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7 Actions That Can Help Your Wallet in a Troubled Economy

7 Actions That Can Help Your Wallet in a Troubled Economy

    While the economic sky is falling, it’s still possible to make sure that your financial status is steady. In the past couple of weeks, I’ve been even more focused on the steps I’m taking to improve my personal finances. I’ve found a few actions that probably won’t make you a millionaire — but they will ensure that a rocky economy doesn’t have too much of an effect on your wallet.

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    1. Pay Down Debt

    When in doubt on your finances, paying down debt is always a good option. The simple fact of the matter is that it’s easier to get more credit down the road if you pay off debt now. I realize that many financial gurus say that an emergency fund is the best place to start. Well, from my own experiences in a rough economy when interest rates can do all sorts of crazy things, paying down debt can be a better plan. If an emergency comes up, you may need to take on more debt to cover it — but you’ll be better equipped to handle it.

    2. Polish Your Resume

    Even if you aren’t in a field that’s currently experiencing a high rate of turnover, you should pull out your resume and polish it. If you’ve already got a good-looking resume in place, you’ve got a head start on all sorts of things: job-hunting, applying for a second job, freelancing and more. It may not be worth hiring a resume coach or other professional, but it’s definitely worthwhile to find a few examples of good resumes and compare yours.

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    3. Take a Close Look at Your Retirement Plan

    401(k)s remain the popular retirement plan and, if you have one, it’s time to take a close look. The same goes for IRAs and any other assets you’ve purchased on your own. The market is very volatile now — it may be possible to pick up some impressive stocks on the cheap and it may be possible to watch the prices of the stocks in your 401(k) tumble downwards. As long as you aren’t retiring in the next few years, you can probably afford to ride this economic down turn out. The only stock-picking advice I can offer — and this applies to other assets as well — is that diversity is your friend. If your money is spread out, at least over a variety of stocks if not a variety of investment instruments, then a problem in a particular company or industry won’t wipe you out.

    4. Buy Stuff Now

    If you’ve got a big purchase coming up that you really do need to make, it’s better to make the purchase now rather than later. The U.S. dollar has already experienced significant inflation; it’s only going to get worse. That basically means your money is worth more now that it will be in a few months. You’ll get more bang for your buck if you can buy now. It’s a little counter-intuitive, I admit, and there are plenty of exceptions to this step. Shopping, however, can be good for your wallet in the long run. You get the added bonus of knowing that you’re improving the economy with every cent you spend.

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    5. Educate Yourself

    I think we’ve all gotten a crash course in terms like ‘MBS’ lately, although we may not know exactly what they mean. It’s time to start seriously studying your personal finance vocab though, up to and including economic terms. The U.S. government offers plenty of free resources that are perfect for teaching yourself more about personal finance. You’ll have to custom fit your educational plan to your own finances: a really great starting point, I think, is reading through my latest bank statement and checking up on all the things I don’t understand, down to calling up and asking a teller about specific fees.

    6. Invest in Your Future

    If you’re having some trouble in the working world, now might be the perfect time to head back to school and get that degree you always wanted. You can get bigger loans with better terms to live on for a few years — hopefully getting you through the worst parts of our current economic problems before going back on the job market. Brushing up on your skills (and learning new ones) can also be the difference between making enough money to make it through economic problems comfortably and having to take a job for which you are overqualified. You don’t have to go all out and enlist back in school. In some cases, reading a book is more than enough effort to improve your career situation.

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    7. Ignore the News

    The news media seems pretty much obsessed with each economic crisis, but you really can’t do much about the Dow Jones slipping or a bank failing. I recommend skipping the nightly news entirely, but muting just the business news might be enough. Some specialized news is, of course, worth paying attention to — if you’re invested in the stock market, it’s probably a good idea to read the stock reports. That’s really about it, though. Most of us have effectively no affect on any economic or business news: I know that even if I send a letter to my Congressman about the bailout package, I’m probably not going to affect his final decision. It’s just not worth paying attention to all that depressing news.

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    Last Updated on July 17, 2019

    The Science of Setting Goals (And How It Affects Your Brain)

    The Science of Setting Goals (And How It Affects Your Brain)

    What happens in our heads when we set goals?

    Apparently a lot more than you’d think.

    Goal setting isn’t quite so simple as deciding on the things you’d like to accomplish and working towards them.

    According to the research of psychologists, neurologists, and other scientists, setting a goal invests ourselves into the target as if we’d already accomplished it. That is, by setting something as a goal, however small or large, however near or far in the future, a part of our brain believes that desired outcome is an essential part of who we are – setting up the conditions that drive us to work towards the goals to fulfill the brain’s self-image.

    Apparently, the brain cannot distinguish between things we want and things we have. Neurologically, then, our brains treat the failure to achieve our goal the same way as it treats the loss of a valued possession. And up until the moment, the goal is achieved, we have failed to achieve it, setting up a constant tension that the brain seeks to resolve.

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    Ideally, this tension is resolved by driving us towards accomplishment. In many cases, though, the brain simply responds to the loss, causing us to feel fear, anxiety, even anguish, depending on the value of the as-yet-unattained goal.

    Love, Loss, Dopamine, and Our Dreams

    The brains functions are carried out by a stew of chemicals called neurotransmitters. You’ve probably heard of serotonin, which plays a key role in our emotional life – most of the effective anti-depressant medications on the market are serotonin reuptake inhibitors, meaning they regulate serotonin levels in the brain leading to more stable moods.

    Somewhat less well-known is another neurotransmitter, dopamine. Among other things, dopamine acts as a motivator, creating a sensation of pleasure when the brain is stimulated by achievement. Dopamine is also involved in maintaining attention – some forms of ADHD are linked to irregular responses to dopamine.[1]

    So dopamine plays a key role in keeping us focused on our goals and motivating us to attain them, rewarding our attention and achievement by elevating our mood. That is, we feel good when we work towards our goals.

    Dopamine is related to wanting – to desire. The attainment of the object of our desire releases dopamine into our brains and we feel good. Conversely, the frustration of our desires starves us of dopamine, causing anxiety and fear.

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    One of the greatest desires is romantic love – the long-lasting, “till death do us part” kind. It’s no surprise, then, that romantic love is sustained, at least in part, through the constant flow of dopamine released in the presence – real or imagined – of our true love. Loss of romantic love cuts off that supply of dopamine, which is why it feels like you’re dying – your brain responds by triggering all sorts of anxiety-related responses.

    Herein lies obsession, as we go to ever-increasing lengths in search of that dopamine reward. Stalking specialists warn against any kind of contact with a stalker, positive or negative, because any response at all triggers that reward mechanism. If you let the phone ring 50 times and finally pick up on the 51st ring to tell your stalker off, your stalker gets his or her reward, and learns that all s/he has to do is wait for the phone to ring 51 times.

    Romantic love isn’t the only kind of desire that can create this kind of dopamine addiction, though – as Captain Ahab (from Moby Dick) knew well, any suitably important goal can become an obsession once the mind has established ownership.

    The Neurology of Ownership

    Ownership turns out to be about a lot more than just legal rights. When we own something, we invest a part of ourselves into it – it becomes an extension of ourselves.

    In a famous experiment at Cornell University, researchers gave students school logo coffee mugs, and then offered to trade them chocolate bars for the mugs. Very few were willing to make the trade, no matter how much they professed to like chocolate. Big deal, right? Maybe they just really liked those mugs![2]

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    But when they reversed the experiment, handing out chocolate and then offering to trade mugs for the candy, they found that now, few students were all that interested in the mugs. Apparently the key thing about the mugs or the chocolate wasn’t whether students valued whatever they had in their possession, but simply that they had it in their possession.

    This phenomenon is called the “endowment effect”. In a nutshell, the endowment effect occurs when we take ownership of an object (or idea, or person); in becoming “ours” it becomes integrated with our sense of identity, making us reluctant to part with it (losing it is seen as a loss, which triggers that dopamine shut-off I discussed above).

    Interestingly, researchers have found that the endowment effect doesn’t require actual ownership or even possession to come into play. In fact, it’s enough to have a reasonable expectation of future possession for us to start thinking of something as a part of us – as jilted lovers, gambling losers, and 7-year olds denied a toy at the store have all experienced.

    The Upshot for Goal-Setters

    So what does all this mean for would-be achievers?

    On one hand, it’s a warning against setting unreasonable goals. The bigger the potential for positive growth a goal has, the more anxiety and stress your brain is going to create around it’s non-achievement.

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    It also suggests that the common wisdom to limit your goals to a small number of reasonable, attainable objectives is good advice. The more goals you have, the more ends your brain thinks it “owns” and therefore the more grief and fear the absence of those ends is going to cause you.

    On a more positive note, the fact that the brain rewards our attentiveness by releasing dopamine means that our brain is working with us to direct us to achievement. Paying attention to your goals feels good, encouraging us to spend more time doing it. This may be why outcome visualization — a favorite technique of self-help gurus involving imagining yourself having completed your objectives — has such a poor track record in clinical studies. It effectively tricks our brain into rewarding us for achieving our goals even though we haven’t done it yet!

    But ultimately, our brain wants us to achieve our goals, so that it’s a sense of who we are that can be fulfilled. And that’s pretty good news!

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    Featured photo credit: Alexa Williams via unsplash.com

    Reference

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