Facts and Logic Over Fear: The Best Way to Cope

Many people have cut back on their spending because of the current economy. This makes sense — provided that these conditions are just a reminder of what they should have been doing all along. Unfortunately, sometimes this isn’t the case. Many are hoarding their money for no other reason than what they’ve read and heard in the news. The news “tells” them that the economy is in decline because fewer people are spending. Why are millions of people spending less? Well, some have indeed lost their jobs, or realize they spent foolishly (like buying a house they couldn’t afford). But a great number of people are making the same money as before, yet they are also spending less. And the most common reason I hear is … “the economy.” Apparently this is code for: “I hear on the news that the economy is bad. I must therefore panic.”

I’m not against rationality and caution. I’m strongly in favor of the free market, and I’m well aware that it cannot function unless self-responsible people exercise proper judgment. But if all this cutting back makes so much sense now, then why didn’t it happen earlier? And if spending before was, for most people, feasible and justified, then why must it stop now?

For example, let’s assume that you really need a new car. If you’re making the same amount of money you did last year, then how does it make sense to not buy a car this year? Well, CNN, Fox News, MSNBC and all the rest are shrieking (every minute of every hour) that the economy is in a tailspin. Well, of course it is. Nobody’s spending anything. News flash: People don’t HAVE to listen to the media. The media does nothing more than dish up whatever happens to be selling at the moment. Anxiety sells. Doomsday sells. With the bulk of media “reporting” so overwhelmingly negative, people latch on to negativity as the all-powerful truth. From a psychological perspective, this is what worries me most: Has the majority surrendered to the false belief that life is ultimately terrible, and that good times are merely an illusion? If so, then things will never get better.

An economic system such as ours is nothing more than millions of people making decisions and transactions in the marketplace every day. Neither spending nor hoarding is intrinsically good. But with the media relentlessly hammering away that spending is bad, irrational behavior can result. My advice? Ignore the media and do what makes objective sense to you, today, in your own situation. Standing still is no more the answer than reckless spending.

My 35+ years of professional experience has shown that fear is the root of many problems. It’s ironic, because fear, based on reason and facts, is actually one of the most life-preserving impulses imaginable. But misplaced fear causes mental and behavioral havoc. Much of the problem lies with disappointed expectations. “I thought the stock market would always go up. When it went down, I was devastated.” Or, “I thought the price of houses would always go up. When they dropped, it was the end of the world.” I’m not an economic expert, but I do read history, and nothing in history supports either of those expectations. Market and real estate values have always fluctuated. So which makes more sense: To wallow in paralysis, or to take advantage of the disappointment and learn from it?

I like to approach things from a psychological angle, and this isn’t the place to get into specific policies. But I think most of us can agree on one thing: When acting on fear, politicians often overreact by making poor decisions. I like the quote that there’s “nothing to fear but fear itself,” but I prefer to look at it this way: When fear replaces facts and logic, trouble is the result. We need to take a deep breath, turn off the chatter of self-serving TV “news,” and observe for ourselves. Then learn and move on.