Friday, February 27, 2009

Anxious Over Money? Stop. Just stop.

Most of us feel at least some anxiety over money these days. No need to reiterate the cause; we all know what is happening. We are beset by what ifs. What if we aren’t saving enough money? What if we aren’t putting it into safe enough institutions? What if someone in the family loses a job? What if one of us gets seriously ill? What if the car breaks down?

To try to assuage all this anxiety, many well-intentioned people are handing out financial advice these days. (And some not-so-well-intentioned, so be careful.) But is anybody listening? It’s so easy to give advice, and so hard to follow it. Every day, each of us makes decisions on small and large issues that could impact our financial health in the future. Despite nodding solemnly about the necessity of building a rainy-day savings cushion in these uncertain times, many of us continue to spend as if our incomes are not likely to be threatened. Oh, maybe not on big items like supersized televisions and new cars. Most of us have gotten the message about those. But on the little items that add up to just as much. Why? Are we trying to keep life unchanged until the blow falls? Are we instinctively trying to store up plenty now, in case catastrophe strikes? Are we simply rebellious? Do we fantasize that somehow, everything will turn out okay, so we don’t actually have to change our habits? Is this another instance of incurable American optimism? Except that, along with refusing to change, we feel anxious.

But many of us have suddenly switched to saving instead of spending. So many that we are accelerating the downward spiral of the economy. And we’re still anxious. It feels odd, initially, to have changed a habit. When I had to drastically stop spending years ago during a period of sudden (relative) poverty, I grieved, actually grieved, for a while. I wandered through stores where I used to spend freely, and I felt very sorry for myself. And then gradually, my emotions caught up with my new habits. I no longer went shopping aimlessly in stores where I couldn’t afford to buy. My attitude and behavior began to fit my circumstances. What at first was a kind of purgatory became a new way of living. I don’t miss the old habits at all. This is good news, because some of us have to change our habits right away, whether we want to or not. Does this mean that we might suffer Starbucks withdrawal for economic reasons, and eventually not be sad over it? Yep. Not right away, perhaps. But humans are almost infinitely capable of adapting, even to unpleasant circumstances. The important thing to keep in mind is that while this economic downturn might force us into dramatically changing our lifestyles, we’re still in charge of our response to all this. We do not have to be anxious and miserable. We can choose to shape our emotional response to unpleasant circumstances. (I didn’t invent this idea. It’s a Holocaust survivor concept. And the point is, many people did survive and a positive attitude had a lot to do with it.)

Feeling anxious probably won’t change any outcomes. Anxiety over money is only useful if it galvanizes us to act to improve our situation. After that, it’s time to shut off the negative thoughts. We don’t want to develop a lot of cortisol to roam our bodies and weaken our immune systems. And we don’t want every day to be filled with fear. The answer is to do as much as we can to positively affect our situation, and then stop fretting. Feeling anxious has never solved a problem yet. So stop. Just stop.

Tuesday, February 24, 2009

Recession? What’s that?

Here’s something strange. Last weekend, I went over to Rockville, Maryland and had lunch out and dinner out. In between, I went to a popular shopping center, Congressional, which is an old strip mall that has a Whole Foods, a Harry & David, and an extravagant baby store, among other shops. After dinner, I went to an upscale shopping mall, White Flint, to a Borders bookstore. At all of these places, there were crowds. The restaurants were hopping. There was hardly a parking space to be found at either shopping mecca. And the line to pay at Borders was long, so people were buying, not merely browsing.

How to account for all this? I was visiting an affluent area, I guess. But if we believe the media reports these days, there aren’t any affluent areas left. Maybe these people hadn’t been rich enough to invest with Bernie Madoff and lose their shirts. Maybe they’d all just received tax refunds and were determined to spend them. Maybe all the holiday bills had been paid, and they had some extra money to throw around. Whatever the reason, I did not see any evidence of an economic crisis.

Nor have I back here in West Virginia, where people on average are poorer than they are in Montgomery County, Maryland. At least, not in the stores. They’re busy. So are the gas stations and the pizza restaurants. Even the karaoke bars that might actually be strip clubs. And on every return trip from Maryland, I pass by Charles Town Races and Slots, and there always are lots of cars turning in, and lots leaving. People still have enough money to gamble it away, even here in a poor state.

Where I see signs of the recession are when I do volunteer income tax preparation, and people have very little income to show for 2008. Or they have unemployment compensation. Or they tell me that they’ve been looking for work every day, and not finding any.

So, yes, the recession is real. But people still have to eat and buy other necessities, and they still do. And whether they are affluent or not, they still entertain themselves by eating out and shopping. I don’t know if this is good or bad, a sign of resilience or folly. We’ll see what the next few months bring.

Monday, February 16, 2009

Plan Ahead

I haven’t been adding to this blog for the last month because people have been dying and I’ve been attending funerals. And that does not include the other people who suffered losses to whom I sent condolences. It hasn’t been a good winter.

The first funeral had been planned and pre-paid years ago in all its details. I’ve never been a fan of such plans, but amazingly, this one worked. In the interim between signing on and now, the price of all the funeral appurtenances had skyrocketed. This family saved many thousands of dollars because they pre-paid. Plus, the bereaved family members left behind knew with certainty that the deceased person had wanted these exact arrangements. This was a blessing during a difficult emotional time. And since the person who died had been ill for a long time and medical bills were pouring in, this family didn’t have a lot of spare cash to fork over in a hurry for expensive arrangements. The result of pre-planning and pre-paying was no confusion for the family, no hurried decision-making, and no financial stress regarding the funeral.

The second funeral was arranged after a death that doctors would call predictable, but family members tend not to accept as inevitable. The person had serious health problems, but still, the end was a surprise. So no prior details had been worked out, and the funeral arrangements had to be decided during the stress of coping with an unanticipated death. In this case, the family was large and had substantial financial resources, so the huge expense of the funeral at today’s prices was not crippling. But all the decisions had to be made during the period of maximum shock and grief immediately after the person died. And the person who died may not have made known any wishes for funeral arrangements.

We all die, but many of us like to pretend we won’t. I remember a radio commercial years ago in which a man brings up the idea of life insurance and his wife gets upset and refuses to talk about it. Period. This is how many of us approach the inevitable outcomes of life. We pretend they won’t happen. We wince away from them. Women even go further into denial about death: we pretend that our husbands will outlive us. We do this even though men have a shorter average life span and husbands usually are older than we are, too. Statistically, the odds are that married women will end up as widows. But few of us plan for the long years of widowhood, or for the financial challenges of being a widow. Let alone for the funeral.

I’m not advocating one style of approaching one’s inevitable demise over another. Probably, the person who didn’t pre-plan knew that family members already had a reasonably clear idea of what would be the preferred funeral. And the person who pre-planned may have been over-meticulous. Funerals do tend to be generic, after all, even though different faiths and cultures have different customs. Regardless, both funerals were dignified affairs that did honor to the deceased.

But I do think that people ought to voice their opinions about what they want long before family members have to make the arrangements. If some of the arrangements are made in advance, so much the better, but sometimes, pre-paying has turned into a financial disaster because of dishonest funeral companies. It’s best to investigate state laws before pre-paying. In some states, all pre-payments must go into an escrow account, but if yours doesn’t offer that protection, pre-paying might be a major financial risk and should be avoided. Of course lately every investment seems like a risk, but an FDIC-insured savings account specifically earmarked for funeral costs is completely safe. Just make sure that the account is accessible to the family member who has to pay for funeral arrangements.

And by the way, leave a will. Nothing spells out your final wishes like a will, and inexpensive will forms are available online that are valid for all states. Living wills are available at hospitals. Durable powers of attorney are on the net, too, as are guidelines for funeral arrangements and local laws. It has never been so easy to plan ahead.