public radio. I like it because I’ve never, not once, heard anything, not the first mention, of Paris Hilton’s sex life, or Brittany Spears underwear. I swear should it ever be brought up, I’ll swear off “news” all together :-) Even NPR I can only listen to for a little while before I just have to go to something more “inane”. Too much information doesn’t do me any good at all.

    ~Mickey

  6. If irritation is a sign of stress than I suppose so. I don’t get stressed more by it in the conventional sense. My day isn’t worse by having seen the same clip aired over and over again. I’m more annoyed that enough people clearly are getting some false fulfillment out of watching the same thing over and over, that its reinforcing *paying* the networks to air it.

    Case in point, during 9/11 when the planes flew into the twin towers. I saw the same clip of the plane crashing into the towers probably a hundred times at least. Its all they showed, that and tearful people. They had nothing to offer of value, no “real” information, all they had was emotional “junk food” to keep people riveted to the tv. That annoys me. I also feel like it sensitizes people to the horror. If you watch something violent or negative, its been shown that it quits having an emotional effect on you. So the news desensitizes people to violence and strife, and people begin to accept it as a matter of course, and then apply it to their own realities. I know people that are terrified to walk outside at dusk because of what they see on the news. A killing in Sacramento scares people across the country, it makes the person feel like it happened in their own back yard. When in reality most of these people live in statistically improbable places for violent crime to happen to them. The ones that live in higher probability violent zones, see it so much they just have to move on with life. Its crazy man. That’s what stresses me out, I really think the 24 hour news is driving the collective consciousness of our world into a much more negative state. All I can do is choose not to participate.

    My house has been unlocked literally for years, I don’t even know where my house keys are right at this moment, I could find them if I had to but… Have I ever been robbed? Nope. May I some day be robbed? Yeah maybe, but would that person break in anyway regardless of my locked door? I think so. So I’d prefer to get in my home faster when its rainy outside than to fumble with my keys in the dark wasting probably hours of my life over the course of my existence, just on the off chance that I may lose a TV.

    Just a few weeks ago our news in my city started running talking points about a gas shortage due to one of the hurricanes. It was just in our town, but every radio station started repeating it, all the local news started airing it. Guess what happened? We were out of gas for a week! Why? Because people heard it all day that they had to rush out and top off all their tanks, literally causing 2 hour lines at the gas pump and draining every drop of fuel out of our city. Gas prices spiked, people got angry, but drive 30 minutes south and there was plenty of fuel. Lower fuel costs and no lines just 30 minutes away. There was no shortage, but people saw it on TV so it must be true, and the news created the new reality. That seems criminally irresponsible to me, yet I don’t think the first thing was ever done to rectify that behavior. People as a collective are often little more intelligent than sheep. The bible had it right.

    Sorry, end of rant, you must all be tired of my posts by now :-)

    ~Mickey

  7. Very helpful advice. I especially relate to don’t panic
    and don’t talk finances with scared people. For myself so far, early in my day I like to do a casual regimen of positive thinking, affirmation, and just staying present to get me into a clear mindset. Talking to someone who is scared and panicky about financial matters can definitely be a challenge. It unnaturally forces me to reprogram the positive outlook I established earlier in the day. This is getting easier to deal with though, for if I have a negative encounter with someone I remind myself that to be panicky and scared is non-productive and makes me LESS able to help myself or others.

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