bUSINESS & FINANCE
If you’re like a lot of people, you probably found it easy to save money the last few months. Many stores were closed, and working from home meant saving on gas and other commuting costs.
So you might be looking at your finances now and wondering why the picture isn’t brighter.
Assuming you’ve paid down debt and have an emergency fund, check where you kept those savings. If they stayed in your bank account or even high-yield savings, you won’t see the needle move.
To make progress, you need compound interest, which helps you build wealth when you invest, says Monica Sipes, a certified financial planner and senior wealth advisor at Exencial Wealth Advisors in Frisco, Texas.
A savings account alone or staying in cash generally will not keep pace with inflation.
The wealth you can build through the stock market makes the difference between Warren Buffett and the average person who has good savings habits yet shies away from investing.
The pandemic sparked a recession that began in February. And the Great Recession is still on the minds of a lot of novice and risk-averse investors, who have a lot of fear around what-ifs.
Instead of giving into the anxiety, though, people need to look at the patterns of the stock market over many decades. “That’s super important,” Sipes said. “Long-term investing will win over time, and investment returns are fairly predictable over the long term.”
In fact, Sipes says, capital markets are one of the greatest wealth creation engines of all time and they are very accessible.
The roadblock for many younger investors is the fear that they’re not knowledgeable enough.
“People assume that to get started you have to have an absolute command over investing,” said Jennifer Dempsey Fox, president of Bryn Mawr Trust Wealth Management in Bryn Mawr, Pennsylvania.
Asking questions is a new investor’s best strategy.
It may sound trite, but Fox says there are no stupid questions about investing — especially if it’s holding you back from the next step.
Young people are often confronted with an overwhelming number of decisions. “Where should they put the money first?” said Adam Vega, a CFP at Goldman Sachs Personal Financial Management in Miami.
“Pay off loans? Save? What I’ve seen them do is start, but start too late,” said Vega. “They’re in their 40s or 50s when they finally begin investing.”
If you wait until you’re more settled and more knowledgeable, “you’ve lost 20 years of saving potential,” Vega said. It seems to be a more or less static problem for this age group, and one Vega does not see changing.
Good financial habits are a great starting point — but if you want to meet substantial goals, such as retiring, starting to invest as early as you can is the best way.
Beginning early, Vega says, lets you take advantage of tax deferrals, compound interest and interest on your interest.
As the stock market cratered again due to crashing oil prices and coronavirus fears, many investors grappled with pulling money out of equities and stock funds and moving it to safer investments, including bond funds, money market accounts — and cash.
It’s been an ongoing quandary as investors were already skittish after a roller-coaster first week of March that saw the S&P 500 index swing up or down more than 2.5% for four days straight.
Emotional reactions from investors are certainly not unprecedented — they need help and want answers.
“In increased times of market volatility, we tend to see increased digital and phone activity from customers,” Fidelity Investments, the largest 401(k) provider in the U.S., said in a statement to CNBC. “This is no different from previous periods of market volatility and is to be expected given the need for additional guidance or reassurance on an existing investment plan.”
While Fidelity does not monitor daily trading activity within its retirement products, Alight Solutions has been tracking 401(k) data since 1997. It found trading activity in 401(k) retirement plans rose to nearly 16 times greater than average at the end of February, an all-time record, and has fluctuated between normal, high and moderate levels since then. Monday will likely see another bumpy ride for 401(k) trading activity, Alight said.
All of this makes it difficult for many investors to heed the advice of financial advisors, who often say to “stay the course” when the markets are volatile. With the market’s roller-coaster ride, long-term investors who have their money in retirement accounts shouldn’t panic. Rather, consider taking these proactive steps — some do’s and don’ts — right now:
Do think about when you’ll retire. Your “time horizon” is key. Someone in their 20s should be much more aggressive than someone in their 50s or 60s.
“For those in their 20s and 30s and even some in their 40s, they will have decades until retirement and should take market swings in stride,” said Rob Seltzer, a CPA at Seltzer Business Management in Los Angeles. “They are a small blip on the radar, so to speak, during their careers.”
If you’re less than five years away from retirement or have already retired, you should be more conservative with your investments.
Do check your asset allocation. Younger investors need to keep in mind that the money in their 401(k) plans won’t have to be tapped for a long time.
“The drops may present some opportunities,” said certified financial planner Roger Ma, founder of Lifelaidout and author of “Work Your Money, Not Your Life.” “For those whose asset allocation has moved far from their original targets, they may want to adjust future purchases toward a higher percentage of stocks.”
Older investors may want to consider moving some stock funds that have over-performed and buying more fixed income investments.
“As people get older and get closer to retirement, they should gradually tweak their allocations to have a larger allocation to bonds,” Seltzer said. However, if you’re investing in a target-date fund in your 401(k), the allocation of stocks and bonds automatically becomes less aggressive and more conservative overall as you get closer to your retirement date.
Do review your contribution rate. “For most clients, it makes sense for them to stick with their schedule of putting money in their 401(k) every couple of weeks,” Ma said. You want to ensure you are contributing enough money to your 401(k) account to get a matching contribution from your employer, if one is offered. Now is a great opportunity to buy stocks “on discount” and also get “free money” from your employer by putting in your own dollars.
Remember, you can’t time the market. “You never know when the market is going to have a good day,” said Adam Grealish, director of investing at robo-advisor and financial technology firm Betterment. “Between 1993 and 2013, the S&P 500 had an annual return of 9.2%.
“But if you had missed just the 10 best market days during that time period, your annual returns would have dropped to roughly half, or 5.4%,” he added. “If the market is going to have a good day, then you want to be there for it — not sitting out on the sidelines.”
Don’t make knee-jerk changes. Research has shown that nearly one-third of investors have admitted to making an emotional decision to sell in a 401(k) plan — and then regretted it. And almost half of those who sold described their investment knowledge as “expert or advanced.”
Take advantage of tools that your company may offer with its 401(k) plan, including access to personal investment advice and/or professionally managed accounts.
Seeking the help of an investment advisor can help remove the emotion of investing during volatile market times.
“Don’t rush to make decisions,” said Zaneilia Harris, CFP and president of Harris & Harris Wealth Management Group in Upper Marlboro, Maryland. “Contact your financial advisor and have a conversation about the markets and your financial goals.
“They are part of your personal advisory team and there to educate and counsel you on what to do now,” she added.
Don’t take an early withdrawal. It’s almost never a good idea to cash out. If you take a distribution from your 401(k) and you’re under age 59½, you’ll have to pay ordinary income taxes and a 10% penalty. In addition, by taking the money out early, you’re also forfeiting tax-advantaged growth. An early distribution from a traditional 401(k) account can also trigger a higher tax bill.
Don’t get distracted from your goals. Follow these wise words from Morningstar’s director of personal finance Christine Benz: “The right response to market downdrafts really depends on you, your life stage, and what your financial priorities are.”
Generally, money for short-term financial goals should be in safe investments, not stocks. Meanwhile, funds for intermediate and long-term needs, including your retirement, can be invested in riskier assets, including stocks.
If you’re less than five years away from retirement, you want to be more focused on protecting your assets, which may mean keeping more of your 401(k) plan money in a stable value or short-term bond funds instead of stock funds.
I recently spoke to First National Horse and Buggy about their innovation efforts. Here are two innovative ways the company is planning to improve their customers’:
It’s Like Installing an Escalator on a Horse Buggy
I didn't really talk with FNHB, of course, because there is no FNHB—horse buggies are all but extinct (except in a couple of places in the US).
Improving the experience of an extinct (or soon-to-be extinct) product is like installing an escalator on a horse buggy. It may add convenience for existing users, but there are better places to put your money.
Yet, that’s exactly what banks and credit unions are doing.
Product Innovation Versus Customer Experience Improvement
In its State Of The Financial Services Industry 2020 study, Oliver Wyman presents an analysis of how banks allocate their investments for change initiatives. According to the consulting firm, banks allocate an equal amount—10%—to customer experience improvement and innovation/scaling up new businesses.
I don’t think this is right.
First off, in Cornerstone Advisors’ What’s Going On in Banking 2020 study, nearly eight in 10 financial institutions said that “improving the customer experience” was a very important priority for their fintech partnership and collaboration efforts, while just three in 10 said that expanding their product line was a very important objective.
In addition, drawing on a study from the University of Cambridge about the use of AI in financial services, Finextra reported:
“A higher share of fintechs tend to be creating AI-based products and services, employing autonomous decision-making systems, and relying on cloud-based systems. Whereas incumbents appear to focus on harnessing AI to improve existing products.”
It’s hard to believe, based on these data points, that banks put as much money in “scaling up new businesses” are they do in enhancing the customer experience of their existing products—e.g., checking accounts.
Checking Accounts Are On Their Way to Extinction
Considering that the FDIC’s last measurement of unbanked consumers in the US—i.e., consumers without a checking account—was just 6.5% of the population, it’s hard to believe that checking accounts are on their way to extinction.
But they are.
I’ve said it before and I’ll say it again: Checking accounts have become paycheck motels—temporary places for people’s money to stay before it moves on to bigger and better places.
The features and functionality of today’s checking accounts aren’t good enough. Feature like viewing balances without logging in and turning the debit card on and off through the mobile app are nice but they’re like the escalator on the horse buggy.
The problem is that—despite the slew of mobile banking features that keep coming out—the value that a checking account provides falls short of what consumers want and need.
The New Checking Account Must Be Service-Focused
What most consumers need is a brain.
Feel free to interpret that as you like, but what I mean is that they need a “financial brain”—a way to manage the transactional aspects of their financial life.
Apple’s mobile wallet is kind of a brain. It provides payment conveniences and offers some “intelligence” (e.g., PFM-like capabilities), but it: 1) Doesn’t enable direct payroll deposit, and 2) Is closed-loop (i.e., rewards are in the form of Apple Cash and other cards the consumer owns isn’t integrated).
The bigger issue with Apple’s—and other providers’—mobile wallets is that they’re too payment-focused. The successor to the checking account will be service-focused, not just transaction-focused.
What kind of services? In a study conducted by Cornerstone Advisors, more than half of Millennials expressed interest in getting subscription cancelling, bill negotiation, and purchase protection services bundled with a checking account from a bank or credit union. And more than seven in 10 are interested in price match guarantees bundled with a checking account.
In some respects, this is 20th century thinking.
Today, however, the only way they (and the banks) can conceive of receiving (and providing) those services is by having them “bundled” into the construct we call a checking account.
Too many bankers think that consumers value having more data about their financial lives thrown at them. Maybe some do, but most just want the “job to be done” done.
The successor to the checking account will have: 1) universal payments (B2C, P2P, bill pay) capability; 2) rewards optimization; 3) account-to-account money movement; 4) receipt management; and 5) value-added service provisioning (see above for examples).
No one in the US market is even close to having something like this.
Other pundits and experts have beaten me to the punch on the “autonomous finance” label (see here and here), but everyone seems to think that AI and machine learning hold the keys to making this a reality.
I’m not so sure about that. Connectivity and integration is the bigger barrier and enabler. This vision ain’t becoming a reality via screen scraping.
And it’s another reason why the Visa acquisition of Plaid is so important. The realization of this vision requires integration with merchants and other non-financial services players. Can FDX accomplish that?
Payroll Processing is the Key to Disruption
Remember our discussion at the beginning of the year about moats? A moat is a Buffettism (Warren, not Jimmy) for a competitive advantage.
Checking accounts’ moat is the paycheck. As long paychecks can’t be deposited directly into a (non-bank) mobile wallet, checking accounts will fight off extinction.
(FYI, there’s one Quora user who believes that there is a workaround available to directly deposit a paycheck directly into Apple Pay.)
This won’t last.
Look for Amazon or some other Big Tech firm to acquire a payroll processor like ADP and seek to control funds at the source: the paycheck. When that happens, the checking account’s days are numbered.
The Slow Death of Checking Accounts
The dying out of checking accounts will be a decade-long process. Here’s how it will play out:
Expect this process to take 10 to 15 years. By the way, this process should sound familiar to bankers, as it’s exactly what happened with mobile banking.
Final word: This new replacement to checking accounts could be a great opportunity for the emerging set of core app providers like Finxact, Neocova, Nymbus, and Technisys to leverage cloud-based technologies and create a competitive advantage over the existing core providers.
Understanding the basics of car insurance can be difficult enough, let alone understanding the lesser-known intricacies involved with the guidelines, policies and procedures of today’s insurance providers. Below, we’ve outlined some important, yet oftentimes obscure, insurance facts, so you’re “in-the-know” when you’re on-the-go.
Fact No. 1: Your credit impacts your insurance rates
Believe it or not, your credit may impact your insurance rates. Insurance providers have found that certain credit characteristics for an individual are useful to predict of how likely it is that the individual will have an insurance claim.
These characteristics are not the same ones that a bank uses to measure lending risk, but rather, insurers may use credit-based insurance scores in conjunction with other variables to assess the likelihood of claims submitted. These variables may include age, driving record, claims history, place of residence, the type of car and the average miles driven, among others.
As a general best practice, do what you can to improve your credit, be sure to monitor your credit report on a regular basis, and contact the credit bureau to clear up any errors.
Fact No. 2: Brand loyalty can cost you
If your mind-set about automobile insurance is “set it and forget it,” you might want to reconsider. Years ago, insurance companies evaluated a short list of factors when calculating your premiums. Today, that list has grown to a confusing labyrinth of criteria causing insurance rates to differ dramatically from provider to provider.
Instead of allowing your policy to automatically renew, comparison shop once a year to ensure you’re getting the best auto insurance rates. Some companies provide policies direct to consumers, while others sell policies through agents or brokers.
An easy place to start is by getting auto insurance quotes online, which could save you money. If you’re worried that lower rates mean less coverage or poor service, don’t be. Today, there are plenty of insurance companies that offer affordable premiums, well-rounded coverage and excellent customer service.
Fact No. 3: Stopping payment? You’ll pay in the long run
If you think switching car insurance companies is as easy as stopping payment, think again. Sure, your policy will cancel, but your existing insurance company could report you to the credit bureaus for nonpayment, damaging your credit score in the process. What’s more, your insurance history will reflect a cancellation which may cause a new provider to decline your application or charge you higher premiums in the future.
Instead, be sure to complete the necessary paperwork with your existing provider, such as a policy cancellation form, and time it right by starting your new policy on the date your old policy ends.
Fact No. 4: Your car insurance company can cancel or non-renew at any time
Your insurance company can cancel your policy at any time if you violate one or more of its guidelines during your policy period. Same goes for nonrenewal. Things such as failing to pay your premium on time, losing your driver’s license due to suspension or revocation, submitting too many at-fault claims, or misrepresenting your driving history or past insurance claims could all be reasons for cancellation or nonrenewal.
In either case, your carrier must notify you in writing within a time frame legally required by your state. When it comes to cancellation, your insurance company is required by law to state the reason, not so with nonrenewal. If you want a reason but aren’t provided with one, you must send your insurer a written request. If you believe you’ve been unfairly treated, you may have legal recourse through your state’s department of insurance.
And don’t forget about your “binding period,” the time when your insurance company is especially conscious of your risk level. The binding period usually occurs within 60 days following your auto insurance application. If your insurer finds a discrepancy on your application, on your driving record or with your credit, it can cancel your policy.
Fact No. 5: You could save money by paying your car insurance premium in full
You might be surprised to learn most car insurance companies charge an administrative fee to break up your premium payments into installments, such as paying every six months, every three months or every month. The more you divvy up your payments in installments, the more these “convenience fees” add up, and your once-cheap car insurance can now cost substantially more. There may also be charges for the method of installment payment you choose, such as automatic bill pay or pay-by-phone.
Be sure to ask your provider what its administrative fees are. If it makes financial sense and you can swing it, pay your premium up front and in full. Not only will you avoid the added expense, you won’t have to worry about missing a payment, or being late on payments, both of which could be grounds for cancellation. Other factors, such as the type of car you drive, can cost or save you money on car insurance as well. Safety features, driving habits and increasing your deductible can also have an effect on the bottom line.
If you manage your own money, you are like most other Americans, according to the new CNBC Invest in You survey released Monday.
In fact, only 1% of those polled said they use a financial advisor.
Yet how do you know if it is the right move? And if you think you want an advisor, what do you need to look for?
“Finding a financial advisor isn’t something you can be pushed to do,” said certified financial planner Winnie Sun, president and founder of California-based Sun Group Wealth Partners.
“You’ll know when the time is right.”
The remaining 99% of those surveyed said they either do it themselves; have their spouse, parent or someone other than a financial advisor handle it for them or didn’t answer. The national poll, conducted for CNBC and Acorns by SurveyMonkey Oct. 21–25, surveyed 2,776 adults and had a margin of error of plus or minus 3 percentage points.
What’s holding people back?
There are a number of reasons people are staying away from getting professional financial help, experts said.
For one, there is a lot more information online these days, compared to past generations, so people feel like they can do it themselves, said
Sun, a member of the CNBC Digital Financial Advisor Council.
Younger Americans are also saddled with more debt, like student loans, so they don’t have a lot to invest, she said.
Then there is the cost. Many people think using a financial advisor is expensive and only for the wealthy, said certified financial planner Douglas Boneparth, president and founder of Bone Fide Wealth in New York.
Plus, people may not understand the different functions a financial advisor can provide, he added.
“They think it’s specifically about managing money and not about receiving financial advice and financial planning,” said Boneparth, who specializes in financial planning for millennials and authored the book “The Millennial Money Fix.”
For those who don’t think they have enough assets, there are a growing number of advisors that will work with a less-wealthy population, he pointed out.
You can also get complimentary consultation and work with planners on an hourly basis.
When to hire an advisor
The decision on when to hire a financial advisor is a very personal one and isn’t necessarily tied to a certain amount of money saved or a specific age.
Boneparth, also a member of the CNBC Digital Financial Advisor Council, said it’s about “becoming financially-planning ready.”
“It has to do with where they are in terms of responsibilities in their life,” he explained.
“The moment in which you are financially-planning ready is when your responsibilities go up and your free time goes down.”
He called it an inflection point — when you may have taken on things like marriage, children and buying a home and find yourself with less time and energy to deal with handling your money and investments.
For Sun a good indication on when you should speak to someone is when you feel like you want to make a difference in your life and aren’t sure where to go. Another signal is if the information you are getting online isn’t speaking to you or making any sense, she added.
“You don’t want to make a mistake,” she said.
Vetting an advisor
The most important thing to look for in a financial advisor is someone you can have a conversation with and listens to you, Sun said.
Experience also matters. You’ll want someone who has been in the industry at least through one recession, she advises.
“It is really easy to manage money when the market is doing well. It is harder when the market isn’t doing well,” Sun said.
There are also different types of investment professionals.
Brokers, who are regulated by the Financial Industry Regulatory Authority (Finra), buy and sell assets like stocks for their clients. Finra is overseen by the Securities and Exchange Commission.
Investment advisors, who are overseen by the SEC and state securities agencies, manage portfolios and provide investment advice.
Boneparth suggests looking for a fee-only certified financial planner, who must pass a rigorous exam and adhere to a professional code of conduct. A fee-only advisor doesn’t receive a commission for selling you a product.
However, thanks to the SEC’s new investor protection rule, all investment advisory firms registered with the agency must now act in the best interest of their clients.
Once you have a name, check him or her out first. You can do a background check to see how long the advisor has been in practice and if there have been any complaints.
Finra and the SEC both have websites that allow you to do that. To verify someone’s CFP certification and background, go to the CFP Board’s website.
“There are so many advisors out there,” Sun said.
“You want to take the time to do your due diligence to make sure that the two of you can work together and it’s a long-term relationship.”
Investing on your own
If you decide to stick it out it on your own, make sure you are in a position to make informed decisions, Boneparth said.
That means asking yourself three questions when faced with deciding on an investment or other financial move: Can I afford it? Will I feel good about doing it? Does this decision make sense?
Also, don’t move forward without making sure you have a solid foundation first, he said. That includes mastering your cash flow and your budget.
“If you can do that and know what your goals are, you can then go leverage these tools out there to invest, have an estate plan and manage your own taxes and insurance,” Boneparth said.
For Sun it’s important that do-it-yourself investors keep it simple and stay diversified.
That could mean something like a target-date fund in your 401(k), which is tailored to your age and retirement year.
“At some point it probably pays to have someone look at it who does this on a day-in-and-day-out basis,” said Sun.
“It is much more expensive to make a mistake than the price you pay to have money properly managed.”
There’s nothing like the clean slate of a new year to inspire us to do better. Unfortunately, knowing what to do doesn’t necessarily translate into getting it done.
If you’re looking to build or rebuild credit, there’s no better time than now. Here are some habits to develop — and some tips on how to make them stick.
1. Pay on time
Even one missed payment can tank your credit because payment history is the biggest factor in your score. Worse, a late payment can stay on your credit report for up to seven years. So getting payments in on time is more important to your credit than any other single thing you can do.
Signing up for automatic payments can work well for monthly bills with a set amount, like a car payment. Automatic payments for bills with varying balances, like credit cards, could lead to overdrawing. On those, you could opt to autopay the minimum to ensure the account is never late and make a separate payment to keep your balance down. You can also set up email or text reminders about approaching due dates.
If a late payment is unavoidable, Terry Griffin, a senior vice president at credit bureau Equifax, recommends contacting the creditor to try to negotiate a lower minimum or interest rate temporarily.
2. Keep an eye on balances
Ideally, your credit card balances should stay well under 30% of your credit limits. Credit utilization — the percent of your credit limit you use — is the second-biggest factor in your score.
Many cards let you set alerts to let you know when your balance nears a percentage of your limit or a dollar amount you choose.
Of course, it’s best to pay the full balance every month. In reality, your refrigerator may fail the same month that your car needs a new transmission. You might need to carry a larger-than-normal balance for a while.
Whittling down balances will help your credit quickly. As soon as lower balances get reported to the credit bureaus, your score won’t penalize you for the past.
3. Save for a rainy day
Information about your savings isn’t in your credit report, so it does not directly affect your credit score. But having an emergency fund can protect your score by letting you keep up with bills after a job loss or avoid a high balance when you have unexpected expenses, for instance, Griffin says.
Arrange to have a set amount of every paycheck sent to a savings account. Even a few hundred dollars can help keep unexpected bills from becoming financial disasters.
4. Monitor your credit reports and scoresYou’re entitled to at least one free credit report every 12 months from each of the three major credit-reporting bureaus. It’s smart to check those annual reports and dispute any errors you find.
But you should monitor your credit more frequently: A big change in your score could suggest identity theft. Sign up for a free online credit score and report that updates regularly. Many banks, credit card issuers and personal finance websites offer them.
If you don’t plan to apply for credit in the near future, freeze your credit. You can still check your credit score and use your credit cards, but a frozen credit file makes it difficult or impossible for a fraudster to open new accounts in your name.
5. Think twice before applying for new credit
Applications can shave a few points off your score because the lender or card issuer does a “hard inquiry” to check your credit. If you’re approved, the new account reduces your average age of credit, which also can hurt your score.
Set alerts to help these habits stick
“Atomic Habits” author James Clear recommends making it as easy and attractive as possible to establish and maintain new habits. Your credit accounts almost certainly have options to help you stay on top of due dates and credit utilization.
Setting up alerts will only have to be done once. You can schedule an hour or so — put it in your brand new calendar planner or bullet journal — to set up alerts and payments, and to sign up for free credit reports and scores that update regularly.
Perhaps you check and act on those alerts after Sunday brunch, pairing bill-paying with an activity you enjoy. Another tip is to use a tracker, like a journal or calendar, which can serve as a prompt and also gives you the joy of checking something off your list.
Previously, I discussed how stress can launch a physical and mental attack on our work and life. Gradually, stress can affect our behaviors by causing unrecognizable, irrational, out-of-control versions of ourselves to emerge. This impedes our productivity.
Clinical psychologist Naomi Quenk calls this condition being "in the grip" of stress, and "grip" experiences can cause Dr. Jekyll/Mr. Hyde-like transformations. The behaviors we exhibit are largely driven by our different personalities. Therefore, stress management techniques that take into account our unique personality preferences are helpful.
Personality And Mental Functioning
According to the Jungian model of personality and mental processing, we subconsciously differ in terms of how we each prefer to:
1. Gain mental energy
2. Gather information
3. Make decisions
Some gain their mental energy from inner ideas and experiences (introverts), while others gain it from external sources (extroverts). Being forced to experience your least preferred energy source can be a significant cause of mental fatigue and block your productivity.
Gathering Information In The Grip Of Stress
You gather information about what's going on around you largely through the mental functions of sensing (focusing on current realities through use of your five senses) or through intuition (focusing on the big picture). We all gather information using both methods. However, one is typically more dominant or preferred.
As long as you are devoting your energy to your dominant mental function, your inferior function is at rest. However, when circumstances such as illness, stress or fatigue set in, the least preferred mental function can come out of hibernation, forcing your mind to function in a way that is uncomfortable. Similar to being forced to write with your left hand when you are right-handed, being pushed to use your inferior mental function to gather information can place you in the grip of stress, slowing you down and decreasing the quality of your work.
Making Decisions In The Grip Of Stress
Decision-making is also a mental function, and you will typically make decisions through either thinking or feeling. If thinking is your preference, you may prefer to make decisions based on logical, focused, impartial, objective analyses of information. This would be your dominant mental function. Making decisions based on feelings would be your opposite (inferior) function and would typically receive the least amount of your energy. Again, we each make decisions using both methods. However, you are typically more comfortable using one over the other and may find yourself in the grip of stress when pushed to use your inferior decision-making function.
Personality-Based Stress Reduction Techniques
Before reading further, ask yourself:
1. Am I more mentally energized from within (introversion) or from the outside world (extroversion)?
2. When gathering information, do I feel more comfortable using sensing or intuition?
3. When making decisions, is thinking or feeling more natural for me?
Here are some stress reduction techniques specific to your preferred decision-making and information-gathering styles. Discover how your experiences of gathering information and making decisions in the grip can lead to personal growth.
When Gathering Information
Extroverted-sensing types can release the grip by:
• Having a backup plan
• Receiving help from others to remove doubt about dreaded consequences
• Receiving help with prioritizing
• Being heard without judgment
Gathering information in the grip can teach extroverted-sensors to:
• Reduce their fear of possibilities
• Embrace the unknown
• Tap into their intuition
Introverted-intuitive types can release the grip by:
• Seeking a change of scenery
• Taking quiet alone time to recharge
• Making their usual schedule lighter
• Not receiving advice or suggestions from others
Gathering information in the grip can teach introverted-intuitives to:
• Understand and accept people unlike them
• Better adapt to outside details
• Create more realistic goals
Introverted-sensing types can relieve stress by:
• Taking time alone to analyze or reflect
• Hitting the bottom to emerge renewed
• Being taken seriously without being patronized
• Receiving help with excessive details
Gathering information in the grip can teach introverted-sensors to:
• Have a broader perspective
• Have clearer values
• Be more flexible in relationships
Extroverted-intuitive types can relieve stress by:
• Taking time to analyze their grip experience
• Exercising, meditating or getting a massage
• Receiving support without being patronized or judged
Gathering information in the grip can teach extroverted-intuitives to:
• Have a broader perspective of expectations of self
• Appreciate facts and details
• Plan better and be more structured
• Identify and avoid grip-causing stress and fatigue
When Making Decisions
Extroverted-thinking types can ease stress by:
• Allowing themselves to experience their deep feelings
• Being allowed to vent
• Talking to a person they trust
Decision-making in the grip can teach extroverted-thinkers to:
• Know their limits
• Accept the irrational
• Understand the importance of close relationships
Introverted-feeling types can ease stress by:
• Allowing the experience to expire on its own
• Engaging in relaxing, distracting activities
• Receiving validation for their feelings
• Having time to reflect
• Being allowed to have their say until they are themselves again
Decision-making in the grip can teach introverted-feelers to:
• Accept their power needs
• Embrace their competencies
• Manage unrealistic ideals
Introverted-thinking types can ease stress by:
• Having their alone time and personal space (psychological and physical) respected by others
• Being excused from responsibilities
• Not being asked how they feel
Decision-making in the grip can teach introverted-thinkers to:
• Accept the illogical
• Embrace their vulnerability
• Express deep feelings
Extroverted-feeling types can ease stress by:
• Studying or journaling alone
• Starting a new project
• Being allowed to be left alone (to mentally work through things)
• Being taken seriously and allowed to vent
Decision-making in the grip can teach extroverted-feelers to:
• Decrease their need for harmony
• Trust their own logic
• Manage their response to adverse situations
Think of a grip experience you may have had recently. How will you better manage your stress to remain productive moving forward?
Have you ever experienced the type of day-to-day distress that affects your productivity or even your health? Have you ever found yourself puzzled at how stress has caused you to act like a completely different person? Are you thinking, “I’ve heard this all before. I know stress. It's everywhere, so we just have to live with it.”
False! Stress is hazardous to your health, and it can sneak up on your life before you even see it coming.
Stress In Your Work-Life Overlap
When I find myself doing something that requires me to physically balance myself, like skating or riding a bike, I'll admit that I have found myself losing balance, wobbling back and forth, arms flailing, trying not to fall over. (Don't judge! I'm better at reading and research.)
This isn’t how we should be living our lives. In fact, many of the things that stress us out at work are rooted in the same challenges that also overwhelm us outside of work, like managing our daily habits, thinking habits, emotions, moods and biases.
These days, it seems that work and life do more overlapping than balancing, and stress likes to hide right in between that work-life overlap. In order to challenge stress, it helps to know where to look and what to look for.
'Good' Versus 'Bad' Stress
Stress is a natural reaction; in some form, it's actually good for you. Good stress or “eustress” is a positive motivator when it comes to things like job interviews, promotions or special celebrations. Our bodies are designed to react to stress in a way that not only keeps us energized in high-stakes situations but protects us when confronted with threats.
Bad stress or “distress” comes in three forms, and our individual experiences and responses to each type are all different.
• The most common type of stress is acute stress, which stems from the recent and anticipated demands of everyday life. This is what you feel when someone cuts you off in traffic or when you have an argument with a spouse. In large doses, this type of stress can be exhausting.
• Episodic acute stress occurs when acute stress becomes habitual. It plagues people who tend to have shorter tempers, are frequently rushed, overextended, tense or anxious. These characteristics are magnified even more in the workplace. At the episodic acute level, a person becomes so accustomed to these feelings that it becomes implanted into their personalities. They often attract a lifestyle of chaos, excessive worry, pessimism, irritability, anxiousness, anger, hostility and overcommitment.
• The highest levels of stress harm our mind, body and overall life. Long-term, untreated, episodic acute stress can morph into chronic stress in response to things like dysfunctional family situations, poverty, abuse, toxic work environments, trauma and other perpetually stressful situations.
When we experience a situation that causes us stress, our brains perceive it as a threat and sound an internal alarm. This alarm causes the release of hormones including adrenalin, which increases blood pressure and heart rate, and cortisol, the stress hormone responsible for communicating with the parts of the brain that control mood, fear and motivation. This is why stressful situations can literally make us feel as if we are being attacked.
For the most part, when stress hormones are activated, they return to normal levels once the “threat” has passed. However, when constant stressors keep our alarm systems activated, the hormone release continues, leading to overexposure. As a result, symptoms such as anxiety, depression, digestive issues, headaches, heart disease, problems with sleep and weight management often appear. In fact, prolonged exposure to the stress hormone cortisol has been found to shrink areas of the brain that control memory.
There are warning signs of different types of stress, and they can become bigger issues if they are not contained. We experience emotional and physical symptoms even when we aren’t paying attention, including:
• Short temper
• Muscle tension
• Dry mouth
• Stomach issues
• Loss of appetite
• Lack of focus
Many times, these symptoms are incorrectly attributed to other issues or even camouflaged by medication or other substances. Therefore, just because you don’t notice it, doesn’t mean that stress isn’t there.
At the acute (short-term) level, symptoms are manageable but can cause mood and concentration difficulties and interfere with your productivity.
At the episodic acute level, more serious health issues can begin to appear, and professional help may be needed in order to come up with an individualized plan of attack.
Left untreated, chronic stress can lead a person to feel as if they are trapped with no way out. Ultimately, a higher incidence of suicide, cancer, violence, heart attack and stroke make this the deadliest form of stress that people experience. (If you feel like your stress is headed to a critical level, discuss how you are feeling with your doctor or a licensed mental health professional.)
While there are many well-known methods of attacking stress, there really isn't a one-size-fits-all method of reducing it. We all differ in terms of how we live, how we interact with the world, how we gain energy, and how we respond to different situations. In fact, both genetics and life experiences affect how we respond to stress. This is why stress management techniques really need to be tailored to the individual. It's possible to gain clarity and take power over stress at the early stages by diving deep into your unique goals, thinking habits, personality preferences, emotional wellness and conflict modes.
In April 2019, Juana Velosa was excited for her upcoming work assignment in Africa. As part of her job, she would be spending three months on the continent.
As she packed her bags and prepared for the trip, she made sure to have a solid checklist in place to make sure she didn’t miss anything. This included making sure all of her bills would be paid in her absence, and logging into her credit card account and paying off the balance in full.
When she finally returned home in late July, she quickly got back into her normal routine. A few weeks later in early August, she went shopping for clothes and when she tried to check out, her store-brand credit card was declined due to an unpaid balance.
Perplexed, Velosa phoned the bank immediately to get more information. Her first instinct was that she was the victim of fraud. She was told that a purchase she made prior to her trip was not included in the statement balance she paid off (it was included on the following month’s total).
Her initial purchase was for $59.68, but it ballooned all the way to $169.99 due to three late charges and $7.31 in finance charges. In order to avoid being charged more fees, she immediately paid off the full balance including the fees (the bank waived the most recent late fee). Thinking this was now behind her, she moved on with her life.
It wasn’t until recently that the seemingly innocuous unpaid balance from her time in Africa began to haunt her again. She was hoping to refinance the mortgage on her home in order to take advantage of lower interest rates. She eagerly applied and was awaiting the approval when her loan officer called her with bad news: her application had been denied due to the snafu with her credit while she was in Africa. Her credit score had plummeted.
What started as a harmless shopping trip in April for $59.68 worth of clothing, may now cost her thousands of dollars in interest payments on her mortgage due to not qualifying for the refinancing. Refinancing a mortgage works the same way as refinancing student loans, which means that shaving a few points off of your interest rate can make a huge difference in the total amount paid over the life of the loan(s).
Velosa is frustrated because she claims she was never notified by the bank regarding the late fees or unpaid balance, and only found out when she coincidentally returned to the same store to make another purchase in August. If she wouldn’t have stopped in that day, the total balance could have easily grown to hundreds of dollars, without her realizing it.
Velosa’s story should serve as a cautionary tale for all credit card users, because it’s easy to see how this could happen to anyone. Even a single innocent misstep can have far-reaching financial consequences.
Here are a couple of things you can do in order to prevent something similar from happening to you and ruining your credit.
1. Check Your Credit Report Regularly
You can get your official credit report for free from AnnualCreditReport.com. By law, each of the three major credit reporting bureaus (Equifax, Experian and Transunion) must give you a free credit report every 12 months if you ask for it. I request one from a different credit bureau every three to four months throughout the year.
The most important things you should look for in your report are derogatory marks, accounts you don’t recognize or any inaccuracies. Making sure your credit report is accurate will go a long way to help you detect fraud and catch any missed payments early.
In addition to getting a free credit report, you can also get free credit scores. Sites and companies like Credit Karma, freecreditscore.com, Credit.com, Mint and Chase Credit Journey will all give you free scores. Some of them are estimates using their own models, but I’ve found them to be very accurate. I’ve used Credit Karma for years and also recently started using Chase Credit Journey. They all do a good job.
You should never need to pay for a credit report or a credit score. You can freeze your credit for free too.
2. Automate Your Payments
One way to avoid missing payments is to take the human element out of it by setting up automatic payments. You will still need to make sure your payment account has enough money in it to cover the full balance so that you don’t overdraft.
Auto-payments will help you avoid late fees and unwanted interest charges, which as we saw in Velosa’s case, can quickly spiral out of control.
Even as a personal finance writer, I used to occasionally forget to pay a utility bill on time, so beginning a few years ago, I began to automate as many payments as possible. From utilities, to credit cards, and even rent. It means I spend less time doing repetitive tasks every month and I never miss a payment. I have a credit score over 800 as a result.
It’s also important to remember that your credit score isn’t the most important thing when it comes to your personal finances.
As for Velosa, it remains to be seen whether her credit card company will heed her request to have the negative remarks removed from her report. Her mortgage refinancing hangs in the balance. Her plan for the money she was hoping to save in mortgage interest? Increase her retirement savings by maxing out her IRA.
Eighty-hour weeks. Demanding work. A high chance of failure. The startup world is gruelling. It's no surprise entrepreneurs (particularly founders) are up to 49% more likely to report a mental health condition than other workers.
Swede David Brudö is an example of an entrepreneur who turned this problem into a competitive advantage. An avid snowboarder, he describes startups as the "extreme sport" of the business world. During the early 2000s, he worked for several different startups and struggled with the grueling pace of work.
"Most startups fail, statistically, so the odds aren't the best. That, of course, has a mental toll on you because there's a constant pressure, more or less," he said.
The pressure Brudö felt was exacerbated by depression, a condition he has faced on and off since his teenage years. "I lived in Sweden; I had a roof over my head; I had food on my plate. I had more material stuff than I would ever need. But I wasn’t feeling grateful," he said.
"Instead I was feeling increased amounts of worry, anxiety, stress, much work related. That … took over me as a person." Brudö's wife suggested he see a psychologist to work through these challenges. At first, Brudö felt getting help was a sign of weakness.
"I STARTED TO READ BOOKS ON PERSONAL DEVELOPMENT. FORTUNATELY, HOWEVER, THIS INTERNAL INSIGHT JOURNEY … GOT ME TO UNDERSTAND THAT SEEING A SHRINK ISN'T THAT BAD."
After therapy, Brudö applied an analytical mind cultivated in the business world to addressing mental health. He was surprised to discover mental health conditions are a leading contributor to sick leave and that care mostly addresses the symptoms rather than the root cause.
"Mental health conditions cost more than cancer, cardiovascular disease, and diabetes put together," he said. "I thought I was just someone that wasn't able to cope with the pressure, but I realized I was not unique. So that led me on to thinking, 'Why can't we approach this from another direction?'"
That other direction led Brudö to set up Remente in 2011 with cofounder Niklas Forser. His team decided to create a pre-emptive tool for addressing mental health rather than one that helps people only after they experience burnout, stress and depression.
Today, Remente helps people set goals and improve areas of their personal life. These include: sleeping better, finding more friends at work, reading more books or cultivating a skill. It also helps people with problems like depression and attention-deficit hyperactivity disorder (ADHD). The company provided these services via a web app before launching a mobile version. It claims up to 2,000 new users a day and has surpassed 1.3 million users.
"Phones [and] the digital devices we use today … make us more depressed and stressed. What if we could use these devices to help us instead of the other way around?" Brudö asked.
His team was recently invited to speak at the American Psychiatric Association 2019 Annual Meeting in San Francisco as an example of mental health innovation. He couldn't have imagined this happening years ago.
"We feel it's really super cool, because when we started out, people said, 'You can't do this with an app. It's not possible.'" Today, the reality is quite different. "The whole process of the app is helping users understand where they are right now and where they want to be and help them get there."
"The whole process of the app is helping users understand where they are right now and where they want to be and help them get there."
Since founding Remente, Brudö and his wife have had two children. Today, he balances the demands of running a startup with a structured home life and snowboarding.
Brudö said about work-life balance:
Once you get into that process, things become so much simpler and … will relieve you from stress. Because you're in control, you're in the driver seat of your life.
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