We are afraid of the coronavirus pandemic. Our health is being threatened. Our loved ones are in danger. Our livelihoods are in jeopardy. Our investments are in free-fall. We are being told to socially isolate. We have no idea when this will end.
It is all quite terrifying.
When we perceive a threat, our brain floods our bloodstream with hormones such as adrenaline, which gets us ready to protect ourselves. While this works great when we are being chased by a predator, our survival response can wreak havoc on our financial lives. Our animal instincts are the primary reason we engage in self-destructive financial behaviors. When we are emotionally flooded, we become rationally challenged. When we are scared about the economy or our finances (or excited for that matter), our animal brain takes over and we are vulnerable to financial self-destruction.
So what can you do when you are terrified about your finances? Here are 5 tips to help you engage in rational financial decisions.
Tip No. 1: Put time between your impulse and your action.
Financial decisions made when we are emotionally flooded are almost always ill-advised. It is essential to calm down and get your rational brain back online. A great way to do this is to find a quiet place and take a few deep breaths. When we are stressed, we take shorter, shallower breaths. Taking several deep breaths can initiate a relaxation response. As you exhale, repeat in