‍Chill Out About the Economy: Here's How to Control Your Finances

‍Stop worrying about things like monetary policy and focus on what you can control, these top nine financial opportunities

The financial newsreel is full of jargon, conflicting predictions, and enough uncertainty to leave you glued to the headlines, perpetually worried.

When it comes to your personal finances, there's a hidden danger in getting caught up in the drama, particularly around events like interest rate announcements, the Monetary Policy Statement (what the heck is an “MPS”, anyway?), and persistent releases of economic data, such as nationwide unemployment figures.

The regular drumbeat of financial news is important for experts to build an overall economic picture, but all this sort of information is often misinterpreted and has less impact on individuals' day-to-day financial decisions than you might think.

Just like a weather forecaster might predict rain with 90% certainty, then it’s still sunny, the economic forecasters don’t have a crystal ball.

Let’s face it, even if you’re worried about the weather – you’re still fretting about something you can't change. It’s better to accept you can’t control the weather, but you can pack an umbrella and sunblock. Focusing on what you can control is the key to financial peace of mind, too.

The Top Financial Opportunities You May Be Overlooking

Rather than the regular pattern of economic news, here are nine key things you can control to help you ride out difficult financial times.

1. Control Your Mindset

Ever wonder why most people who win the lottery, and many professional athletes who get rich quickly, often lose it all and end up bankrupt? The answer lies in their attitude. When sudden wealth comes without the foundation of a strong, positive mindset, it can quickly dissipate. Your attitude is one of the few things in life over which you have total control. As Harvard psychologist William James famously stated,

“The greatest discovery of my generation is that a human being can alter his [or her] life by altering his attitudes of mind.”

This quote underscores a powerful truth: your mindset shapes your reality. If you want to perform at your best and maximise your happiness and fulfilment, you must harness the life-shaping power of your attitude. The most successful people understand that no other person on Earth should dictate their attitude. Nor should any news item, financial or economic announcement, or even the weather! While these external factors can influence us — whether through teaching us poor thinking habits, unintentionally misinforming us, or providing negative influences — they cannot control our attitude unless we voluntarily surrender that control.

Imagine your attitude as the lens through which you view the world. If that lens is clouded with negativity, alarm, or defeatism, everything you see will be tinged with that outlook. Alternatively, a lens polished with positivity and resilience reveals opportunities and solutions even in the face of challenges. This mindset is particularly crucial when navigating personal finances. Instead of being paralysed by fear during market downturns or swept away by the euphoria of market highs, a clear-minded, controlled attitude allows you to make rational, informed decisions.

Let’s circle back to the story of lottery winners and professional athletes. Many of them find themselves unprepared for the responsibilities and pressures that come with sudden wealth. Without a disciplined attitude, they fall into the trap of reckless spending, poor investment choices, and trusting the wrong professional (or unprofessional!) advisers. This highlights the importance of a proactive and mindful approach to managing wealth. A positive attitude combined with financial literacy and discipline can protect and grow your wealth, regardless of how it was acquired.

To cultivate a strong, positive attitude, remain fixated on what you can control. Instead of worrying about external factors like stock market fluctuations or economic forecasts, concentrate on your practical financial habits, such as the items on the rest of this list.

2. Control Your Spending Habits

Regardless of inflation, the economy, or anything else, you still have control over where every dollar of your spending goes.

Here are a few practical suggestions:

• Track your expenses: Knowing where your money goes is the first step to making smart choices. Use budgeting apps, spreadsheets, or even a simple notebook to keep tabs on your income and outgoings.
• Identify areas to cut back: Are there subscriptions you don't use? Can you ‘brown-bag’ lunch instead of eating out? If we’re honest, any one of us could trawl through our bank and credit card statements and find things to cut back on.
• Embrace smart shopping: Look for deals, compare prices, and consider buying used items when possible.

These dollars can then be reallocated to be focussed like a laser on life’s big objectives and goals. Every dollar saved is a dollar invested in your future.

3. Start Saving

Once you cut back on your spending you might have more opportunity to add to your savings. In other words, unnecessary spending can be reallocated to things that really matter.

Having clear goals will motivate you to save and invest. Do you dream of a European holiday, a down payment on a house, a stream of passive income, a comfortable retirement, or something else?

Or, do you first just need to build a bigger buffer should things go wrong? Having a safety net of three-to-six months’ worth of living expenses can help you weather unexpected financial setbacks, like job loss, health issues, vehicle mechanical trouble, and so on.

4. Put Your Money to Work

When you let your money sit idly in a bank savings account, you are earning next to nothing and in fact, usually losing money after taxes and inflation are factored in. Start to explore your options and develop a plan today.

Start investing early, even if it's just a small amount. Thanks to the magic of compound interest, that little seed you plant today can grow into a mighty Kauri tree in the future.

5. Your Physical Health

Your physical health is the foundation upon which all other aspects of your life are built.

Maintaining a balanced diet, engaging in regular exercise, and ensuring adequate sleep are essential practices that directly influence your energy levels, productivity, and overall well-being. These habits not only prepare you to perform at your best but also equip you to make sound decisions, whether they pertain to your finances or other critical areas of your life.

Beyond the basics of nutrition, exercise, and rest, incorporating other healthy practices can further enhance your overall well-being. You might also consider regular meditation or prayer, spending time outdoors, scheduled time with family and friends, and charitable giving or activities. Everything adds up to an overall healthy routine.

Combining these elements into a cohesive, healthy routine creates a balanced lifestyle that supports both your personal and professional goals. When your body and mind are well cared for, you are better equipped to handle stress, make informed decisions, and enjoy your leisure and family time to the fullest.

6. Automate Your Finances

If you automate your finances, you won’t need to actively manage your money all the time.

Here are a few ways to do that:

• Investments: Set up automatic transfers to your investment accounts so you "pay yourself first" each payday. This removes the temptation to spend that money, avoiding the creep of a more luxurious lifestyle, and ensures you're consistently building your wealth over time.
• Automate retirement savings: Contribute to your KiwiSaver Scheme or other retirement investments through automatic payroll deductions.
• Short-term savings: Set up automatic transfers to different savings accounts for various shorter-term goals, such as buying a new car or going on holiday). This way, you'll be consistently saving without needing to remember to transfer money manually.
• Insurance: if you can, automate all other regular payments, such as insurance premiums.

7. Control Your Knowledge, Become Financially Savvy

Knowledge is power. The best investment you'll ever make is in yourself. Understanding key concepts like compounding interest, taxes, and inflation can help you make informed financial decisions.

Subscribe to good blogs (like the one you’re reading right now!), listen to podcasts, and take online courses. There's a wealth of free and affordable resources available.

Learning new skills, upskilling in your current field, or pursuing skills and knowledge to build a whole new career path all increase your earning potential. Plus, it's a fantastic way to recession-proof your earning power – your ability to generate income.

Plus, the more you know, the more confident you'll be in making smart financial decisions.

8. Block Out the Noise

In today's fast-paced world, it's easy to get caught up in the noise and distractions that derail our focus from the things that matter.

Start being intentional about eliminating distractions that take you away from the task at hand, whatever that task may be. This could mean:

• Set dedicated time for topics including family time, productive time, exercise, hobbies, and so on.
• Turn off your phone, even just for a couple of hours a day! Create a specific workspace, especially if you work from home.
• Using productivity apps that block out social media and other notifications.
• Unplug from social media altogether, at least for a while. You might also set aside times of day to check social media and emails.
• Turn off the news! Limit your exposure to overly negative or sensationalised news, financial news or otherwise.
• Seek out reliable, unbiased sources of information relevant to what you are interested in.

Don't let the noise overwhelm you. Focus on what you can do, and let that guide your decisions.

9. Measure Inputs, Not Outputs

Focusing on inputs rather than outputs is crucial for long-term success and satisfaction.

When it comes to financial matters, we can all get overly focussed on the outcome, rather than what we’re doing. Think of it this way: if you start an exercise and nutrition regime, you won’t spend most of your time tracking progress by standing on the scales. Instead, you would focus on eating right, exercising, and maintaining healthy habits. Similarly, in managing your finances, focus on:

• The total dollars you’ve invested over any given timeframe, rather than constantly checking the investment’s current value.
• How much mortgage or other debt you’ve repaid, instead of obsessing over the interest rate.
• How much you’ve contributed to KiwiSaver, rather than just monitoring your account balance.

While regular tracking is important, the emphasis should be on consistent, positive actions. Over time, these efforts will naturally lead to the desired outcomes. By concentrating on what you can control, you set yourself up for sustainable financial success.

The Bottom Line: Take Control, Not Cover

Embrace continuous learning and seek out resources that can enhance your financial knowledge. Surround yourself with positive influences — mentors, books, and communities that encourage growth and resilience.

Avoid being bogged down by economic matters, financial news, and the latest policy announcements. Focus instead on the things you can influence – your mindset, where you focus your attention, and the practical action steps you take from week to week.

Whether the economic backdrop is cloudy or bright, you always have the power to take charge of your personal financial future.

It would be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above, so get in touch today.