Tip for Surviving Economic Adversity in 2023
Originally a thread on X/Twitter:
2022 was a horror story with inflation being the boogeyman and the markets being a serial killer on the loose.
Surviving economic adversity is a life skill so here are a few tips to help you navigate 2023 and stay mentally strong.
Tip #1: Internalize that cycles are normal
There is no permanence to a particular economic state. Good times come and go. Bad times come and go. The first step to navigating a tough economic environment is to realize that it too shall pass.
Since WWII, the US went through a recession an avg of every 58 months. At this pace, each of us will live through 10-15 periods of economic disruption in our adult lives.
But our most recent expansion lasted 128 months which caused many people to forget that cycles are normal.
But economic down-cycles typically turn around quickly.
The 1873 recession lasted 65 months and the Great Depression lasted 43 months. But since WWII, the average recession has lasted 11 months. And post-recession, an economy can rebuild and enter a new period of expansion.
Tip #2: Widen your frame of reference
Information is abundant and available real time. But a market sell-off or new print of economic drivers can easily create anxiety.
Focusing on negative news misses both the bigger picture and the micro picture.
The bigger picture is all about your ability to achieve your long-term goals. Are you gaining skills that will advance your career over time? Are you investing in asset classes that systemically perform well over long durations. If “yes”, everything will eventually work out.
The micro picture is about your situation today. Are you currently employed and able to pay your bills? Are there ways you can cut back on expenses or earn more money to reduce financial stress? If “yes”, everything will eventually work out.
If the answer is “no” then survival is about making big moves to position yourself better. It’s not easy nor always possible, but making big moves is sometimes the best “out”.
The key is to pay less attention to negative news and focus on your situation and moves you can make.
Tip #3: Don’t focus on all-time highs
Assets values go up and asset values come down. The path up is rarely linear and the path down isn’t either. Rarely is a peak or a fall fully justified.
What matters is an asset’s future potential, not the value it achieved in the past.
Experience teaches you that anchoring to all-time highs is a fools game and one that can mentally crush you.
Focusing on the fundamentals of your underlying assets and whether they are likely to appreciate or depreciate going forward is all that matters.
Tip #4: Focus on what you can control
Anxiety is the enemy of happiness and stems from uncertainty.
Anxiety arises when our minds focus on topics that we have no power over. We worry about everything bad that might happen and lose all sense of where we can shape outcomes.
Remember that thoughts create emotions. When we think negatively it creates a biological response that presents as negative emotions.
But the opposite is also true. When we focus on what we can control, we create a biological response that presents as positive emotions.
This isn’t about denial. It isn’t about ignoring the reality of a bad situation. It’s about focus and attitude.
You might not like the situation you’re in, but focusing on what you can control and showing up with a can-do mindset can massively reduce your anxiety.
Tip #5: Avoid negative people
Surround yourself with realistic people who lift you up. Unbridled optimists aren’t helpful but people who fixate on how things could get worse are toxic.
Realists understand that over a lifetime there are mood good days than bad.
During down cycles there will be times that life will feel out of control and you’ll feel powerless to affect whatever may happen next.
Having the right support system will remind you that you didn’t come this far to only come this far and that the future has yet to be written.
Tip #6: Celebrate small wins
When it feels like bad news is dominating your life, small wins can give you an important boost. Small wins can provide a break from all the stress and negativity you’re dealing with and motivate you to keep going.
It’s an unfortunate truism that during times of stress most people will mentally blow problems out of proportion and make them seem unsolvable. Small wins can break this mental mindset by showing that the situation isn’t completely hopeless.
Just remember that no journey through life consists entirely of roses and rainbows. Good and bad times are incomplete without each other so learning to cope with the bad to get to the good is an important life skill.
