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My spending has doubled in the past year! How can I avoid a personal recession?

My spending has doubled in the past year! How can I avoid a personal recession?

| November 10, 2022
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4-minute read time

Recession could be coming: 6 months of declining Leading Economic Index (LEI) and 2-year treasury yield and 10-year treasury yield inverted. “Historically, the LEI fades into every recession, outside a one-time huge economic shock like COVID-19,” writes economist, Logan Mohtashami, who created the six-red flag economic recession model. In early August, Logan raised the sixth recession red flag, despite strong jobs reports.

Spend like you mean it

The best way to avoid a personal recession is to live within your means and not take on too much debt. Even if the Fed can orchestrate a soft-landing and avoid a recession, you can use this gut check to review budgets with your financial planner and make sure your spending is intentional. Spend money on goods or experiences that you planned for. Make a list of intentional goals you plan to achieve for the next five years.

Give every dollar a name

Whether you spend your money on a daily cup of premium coffee, a mid-year trip to Thailand, or a once-in-a-lifetime periodontal surgeon – be mindful about what you spend. It’s okay to treat yourself but to avoid buyer’s remorse avoid purchases that are sudden and emotionally driven.  

Behavioral finance expert Brian Portnoy, in his book How I Invest My Money, urges investors to explore their own “money stories”. When one makes a bad decision, it is hard to talk about because we feel icky. It’s hard to confide our guilt with even those closest to us since they tend to be most affected by our bad decisions leading us to stay silent in shame.

Investment Advisor Representative David Treece talks about clients feeling money shame and how it is healthy to talk about it rather than keep it locked inside.

During a discovery meeting with a couple, David asked a follow-up question about debt, which brought to light that she was keeping her debt hidden from her partner. Even though this caused tension and uneasiness within their relationship, they were able to construct a plan with David to pay off the debt and get back on track. Sometimes all that’s needed is a little nudge to do the right thing. Doing the right thing can be the best thing not only for our wallet—but our health too.

Change the way you think to be healthy, wealthy, and wise

"Early to bed and early to rise, makes a man healthy, wealthy, and wise." John Clarke, 1639 book of English and Latin proverbs

The pattern I see with going to bed early and waking up early is getting time to yourself. This presents opportunity for mindfulness through less distraction. Mindfulness expert and founder of the popular app, Headspace, Andy Puddicombe describes the transformative power of refreshing the mind for 10 minutes a day, simply by being mindful.

If you take a pause from your day-to-day busyness to reflect and accept the certainty of uncertainty, it can help reduce both financial and emotional stress. This gives you mental and emotional space and strength to make better decisions about both money and our lives.  

“Hard choices, easy life. Easy choices, hard life.” — Jerzy Gregorek

Tim Ferriss, author of The 4-Hour Workweek, offers his personal practice of  “fear-setting” to take-on seemingly insurmountable dreams and sometimes grueling tasks. It helps you be truthful and honest about the worst-case scenarios associated with something challenging or difficult you want or need to face. Like leaving a toxic relationship, or taking up Bachata lessons, or broaching the conversation with a loved one that you detect the early signs of Alzheimers—this exercise works.

Underachieve your way to success

Taking the first step is the hardest and can feel unnatural. So, plan to underachieve to build small victories that ultimately lead to the larger goal at hand. Tom Brady and the Patriots orchestrated one of the biggest comebacks in Super Bowl history by coming back from a 25-point deficit at halftime in SB 51 by systematically scoring 31 points executing designed plays and correcting the mistakes they made in the first half.

Start with small specific goals then gradually build to the big ones

  1.  Identify your top 3 priorities over the next year, 3-years, and 5-years under the headings of Health, Wealth, and Wisdom.
  2. Check-in regularly with yourself and your trusted partner/professional to see how you are tracking. 
  3. No shame. No judgment. This is an organic process and it is good to prim and trim to readjust your goals.

Mapping and tracking your priorities reduces the stress of not knowing and just reacting during a recession or when spending gets tight. By not overreacting to negative market news and reviewing your plan you couldavoid selling or buying in an emotional state which can help you preserve and increase your wealth.

So, put your pen to paper and map out whats important to you and your family.

Make sure your goals scare you enough to get you excited just thinking of completing them. Most importantly, dont feel like you must go it alone. Financial advisors are experienced in helping you overcome your personal recession so you can move toward financial freedom.

Please be in touch if you'd like to chat about your goals. I am here to help.

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Photo by Andrea Piacquadio

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