The Psychological Impact of the Economy and How to Manage It

By: Larina Kase, PsyD., MBA

The Psychological Impact of the Economy and How to Manage It

I see two psychological causes behind the most negative impacts that the economy is taking on so many of us: Control and Anxiety.

The first major psychological toll on people because of the economy has to do with control. The perception of having control over our work, finances, relationships and lives is linked with psychological well being. When people feel that no matter what they do, their course of action is determined by a factor outside of their control (the economy, company layoffs, etc.), a psychological toll is taken. Results of this include:

• Frustration and irritability
• Hopelessness
• Analysis paralysis (going over and over potential decisions and not taking action)
• Anxiety and stress
• Extremes in behavior—ranging from extreme caution (“We can’t buy fresh produce, we have no money!”) to extreme abandon (“It’s all out of my control anyway so I might as well gamble with what I have left”)

I recommend two strategies to cope with the stress associated with feeling out of control:

1. Look for the activities that you can control. If out of work, can you create a support group and help one another with strategies, resume review, etc? Can you give yourself an image makeover to best present yourself in interviews? Can you ask your past bosses for endorsements and include their specific quotes on your resume? Can you get active on social networking communities to build your networks?
    
2. Engage in relaxation and stress management activities. Select the activities that invigorate you and make you happy, such as time with friends and family, going for walks in nature, and so on. People often get hyper-focused on their stressful situations and abandon these things when they need them most.

Time spent on important activities that don’t relate to money or work help you keep everything in perspective and see that other things matter as well. When we focus on what is going well and what we’re grateful for, we maintain a positive outlook and energy level.

The second major psychological impact is anticipatory anxiety. There is talk of things getting worse before they get better and many people are worried and waiting for the other shoe to drop.

In my experience researching and treating anxiety, I have found that anticipatory anxiety is the most difficult to deal with. This is because we are dealing with unknowns and it is easy to catastrophize and predict that things will be horrible. We can easily get caught up in the “What Ifs…”

Here’s a technique I learned from Joe Vitale who I recently interviewed:

• Instead of asking yourself “What if down?” Ask yourself “What if up?”
• So rather than focus on the downside that could happen, focus on the upside that could happen.
• Instead of saying, “What if I get laid off?” Ask yourself, “What if my layoff leads to my dream job or beginning a new business? Or “What if I don’t get laid off but I get more responsibilities and am able to shine as invaluable?” Or “What if I get laid off and get a package which allows me to take some much-needed time off to travel?”
• You’re not trying to convince yourself of anything, you’re just changing your questions.

There’s no denying that tough economic times will take a toll on all of us, but you can engage your thoughts and actions to minimize any negative psychological impact. Some of the best experiences, new directions, and innovations arise out of times of hardships, so if you remain optimistic, it may all work out better than you expect.

About the Author

Larina Kase, PsyD., MBA helps people handle the challenges that lead to their greatest successes. She is a New York Times bestselling author and her latest, The Confident Leader: How the Most Successful People Go from Effective to Exceptional is timely and helps people take charge of their careers and lives. Learn more at http://www.pascoaching.com/ConfidentLeader

Keywords:
psychological well being, psychological toll, anxiety and stress, Psychological Impact of the Economy, anticipatory anxiety