Recessions: 5 Mental Habits for Building Resilience

July 25, 2023

In a global economy that never sleeps, recessions have become a looming reality that every individual has to contend with at some point. During such periods, fear, uncertainty, and anxiety can often take precedence over rational decision-making. This fear can cloud our judgment, paralyzing our ability to respond constructively to economic downturns. It is essential, therefore, to develop sound mental habits and daily practices that not only maintain our mental clarity but also help us weather economic storms.

Understanding Recessions

Before diving into the habits to adopt, it’s crucial to understand what a recession entails. In simple terms, a recession is a significant decline in economic activity that lasts more than a few months. It’s visible in real GDP, real income, employment, industrial production, and wholesale retail sales.

The Emotional Impact of Recession

Recessions are often accompanied by a barrage of negative headlines, rising unemployment rates, and a general atmosphere of uncertainty. Such conditions can trigger a range of emotions from anxiety to outright panic. In turn, these emotions can lead to sub-optimal financial decisions such as panic selling, unnecessary frugality, or risky financial endeavors.

1. Adopting the Long-term Lens:

One of the most vital navigational tools at your disposal is a long-term perspective. This mindset serves as an anchor, steadying your financial decisions and helping you stay the course rather than being swayed by short-term disruptions. Here are several ways to foster this perspective:

Embracing the Cyclical Nature of Economies: It’s critical to acknowledge that economies operate in cycles, much like the natural world around us. Just as day follows night, periods of economic growth succeed in recessionary periods. This cycle may feel disruptive, but it’s a natural ebb and flow that has been observed time and again throughout history.
Acknowledge Current Challenges: Recognize the immediate issues that the economic downturns present, such as job insecurity, unstable markets, or personal financial difficulties. Ignoring these realities doesn’t make them disappear; instead, understanding them can help you plan more effectively.
See Beyond the Immediate Crisis: Don’t allow the immediate challenges to blind you to the long-term economic landscape. A recession, no matter how severe, is a phase within a larger economic cycle, not a permanent condition.
Avoid Hasty Decisions: An economic downturn can incite fear and prompt rash financial decisions. Maintaining a long-term perspective can help you avoid such impulsive actions and stay committed to your long-term financial strategy.
Regularly Reassess Your Strategy: While holding a long-term vision, remember to regularly reassess your financial strategy. This ensures it remains aligned with both your personal circumstances and the broader economic environment.

2. Empowering Yourself Through Financial Literacy:

Securing a solid understanding of financial principles and market mechanisms is a powerful safeguard during periods of economic downturn. Such understanding forms the bedrock for sound decision-making and can significantly ease the anxiety that often arises amidst financial instability. Here are some practical tips to enhance your financial literacy:

Stay Informed: Regularly follow reliable financial news outlets, read economic analyses, and monitor market trends. This will help you grasp the complexities of financial markets and keep abreast of the economic landscape.
Education is Key: Consider taking online financial courses or attending financial literacy webinars. These can be great resources for understanding fundamental financial principles and mastering the art of money management.
Read Financial Books: Books written by financial experts can offer deep insights into the world of finance. Such books can provide you with a comprehensive understanding of economic patterns, investment strategies, and personal finance management.
Leverage Technology: Use financial apps and tools that can educate you about budgeting, investing, and financial planning. Such tools can also assist you in managing your finances more efficiently.

The value of financial literacy cannot be overstated. When you’re knowledgeable about finances:

You Gain Control: Understanding how financial markets operate, the basic principles of economics, and how historical trends have shaped the present gives you a sense of control, even in the most turbulent of economic times.
You Make Informed Decisions: When you’re well-versed in financial matters, you’re better equipped to make decisions based on facts and analysis, rather than being driven by fear or impulsive reactions.
You Stay Ahead of the Curve: Keeping an eye on economic trends can help you anticipate market movements and adjust your financial strategy accordingly.
You Protect Your Financial Future: The knowledge you gain today will continue to serve you throughout your life, helping you make sound financial choices that safeguard your future.

To develop your financial literacy, commit to setting aside a little time each day for learning. This could involve reading financial news, attending webinars, taking online courses, or simply reading a chapter from a financial book. As your understanding grows, so too will your confidence in managing your finances, no matter what the economic weather may be.

3. Carving out a Routine:

In the face of the chaos that a recession can often bring, a daily routine becomes your anchor, offering a sense of control and normality amidst the storm. A daily schedule does not need to be complex or time-consuming, even for those with busy schedules. Here are some straightforward ways to implement these tips into your routine:

Incorporate Short Bursts of Exercise: Even with a busy schedule, it’s possible to incorporate short periods of physical activity. Try taking a brisk walk during your lunch break, doing a 10-minute online workout in the morning, or even stretching exercises while watching TV.
Plan for Healthy Meals: Preparing nutritious meals doesn’t have to be a time-consuming affair. Consider meal prepping on the weekend, utilizing slow cookers for time-efficient meals, or keeping healthy snacks like nuts and fruits on hand for quick nutrition.
Prioritize Quality Sleep: Ensure you’re getting enough rest by setting a consistent bedtime, avoiding screens before sleep, and creating a restful environment in your bedroom. Even if you can’t control the quantity of your sleep due to a busy schedule, you can improve the quality.
Insert Brief Mental Breaks: You can incorporate mental breaks into your day without taking up much time. Try meditating for a few minutes before starting your day, taking mindful moments to enjoy your morning coffee, or practicing deep breathing exercises during work breaks.
Engage in Quick Activities You Enjoy: Find time for activities you love by integrating them into your daily tasks. Listen to an audiobook or podcast during your commute, spend a few minutes tending to your plants before work, or unwind with a short chapter of a book before bed.

Implementing these simple steps into your routine can help you maintain a sense of control and normalcy, even in the midst of a recession. Remember, consistency is key, and even small actions can make a big difference when performed regularly.

4. Cultivating Emotional Awareness in Financial Decisions:

Emotions, while natural, can significantly impact our decision-making processes, especially in stressful situations like economic recessions. Fear, anxiety, and uncertainty are common reactions, but being mindful of these feelings and how they influence your financial decisions is critical. Recognizing and understanding your emotions can lead to more conscious, rational choices instead of reactions solely based on emotional impulses.

Here are a few strategies to build emotional awareness in the financial context:

Pause and Reflect: Before making a financial decision, take a moment to consider your emotional state. Ask yourself if your emotions could be driving your decision and try to separate your feelings from the facts at hand.
Practice Mindfulness: Regular mindfulness practices like meditation can improve your emotional awareness. These practices can help you stay grounded and focused, even when financial news triggers strong emotions.
Seek Outside Perspectives: Consulting with trusted financial advisors or knowledgeable friends can provide a different perspective on your situation. This can help you see past your immediate emotional responses and consider alternative approaches.
Educate Yourself: Knowledge can alleviate fear and anxiety. The more you know about your financial situation and the broader economic environment, the more confident and calm you will feel about your decisions.
Create a Financial Plan: Having a clear, well-thought-out financial plan can provide a sense of control. During times of uncertainty, refer to your plan and adjust it if necessary, but avoid making drastic changes based solely on emotional reactions.

By cultivating emotional awareness, you not only navigate your way through economic downturns more smoothly but also lay the foundation for making better financial decisions throughout your life.

5. Engaging in Fulfilling Activities Amid Economic Downturns:

During the tumultuous times of an economic downturn, our focus often narrows down to the financial challenges at hand, and in the process, we risk losing sight of other aspects of our lives that bring joy and fulfillment. However, ensuring that our lives are not entirely consumed by the gloom of the economic landscape is key to maintaining a balanced perspective and overall well-being. Here are some ways to make room for your passions even in challenging times:

Carving Out Time for Enjoyment: Make sure to dedicate some time to activities that bring you joy and relaxation. This could be anything from painting, gardening, reading a book, or going for a run. Engaging in these pursuits can offer a much-needed break from stress and bring some positivity to your day.
Maintaining Regularity: Instead of considering these activities as mere hobbies, think of them as integral parts of your routine. Regular engagement in these activities can provide a sense of normalcy during uncertain times.
Remembering Life Beyond Recession: It’s crucial to remind ourselves that there’s more to life than the state of the economy. By engaging in your passion projects, you reinforce this understanding and help to maintain a balanced perspective, which can be a great morale booster.

Finding Therapeutic Value: Many activities have therapeutic qualities. For instance, gardening can connect you to nature, painting can allow self-expression, and running can help relieve stress. Find an activity that not only brings you joy but can also serve as a coping mechanism during challenging times.

By actively engaging in activities that bring joy, relaxation, and a sense of accomplishment, you can ensure that your spirits remain high, and your perspective remains balanced, even amidst the difficulties of an economic downturn. This in turn, can help maintain your mental health and resilience as you navigate the economic storm.

The Journey Ahead

While the principles listed above might seem intuitive, they often get lost in the fog when fear and uncertainty cloud our vision. Building resilience to handle recessions is a journey that requires discipline, self-awareness, and patience. By adopting a long-term perspective, cultivating mindfulness, fostering emotional awareness, and nurturing connections, you can steer your financial ship through even the choppiest of economic waters.

Recessions, despite their daunting nature, are not invincible Goliaths. By building and cultivating these mental habits, you can maintain mental clarity and make sound financial decisions irrespective of the economic climate. Remember, the goal isn’t just to survive the recession; it’s about learning, growing, and emerging stronger, ready to ride the waves of economic growth once more.

Additional Resources

TED Talks’- Understanding World Economics: A curated list of insightful talks from experts on the global financial crisis.

Bank of Canada: The central bank of Canada provides a wealth of resources and economic data, including information on how the bank responds to economic downturns.