In our first part of money anxiety we looked at the how the brain reacts to threats. Our ancient ‘fight or flight’ response evolved to keep us safe in situations of danger. It works well in the short term, but it’s very emotionally and physically intense and it’s not meant to be constantly activated.
Unfortunately, our lack of work/life balance and lifestyle choices mean that this response is always switched on and this leads to a breakdown in our biological systems. Whilst we don’t have many physical threats to worry about any more, we have become much more anxious about our financial health and for many, a lack of financial security. This makes us overfocus on the cause of the financial stress and therefore affects our ability to make decisions. As a result of this, our brain is swamped with cortisol and adrenaline, losing the ability to focus on making good financial choices. Also this means that we don’t have any mental space to think about other things that need to get done and as a result, nothing gets done well. Sound familiar? This has become a common feature for many people during the pandemic.
Breaking the cycle
There are things we can do to break this cycle of financial anxiety and panic by engaging our higher brain to help us make good money decisions.
One of the most effective ways is to create mental distance between ourselves and the problem. We do this when we help other people resolve their problems by being detached and objective to their issues. This is because we are not emotionally attached to other people’s problems so when it is not happening to us, it’s easier to be rational because we are not being triggered. Try referring to yourself in the third person so rather than asking “what should I do?” rephrase the question as “what should Dennis do?” or “What would be the best thing for Dennis right now?”.
You can also work through your feelings using your own name – ‘Why is Dennis feeling this way?’. ‘What would help Dennis right now?’. ‘What does Dennis need to know to make a good decision?’.
Another way to create this psychological distance is to use somebody we admire to guide our thoughts – ‘What would Warren Buffet do?’. ‘How would Warren Buffet think about this problem?’. This way of framing the problem creates space between ourselves and our emotional responses; it helps us to engage our higher brains and stop them being highjacked by the emotions from our lower brains.
Mental time travel
Other techniques include temporal distancing or mental time travel. This is where you create a gap by using the element of time. Remind yourself that this problem will pass and that you will get through it – for example, think about how you will feel in two years’ time rather than now.
Alternatively, imagine that in two years’ time you are telling the story about how you responded during the pandemic. What do you want that story to be? Is it the story of somebody who gave up? Or is it the story of somebody who worked out what they needed to do to get through the crisis? Is it the story of somebody who lost control? Or is it the story of somebody who focused on the things they could control, addressed the challenges they had, and found solutions for those challenges?
Right now it feels like we have very little control over anything. However, we can control our emotions and our minds. And when we do that, we are able to make good financial decisions.
Next week we’ll look at ways to control our emotions in order to make good financial decisions.
To learn more about distancing, listen to the Coronavirus BONUS episodes of the Happiness Lab.
Dennis Harhalakis is the Founder of Cambridge Money Coaching