Don’t Let Stress Hijack Your Finances

By: Carol Cho, CLU®, ChFC®, BFA™

“The best plan in a time of stress is the plan we made in a time of calm.”

As a behavioral financial advisor (and human being), I’ve seen how emotions can often get the better of us, especially during difficult times.

Life is unpredictable, and stress often comes uninvited. Yet, the plans we make in moments of calm can be our greatest assets when chaos ensues. When we are calm, we can think clearly, store new information, and make better decisions.

In other words, stress can make you feel… well, a bit dumb.

Why? Stress is known to significantly impact our prefrontal cortex. Studies show that chronic stress can reduce the size of this brain region by as much as 20%! This has a profound impact on our ability to make good decisions, especially sound financial ones.

When we are stressed, our brains shift into survival mode, making it tough to process information clearly. Have you ever felt so stressed you couldn’t breathe? So angry or anxious you couldn’t think straight? This is stress hijacking our prefrontal cortex.

When this happens, we might overlook important details or fail to consider long-term consequences, leading to impulsive, short-term thinking and poor decision-making skills.

For some, it can result in hasty decisions, like selling investments during a market dip or overspending to cope with stress. For others, it can lead to avoidance. Instead of facing financial challenges head-on, we might procrastinate or ignore issues, which can make problems worse.

And these days, it can often feel like the world is spinning out of control. It’s easy for our brains to hit the panic button, urging us to do something --- anything. THIS is what you do…

Take a deep breath --- This boosts blood flow and channels oxygen back to the prefrontal cortex, allowing us to think more clearly.

Remember that you have a plan --- A plan that was created precisely for times like these. A plan that accounts for good times, bad times, and everything in between.

By staying calm and trusting the process, we can navigate through uncertainty with confidence!