5 ways to get over the money blues

In a surprising conversation with a client, I learned that he logs into his account online in the morning and again in the afternoon every single day. What makes this even more peculiar is that our online access gets updated once daily (in the morning) and reflects the previous day's market close. So when he logs into his account for the second time, he sees the EXACT same value that he saw when he logged in that morning. When I asked him why he checks twice a day, he responded, “Yeah, I know. Just want to make sure my money is still there.”

<sigh>

This poor guy wasn't helping himself relieve any stress. By constantly being connected and fearful that his money would somehow magically vanish, he was falling victim to what I call the “money blues.” The housing bubble burst, Great Recession, and slow economic recovery left many investors asking themselves, “What in the heck happened?” More recent headlines involving the fiscal cliff, government shutdown, and Greece's economic struggles just add fuel to the fire.

When you feel powerless over things beyond your control, it can easily lead to anxiety.

Reflecting back at the value of your 2007 investing statements does as much good as wishing you bought that “one stock” at that “one time” at that “one price.”

Yeah, you know the one I'm talking about. You didn't listen to Larry at the water cooler at work and now he's driving a Porsche he bought with his hot stock tip profits and waving to you every morning with that smug smile… Don't worry. It happened to me, too.

In all seriousness, anxiety can lead to terrible financial decisions. Bad things happen when you let your emotions drive, and I see it all too often in my financial planning practice. It always pains me to sit down in my office to talk to an individual who has done the exact opposite of what they should have done. The financial carnage is real. During the Great Recession, right about the time the stock market had tanked and lost about 40 percent of its value, I sat down with a client to try to talk them out of making a horrible decision.

They wanted to sell. And not just trim-the-fat kind of selling. Not minor adjustments to their asset allocation. They wanted to sell everything — every investment straight to cash.

I tried to talk them out of it — the market would rebound, right now you have paper losses not real losses, you're selling at the absolute lowest point — but was unsuccessful.

Their anxiety led them to buying high and selling low.

Right after they cashed out, the market started going up again. By the end of 2010, just one and a half years later, the market was up 49 percent from where they sold. Now, four and a half years — well, you know where it is. It's fully recovered and then some! They missed out on tens of thousands of dollars all because they let their anxiety win.

Fight back against your money anxiety

Again, whether we are talking about personal finance or just life in general, it holds true that nothing good can come from making rash, emotional, anxiety-laden decisions. If you feel yourself suffering from your own case of the “money blues” consider these tactics to get you back on the road to recovery.

1. Turn off the news.

Watching the news about what's going on with the market is just as good as trusting your weatherman's forecast for the weekend ahead. You have to remember that the media is there for one thing — to make advertising dollars.

Oh wait, was I supposed to say “inform the public”?

It's all about viewership and the advertising revenue those viewers bring in. The focus on getting as many viewers as possible drives sensational headlines, talking (sometimes screaming) heads that take opposing viewpoints on random topics, and every little thing being a piece of news, whatever it takes to get you to turn to that channel and watch.

The sky is always falling in the media. Dismiss the exaggerated headlines and focus on the items in your life that you do have control over.

2. Communicate with your spouse.

Two of the biggest contributors to a failed marriage are communication and finances. When finances get tight and emotions get intense, communication becomes even more important.

Make it a point to have regular conversations about the finances. Maybe for you that's weekly. Maybe it's monthly. It doesn't really matter as long as you stick to a schedule and actually communicate.

These open conversations are healthy. They can help diffuse situations, stop the finger-pointing, and help you remember you're on the same team. (I highly recommend having “the money talk” early and often in a relationship.) Talk through solutions to problems. If times are lean and conditions are expected to remain the same or get worse, talk about possible solutions. If you have a plan B in place, it can at least help ease the stress more than if there is no contingency plan at all.

So many couples stick their proverbial heads in the sand to avoid talking about touchy subjects, and they end up worse off for it. Be different. Communicate.

3. Don't ignore the obvious.

You may have high anxiety about money because you are really bad at managing your money.

That's OK.

Being bad at managing money isn't the end of the world. You can't work on something you don't know that you're bad at, so if you know you're bad at money — great! Just do something about it. For many people, being a poor money manager means they have a lot of debt. That debt and the ever-rising tide of minimum payments is like a boa constrictor slowly squeezing the life out of your dollars and cents.

That slow squeeze can lead to extremely high anxiety; enough to the point that it seems paralyzing. It's like you know you need to do something, anything to make the situation better, but you are so freaked out about it that you end up doing nothing.

Yet doing nothing is only going to make things worse, which in turn leads to more anxiety, which in turn leads to you doing more of nothing… It's a vicious cycle.

Don't ignore the obvious. You can't spend more than you earn. You have to own up to putting yourself into debt and then work toward paying off that debt. As you start to dig out of the hole you're in, you will feel your anxiety levels going down and your “I'm actually doing this!” levels going way up.

4. Don't check your accounts daily (especially twice a day).

We live in a hyper-connected world. Everything has WiFi. You can get portfolio updates on your kid's iPod Nano if you want. Every little piece of data about you — your spending and your investments — is tracked religiously by mega-corporations.

Instead of not having enough information on a topic — anyone else remember using the Dewey Decimal System and the good ol' card catalog at the school library? — we are inundated with data. All this connectivity means you can check your bank account, credit card, and investment accounts daily. You can check your bill statements online too. I even have retired clients who I know check their investment account twice a day, although our systems only update at the end of the day.

At some point you have to stop and ask yourself: Is this really worth my time? Has anything changed significantly between yesterday and today?

Even if something has changed — e.g., the market went up/down 1 percent — does that mean I am going to do something about it? Probably not. You're better off re-balancing your portfolio on an annual schedule rather than worrying about the minuscule ups and downs of the market each day.

We must accept that some things are out of our control.

It's OK to have a plan to deal with specific scenarios. In fact, I highly recommend having an investment plan that reminds you of your investing goals, how comfortable you are with risk, and what to do if the market does this or that. Your investment plan becomes your guidebook for when your emotions are going haywire.

5. Give yourself a release valve.

Sometimes we feel like we have to just do something to feel better about a money situation. If the market is tanking and you have the urge to sell everything, give yourself a way to relieve some of the pressure you are feeling about your finances.

Let's take the clients who sold out of 100 percent of their investments at the bottom of the market. In the end, that was a terrible decision that cost them a great sum of money.

What if that client had only sold 10 percent and moved it to a safer short-term investment? (Here are the 11 best short-term investments for your money right now.) When the market rebounded, they would have 90 percent of the portfolio rebounding with the rest of the market. Sure, they'd technically be behind the person who kept 100 percent of the investment invested, but that freedom on the relatively small 10 percent would have kept them from making a significantly worse decision.

Give yourself 5 percent to 10 percent of the portfolio that you can do anything you want with. If you are panicking and want to sell everything, you don't just sit there. You sell off that 10 percent of the portfolio you allow yourself to do whatever you want with.

This 5 to 10 percent freedom is also how many advisers handle clients that want to invest in individual stocks. Individual stocks are generally not the best idea for individual investors, but if the client is going to make mistakes, we try to limit how much damage is done to the overall portfolio and make sure they land one of the best online brokers for beginners too.

Don't let anxiety rule you

Being a good steward of your money is important. If you handle your money well, you can transform not only your family, but the generations to follow as well.

At the same time, you shouldn't let your anxiety over money run your life. Take some simple steps to put a buffer between the “calm” you and the “freaked out over money” you. Control what you can control, be smart about your decisions, and sleep better at night.

More about...Investing, Psychology

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FI Journey
FI Journey
6 years ago

When I’ve talked with people who are stressed out over finances I’m surprised at how many don’t have an emergency fund in place. And some of those people totally disagree with (or at least discount the value of) having an emergency fund to begin with

I think the majority out there would agree that the anxiety relief it gives is unmatched.

Jeff Rose
Jeff Rose
6 years ago
Reply to  FI Journey

Agree x 100!

Matt @ Your Living Body
Matt @ Your Living Body
6 years ago

I’ve found that making the habit of checking financial accounts only a couple times a week helps for me. It helps me focus less on the account and more on the activity.

Alicia @ Financial Diffraction
Alicia @ Financial Diffraction
6 years ago

I am one of the perpetual checkers… even when I KNOW nothing could be changed because all my bills are paid, and that money is just sitting there until I need it. I’m trying to pare it down, but having multiple financial institutions to check doesn’t help me any.

Jeff Rose
Jeff Rose
6 years ago

@Alicia Not sure if this would help but have you checked out Personal Capital?

It’s a free online platform that allows you to integrate all your accounts into one place.

Their interface is really slick and I even suggest clients check it out even though they are technically competition.

You can see my review here: http://www.goodfinancialcents.com/personal-capital-review/

Brian
Brian
6 years ago

It like going on a diet and them weighting yourself everyday to see if you’ve lost weight. Very counterproductive. Organize yourself and stick to the plan.

John S @ Frugal Rules
John S @ Frugal Rules
6 years ago

Great points Jeff! I saw very similar situations when I was in the industry and it would almost always sadden me to see investors make decisions based off of anxiety. I think your #1 and #2 are vital in helping fight against that, but #4 is huge. There are always going to be movements and by checking in on them so regularly you’re only going to be more sensitive to them which could lead to a foolish decision. Largely speaking, you should be looking at the long term as opposed to day to day movements.

Matt Becker
Matt Becker
6 years ago

I rarely know what’s going on with the stock market at any particular point in time. I have a general sense as I spend 5 minutes checking my investments each week just to keep a historical record (mostly for my own curiosity years down the road), but the actual ups and downs really don’t even register because they just aren’t important. One of my favorite sayings is “this too shall pass”, and nowhere is that a better mantra than in investing. Whatever conditions exist right now are temporary and will soon be replaced. Sticking with a consistent plan is really… Read more »

Kelsie
Kelsie
6 years ago

I think it helps to know your investing long-term. That way you’re not worried about every loss. As I reach retirement age I think it will be harder to stay calm if the market is crazy.

Jeff Rose
Jeff Rose
6 years ago
Reply to  Kelsie

@Kelsie

I think you’re spot on!

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago

I am guilty of looking at my bank statements/credit cards a lot, but for some reason I’m good about not checking my retirement account. When the recession hit five years ago, I didn’t even look at my statement for several months. I was only 25 at the time, so I knew the crash wouldn’t affect me in the long-term, and it would only stress me out if I saw how much my balance had dropped.

Tim Butters
Tim Butters
6 years ago

I check my financial dashboard everyday because I run my finances like a business. Sure there are long-term strategies in place, but I still monitor daily to pick up on trends which might be forming. Jeff might not check his finances but I bet he checks his SEO numbers. How is it different?

Jeff Rose
Jeff Rose
6 years ago
Reply to  Tim Butters

@Tim

Ha! I used to be obsessed and check my blog stats every day. Sometimes twice or day more more. And you’re right, it’s not different.

I then realized that it was causing anxiety, just like people get with checking their money everyday.

Now, I check my stats 1-2 times per week, if that.

Helps me keep sane!

Dillon
Dillon
6 years ago

I check my balances sometimes more than twice a day but sometimes, I don’t check for a couple of days. I wouldn’t say I am stressed. Even when they are down, I like to see if my stocks are doing better than the Dow or if they are doing worse. I know that I have made good stock choices and the fluctuations that I am seeing are due to outside factors and not because the company is doing better or worse. Maybe it is because I buy dividend stocks, so I don’t care that much about the market ups and… Read more »

Jeff Rose
Jeff Rose
6 years ago
Reply to  Dillon

@ Dillon

No harm in that. It’s one thing to check for curiosity purposes: “Wonder how my dividend stock is doing with the recent market pullback?” vs. checking because you think you’ve lost your butt and need to do something now. Which most people don’t do anything anyway and that’s when the stress and anxiety rolls in.

Afz
Afz
6 years ago

I use BOA portfolio that has all my accounts integrated at one place, I check once everyday except weekends. The updates happen on the weekdays and no transactions are posted over the weekends anyways. We have weekly Finance talk schedule to discuss on various topics. It keeps on track for achieving my goals and also keep my monthly budget in control. We have seen a good progress over the years. We try not to make decisions based on anxiety and that has helped me. We save during one year and use the following year for investments, etc.

Stefanie @ The Broke and Beautiful Life
Stefanie @ The Broke and Beautiful Life
6 years ago

I’m working to find a balance between not checking the news and my finances constantly but still being informed and on top of relevant information that may require me to take action.

Tiara
Tiara
6 years ago

I check my retirement accounts about once a quarter (and I avoid doing it on days when I know the market is down a bit). No anxiety here – I have picked an asset allocation I am comfortable with and I am staying the course.

Paul Paquin
Paul Paquin
6 years ago

Does anyone sense paranoia? Not that I haven’t done the same thing before, but it is a little ridiculous to log into your account 2 times in one day. Like the money will either magically appear, or disappear. I do recommend changing your password to your bank account at least 1 time per month, since we are talking about being paranoid. That could actually cause the security of your bank information to be at risk. Passwords can be discovered by hackers when they go unchanged. I worked for a security firm about 11 years ago, and that is one of… Read more »

Micro
Micro
6 years ago

I check my accounts on an almost daily basis but that is because I enjoy watching the ups and downs of the daily market. I know my money is going to be more valuable in 20 years so if it loses money over a couple of days, I don’t sweat it. I actually am a little happy when that happens because I know my next contribution will buy me more.

Karin
Karin
6 years ago

Some excellent advice here, but I disagree with the one about not checking accounts daily. I’m not referring to investment accounts (which I might check monthly or even less frequently) but bank accounts. A few years ago, my credit card details were stolen and cloned while I was traveling overseas, and if I hadn’t been checking balances regularly the thieves might have got away with more than the $900 they stole. I eventually got the money back, but since then have checked my bank account balances very regularly, to ensure no more unauthorized transactions have occurred. Just my 2 cents… Read more »

MoneyAhoy
MoneyAhoy
6 years ago

I’d add one more to the list. FOCUS ON THE LONG TERM. I wish I would have done more of this back 5 years ago, I’d be so much further ahead if I had…

Paul Paquin
Paul Paquin
6 years ago

Hi Karen, For purposes of security, I do agree that yes check your account daily if you want, but 2 times per day is obsessive. There is a fine line between smart, and obsessive. Obsession can actually be an obstacle in the way of growing your income, being successful, etc.. Control obsessions and use that trait in a positive way. Like be obsessed with helping your family members, and not checking your account 2 times per day. This is a problem in my opinion. Also, in regards to a few other comments that I see, I think you guys will… Read more »

Karin
Karin
6 years ago
Reply to  Paul Paquin

Paul – it’s not an obsession, it’s about one minute per day. As the old adage goes … better safe than sorry.

Mark W
Mark W
6 years ago

I used to be obsessed about checking my accounts and portfolio at least a couple of times a day. For me it was like facebook.I was constantly worried that something is not right, especially with my portfolio (updated at noon on weekdays). Now I check both every 2-3 days and I know most people will say it’s too often. Dont know why but I just need to know exactly how much money I’ve got at any given moment!

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