People, by their very nature, need to exercise some control over their environment. The anxiety brought about during a recession can leave one feeling that they have little control over their financial affairs or even their lives in general. “The loss of a job, or the shrinking of assets, can be a serious stressor that could even trigger clinical depression or an anxiety disorder. The uncertainty of the current economic situation causes stress and worry, leading some to work longer hours, others to eat too much or drink too much to get relief” according to Dr. Carol E. Harkrader.

It is important that emotions don’t drive the decision making process and keep one from making good decisions. To avoid having that happen there are some steps one can take to get off the emotional rollercoaster and put their lives and finances in order.

“It’s important to safeguard your health by choosing healthy coping techniques, like exercise, more time with friends, and seeking out chances to laugh. If you do develop recurrent insomnia, or constant worry, or a loss of energy and concentration, it’s time to seek help. The good news is that serious depression and anxiety are very treatable especially when they haven’t been present for long” says Dr. Harkrader.

Once you have adopted the physical techniques for coping start to become a little tougher in your financial psychologically. Don’t let the stock market or the economic news scare you into inaction or over-reaction. You talk to people every day and yes, some people are losing their jobs, but not ALL of them. Most of the events that we participate in are still going on, if even at a reduced rate or scale. The world is not coming to an end, embrace the fact that this is just part of the economic cycle and that it will resolve itself over time.

Once you resolve to reestablish control begin by reviewing your financial situation. While this sounds painful, it is the first step in gathering the data for sound decision making. Like planning a trip, you have to know where you are and where you want to go before you can decide on how to get there. Start with the basics, money coming in and money going out. Think of your budget like you would a business and put expenses in categories according to their importance. Maybe some temporary cost cutting is in order.

Take a look at your investments and asses your risk tolerance. Much of the US brokerage business is built on people being ‘long term investors’ that can be grouped into asset allocation models. This is great for brokerage firms and brokers because it allows them to handle large numbers of clients in discrete groups. Just make sure that you understand the risk associated with each of the investments in your account, not just the expected return, and that the risk and return expectations meet your objectives.

Asset allocation is generally more important than security (individual stock) selection. While history has shown the stock market to be a good investment over time, the S&P 500 is at roughly the same level it was in 1997. Most people have been over-allocated to stocks and although bonds aren’t sexy, highly rated bonds are safe, they return their principal, and they pay interest that can be reinvested or used as income when needed. Portfolio diversification is important in providing long term growth with decreased portfolio volatility.

The market environment is more complex that it has ever been but, if you don’t understand an investment you probably shouldn’t be in it. And, don’t let the financial press or even your broker lead you into making poor investment decisions. If you take the time to understand a complex investment, make sure that you are seeing a range of possible offerings and that the security offered is good for you, not just good in what it pays your broker.

Unfortunately, there are times that exercising control over your finances can strain relationships. No one can look out for your best interests like you can, so go ahead and exercise control over your financial well being. It is your money.
Mark Stys is the Chief Investment Officer at Bluemont Capital Advisors, LLC an independent investment advisory firm.

Dr. Carol E. Harkrader is a psychiatrist that has her practice in Purcellville, VA.

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