Do you have doubts? Good!

debt
By Naim Fadhoud
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The coronavirus situation has many people thinking. This is a good thing. Everyone needs a review of their own beliefs and sense of confidence from time to time.

I was prompted to write this short article by several observations that coincided.

First: I’ve been receiving more and more emails asking me what to do in a coronavirus situation with my finances. You write in different situations: someone has lost his job, someone else is expecting to be fired, someone is afraid that in a moment his salary will be cut by several dozen percent, someone was trying to buy an apartment and does not know whether to hold off or not (by the way, I already wrote about this topic in the article “What to do with the money in the face of coronavirus epidemic and what threatens personal finances”), Someone else has a good situation, considerable savings, but wonders whether to change something in his way of working because of the coronavirus.

Second: there are also people writing who are only now noticing the importance of systematically built financial cushions. They share thoughts about their sense of security, but at the same time, they also manifest some doubts, e.g. what to do with savings in times of low-interest rates. Even though they are objectively in a good situation, they are torn by various doubts about the future and the possibility of protecting the accumulated capital.

Thirdly: I also notice the other pole. There is no shortage of overconfident people who see straightforward solutions, e.g. “interest rates on deposits have dropped + stock market valuations have fallen = it means there is an opportunity and one should invest”. They go like a boar into acorns (apparently in the South they say: like a pine tree today) and are willing to take excessive risks without applying any risk mitigation and capital management principles. You can read one such story on the App Funds blog – “I have PLN 20k and I want to buy KGHM shares. Will I make money?”.

How to center it all? When to worry, and when to consider that the situation is quite OK? Should one be concerned about the uncertain future? – These are all very legitimate questions and it doesn’t surprise me at all that this is the time when all sorts of doubts come to us.

So I’m going to share some personal reflections + give you some common sense hints. I hope that at least some of you will find it useful.

Many questions with many possible answers

Let me start by saying that it’s quite normal to have all sorts of concerns and doubts. We have all now been confronted with the effects of a coronavirus outbreak – an unexpected, unknown and unusual situation. If you are around 20-30 years old, you are unlikely to have experienced the financial crisis of 2007-2009 directly, so it is difficult to compare the current situation with anything. If you are 40-50 years old, you probably remember the crash after the .com bubble in 2000 and the turmoil of 2007-2009 which had its repercussions also in Poland.

I remember exactly how my employer at that time was afraid of a decrease in orders and that we, as a company, would get hurt. I also remember that many companies were very proactive at that time, preparing for the worst even before they noticed the effects of the crisis on their financial results. What was the most important for them was to adapt smoothly to the current situation and survive the worse period in such a way as to be able to quickly unfurl the sails once the economy rebounded.

That was how it looked from the perspective of companies and employers. And what was the perspective of the serial worker?

I remember tremendous uncertainty. I had a good position in the company, but my salary depended directly on business performance. I feared that they would drop, and drop significantly. For me, this meant potentially lean times. I had savings, but… in the meantime, I had an accident and expensive surgery. The rehabilitation period was in 2008, and at the same time, it was the darkest time of my life with many questions about my near and distant future. The crisis and the accident made me realize how thin a cube of ice I had been walking on for years. My friends, with whom I occasionally met, were not very optimistic. Conversations were full of “it’s been good before” and topics related to layoffs and job changes.

 

I have a feeling that we are now having a “repeat of entertainment”. After the decade of the employee market, when good job candidates dictated terms to their future employers, there has been a kind of reset. The economy has taken a costly pause, which, according to various experts, may continue for quite some time. At the level of individual households, this means numerous problems and challenges: a lot of people have lost their jobs or at least are not sure about their earnings shortly, a lot of micro-entrepreneurs had to stop their activities, many people had to learn to work from home or take special precautions at their workplace. Objectively – the situation has become lightning complicated.

There is nothing strange in the fact that during such a period of uncertainty – all sorts of doubts come to us. It’s no wonder that during such a period of uncertainty you will find yourself in some different situations. They vary depending on our life and financial situation, but I think you will hear yourself in many of the following:

  • Is the current situation a repeat of history or something entirely new?
  • What will happen to the economy and how will that translate into my wallet?
  • Will this situation lead to high inflation?
  • What to do with savings in times of low interest rates?
  • Are my savings safe? Where should I store them?
  • Is this a good time to start investing in the stock market?
  • Or maybe it is worth buying currencies?
  • Or maybe gold?
  • What will my employer do and am I at risk of being fired?
  • Should I accept a proposal to reduce my salary?
  • Will I find a new job now if I get fired?
  • What can I do to protect myself against such situations in the future?
  • How can I turn my business around and make it more resilient?
  • How about shutting down my business?
  • What if there is another wave of illness?
  • How long will the crisis last?
  • Will it ever be possible to live a normal life and socialize again?
  • How will I cope if I have to function like this for the next few years?
  • Should I make plans to change my job/own company/overpay my credit/buy an apartment, or is it better to wait until the situation becomes clearer?
  • How long will I have to wait?
  • And what if it takes longer than I expect?
  • Permit yourself to doubt
  • These questions are legitimate. Worry and concern are legitimate. The more uncertainty, the more questions.

When things are going well, we tend to be optimistic about the future. Some devise a plan and look forward to its systematic implementation. Others live in the present with the hope that somehow things will work out. But when we are knocked out of this idyllic balance, doubts arise. To make matters worse, listening to experts speak about the future increases our uncertainty. It’s easy to get unnecessarily emotional in these situations – the worse the situation we’re in.

I can see from your emails that even people who are super-right in the financial area, lose confidence and conviction that their approach is one hundred percent right. Even with a financial cushion and extra surplus savings, they wonder how they are going to make it in a humongous situation.

I think the most important thing is to understand that we have the right to feel insecure and have all kinds of doubts. It’s a completely normal reaction to the situation we find ourselves in. The reaction itself should not be feared. Understanding that we have the right to do so, it is worth remembering and realizing a few basic facts:

1. emotions make it difficult to make good decisions.

Therefore, remember to give yourself some time. So long as to cool down and to switch on our rational thinking again. If, for example, an employer now offers us a salary reduction, then instead of immediately throwing papers, it is worthwhile to coolly analyze the pros and cons. Perhaps use this pretext as an opportunity for substantive negotiations and arrangements for the future “after coronavirus”. The most important thing to remember is to give yourself time to cool down. I find it helpful to simply postpone a key decision about which I have doubts until another day. A “I’ll sleep and see…” approach is usually sufficient.

 

It’s normal to have doubts.

The world is not black and white. It has many shades of grey. The more experience I have, the more I see how many times my approach to different topics has changed throughout my life. I have evolved and continue to evolve. I gain more and more distance, but at the same time, the more I know, the more doubts I have. I perceive more and more complexity of reality. I can see perfectly well that something that I once took for granted is not so at all. Although there are, of course, cause-and-effect relationships, it is only with time that I realize how many of these causes there are – although I am still convinced that even now I can only see part of them. Something that may have occurred in a particular situation does not necessarily produce the same result in another context (and usually does not). That’s what makes guessing the future so difficult.

Is it possible, when realizing the complexity of a situation (not even related to coronavirus), not to have doubts? I sincerely doubt it. I have a whole bunch of them and it seems perfectly normal to me.

I wish you know how to have doubts and deal with them. You can do it in different ways – you can go into action and look for answers to your doubts, or you can say to yourself “I don’t know and I don’t want to waste my time on that”  It should be your choice.

And beware of those who are sure of everything – especially about the future.  Unfortunately, difficult times cause a rash of “witch doctors” taking advantage of our emotional unrest.

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