When the United States began its war with Iran, Ms Merry Renduchintala’s first impulse was to “buy everything now”, before prices increased.
She isn’t alone. Roughly two-thirds of Americans feel stressed about money, and a March survey by the University of Michigan found that Americans’ overall confidence about their personal finances over the next year fell by 10 per cent.
With fluctuating oil prices and interest rates, and fears about wars and a recession, staying optimistic about your financial prospects isn’t easy.
One way to calm your financial anxieties is to focus on what you can control. Taking stock of your bank account with a “financial spring cleaning” timed to the season of renewal can help.
Start by auditing your expenses. Experts suggest dividing items into necessities – like shelter, food, clothing and transportation – and nice-to-haves. Budgeting apps can help, though most charge subscription fees. For those who prefer a free option and don’t mind going old-school, spreadsheets work just as well.
Ms Faith Strongheart, 52, a single mother of two, recently reviewed her monthly spending. “There were a lot of things that I’d been doing out of convenience, like having auto subscriptions on Amazon for household supplies,” she said. Once she took note of what she actually needed and didn’t, cutting back was easy.
Financial volatility often incites overwhelming fears, which can impair rational decision-making because of what experts call a “cognitive bandwidth tax.” It’s like “having a thousand tabs open on your computer,” said Ms Chantel Chapman, a financial expert and the author of The Trauma Of Money. And it can push you towards decisions that ultimately backfire. For example, you might decide to “live for today” and spend beyond your means or pull back on your retirement contributions.
Reactive choices, according to Ms Chapman, are “stress responses” that arise when scary emotions take over. Remembering that feelings aren’t facts is a good place to start. Just this pause can create “psychological distance” in the brain, leaving you feeling calmer. This small shift can help you make “wise” choices that aren’t informed by “catastrophic thinking”. she said.
Reassessing your financial goals – like buying a house or saving for retirement – can also help curb shortsighted thinking. These check-ins ensure that you stay on track as circumstances and needs change, too.
Financial experts advise saving six months’ worth of expenses, but don’t be discouraged if that feels out of reach right now. Even if you “can only put a few dollars per month into savings, it’s important to keep doing it”, said Ms Kate Bulger, a vice-president of business development at Money Management International, a nonprofit credit counseling agency.
If you’ve mapped out your budget and trimmed the fat but still feel stressed, don’t fret. Give yourself permission to step back, Ms Bulger said. “Sometimes taking a break from cable news, or however you’re getting your information, can be a really healthy thing, too.”
In times of crisis, experts recommend pulling back on discretionary spending through strategic cuts to your budget. Many streaming services and gyms, for example, offer the option to pause your monthly membership. This makes it a lot easier to pivot when you need to adjust your budget very quickly, said Mr Bruce McClary, a spokesperson for the National Foundation for Credit Counseling.
Mr Cody Bortle, 24, a high school math teacher in Phoenix, feels the financial pinch. He recently spent US$60 (S$76) on petrol for his car, up from US$45 last month, and while he supplements his income with a cross-country coaching gig, he still lives pay cheque to pay cheque.
He’s been able to stretch his grocery budget with the help of his school’s food bank. “I’ve been getting food packages that have canned and boxed items, which has been incredible,” Mr Bortle said. With the staples covered, his limited funds can now go towards fresh produce.
He’s accustomed to such adjustments – for example, last year he moved to central Phoenix, paying US$100 a month more in rent, to reduce his commute to 10 minutes from 45. “I feel more comfortable living in an area where I’m really close to work, and I’m surrounded by my community members and my friends,” he said.
A weekly date night or a routine grocery run might not feel different now compared with a year ago, but the bill often is. Price increases, whether from typical inflation or because of tariffs or being at war, may tempt you to use your credit card more often.
“We hear about people who are using credit cards for all sorts of expenses that they would have otherwise used cash for,” Mr McClary said.
Making judicious cuts can help your monthly budget, but there’s more to the equation. Financial resilience, or the ability to take a financial hit and recover, also comes from bolstering savings and reducing debt.
Ms Bulger suggests starting with unsecured debt, like credit cards, which typically carries higher interest rates than secured debt like mortgages or auto loans.
And if you’re struggling to pay off debt, let your creditors know sooner rather than later, Mr McClary said. Your creditor may allow you to skip a payment or two without incurring a late fee as you weather the financial setback. NYTIMES
Source : https://www.straitstimes.com/business/invest/how-to-save-and-spend-during-a-crisis
