Inflation anxiety
When we look out the window and see dark clouds, we immediately conclude that rain is coming. And no matter how much we may complain, we cannot stop the force of nature. Similarly, we cannot control rising prices, oil shocks, high interest rates, wars or geopolitical tensions that influence inflation.
So, before jumping into the usual recommendations of personal finance experts, why not focus first on what we can immediately control? Our emotional response.
Inflation affects more than our budgets. It affects our emotions and even our physiology. As prices rise, we experience stress and anxiety. Our brains interpret uncertainty as a threat, activating the body’s fight-or-flight response. The stress hormones of cortisol and adrenaline increase, heart rate rises, breathing becomes shallower and our minds become preoccupied with immediate concerns.
From the perspective of behavioral economics, this is dangerous. Fear narrows our focus and impairs judgment. It makes us vulnerable to impulsive spending, panic, indecision and excessive pessimism.
This is why managing our emotions comes before managing money.
Before making important financial decisions during stressful times, our company, the Personal Finance Advisers, recommends what we call the PST Reset. This is a simple 45-second exercise designed to calm the body’s threat response.
P stands for power pose
Stand upright, keep your shoulders back and maintain an open posture for 15 seconds.
Posture influences breathing. Deep, unrestricted breathing increases oxygen flow and stimulates the parasympathetic nervous system, which is the body’s natural braking mechanism. Many people report feeling calmer and more confident simply by changing their posture. Instead of reinforcing feelings of helplessness, standing tall sends a signal of readiness and control.
S stands for smile
Spend the next 15 seconds smiling, even if you don’t feel like it. Surprisingly, facial muscles communicate with the brain. Smiling activates neural pathways associated with positive emotions and can trigger the release of small amounts of dopamine, serotonin and endorphins, the body’s natural “feel-good” chemicals. These chemicals help counteract stress and create just enough emotional distance to prevent fear from taking over.
T stands for thankfulness
For the final 15 seconds, think of one thing for which you are grateful. Gratitude shifts attention away from scarcity and toward abundance. Studies have shown that gratitude practices activate areas of the brain associated with reward and emotional regulation. They are also associated with increased serotonin and oxytocin activity, creating feelings of calm, trust and connectedness. Gratitude slows the mind down and reminds us that not everything valuable in life is measured in pesos and centavos.
Will this 45-second exercise lower inflation? Certainly not
Think of inflation as rain. We cannot stop the rain from falling, but we can choose to carry an umbrella.
Likewise, while we cannot control economic conditions, we can control our physical and emotional responses to them.
And that matters because good financial decisions are easier to make when we are calm.
Over the years, we found that personal finance is best approached through four pillars which we call EnRich Cash, Debt, Risk, and Wealth or CD-RW management.
These pillars become even more relevant during periods of high inflation.
Cash management is the foundation because rising prices affect day-to-day expenses. Debt management closely follows because financial obligations become harder to service when interest rates and living costs rise.
Risk management, which is mainly insurance, protects families against unexpected setbacks.
Finally, wealth management helps preserve and grow purchasing power over the long term.
In the next two articles, we will discuss each of these pillars in greater detail. More specifically, we will explore practical ways to manage cash flow, reduce debt burdens, strengthen financial protection and invest wisely during uncertain times.
No one can predict where inflation, interest rates or markets will be a year from now. But we can prepare. After all, wealth is not built by controlling the weather. It is built by learning how to dress for it.
And sometimes, putting on that raincoat starts with just 45 seconds, that of striking a power pose, forcing a smile and giving thanks before moving on to the more important work of managing our cash, debt, risk and wealth wisely.
Send questions via “Ask a Friend, Ask Efren” free service at personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook. Efren Ll. Cruz is a registered financial planner and director of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines and a YAMAN Coach.
