Perhaps I am being a bit cynical. But, seeing a post on social media about “recession proofing” your business made me go, “hmm…, that’s interesting.”
Why this reaction?
Well, because according to the U.S. Bureau of Labor Statistics, the annual inflation rate in March of 2023 was 5%. Yes, it is still high compared to what it was at the start of the COVID pandemic. Yet, it is a number that reflects a downward trend for the ninth consecutive period.
As I shared in a piece I wrote almost a year ago, the National Bureau of Economic Research (NBER) defines a recession as, “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The NBER also determines when a recession starts and ends.
It would seem our economy is not in a decline, when you consider (a) the downward trend of the annual inflation rate, (b) the current unemployment rate of 3.5% and the fact that the Black unemployment rate is 5% – its lowest, EVER, and (c) that the 30-year fixed mortgage rate is currently 6.68%.
Now, I am not bypassing the fact that things are not where they were before COVID. My purse has also been affected by how much the cost of living has increased in the last few years. Yet, as I pen this piece, it is also true that the economy is not as dire as it was in 2020.
Given the data points shared in the two paragraphs above, I was perplexed and unable to discern the intent of this phrasing – “recession proofing.”
Was the use of those words a scare tactic or a clever, timely attention-grabbing marketing angle, or something else?
But, my “hmm…that’s interesting” reaction was followed by, “this feels like noise.”
There is a tremendous amount of financial noise you and I have to wade through in order to have the clarity of mind to feel confident about the choices we make.
Financial Noise; What’s That?
Believe it or not, I didn’t just make up the term “financial noise” to suit the purposes of today’s email.
According to Investopedia, “…noise refers to information or activity that confuses or misrepresents genuine underlying trends. In the financial markets, noise can include small price corrections in the market as well as price fluctuations–called volatility–that distorts the overall trend.”
“Financial noise,” along with “stock market noise,” are technical terms used in the industry and to sometimes describe a type of trader.
Today, I am taking creative liberty to share other ways I believe financial noise can show up for you. Along the way, I’ll also offer some suggestions on how to counter the negative effects of it.
Information overload
Where do you turn for guidance and help when you have a question or challenge on how to manage your personal finances?
If this question looks familiar, it is because you’ve taken a workshop of mine; it’s part of the pre-session questionnaire. 🙂
Who, what, or where are your sources of information, inspiration, and action?
As you reflect on what comes to mind, is what you are hearing from your different sources complementary, or are the views opposing? Are you listening to experts or so-called experts?
In order to minimize the noise of information overload,be discerning about your sources (who, what, where) so that you aren’t unknowingly pushed off your game-plan.
Lacking a decision-making framework
I’m known for saying, “having a choice is not the same as making a choice.”
And despite the many tools available to help improve the speed at which and the quality of the decisions you make, does it sometimes feel harder to actually make a decision? If you said, “yes,” I wouldn’t be surprised.
What I’ve discovered and observed is if you don’t have or follow any rules to guide what you’ll say “yes,” “no,” or “hold” to, and if you don’t have a way to get to that yes/no/hold, you run the risk of not making a decision!
For example, rules like:
- making a list of possible solutions and options;
- creating a pros/cons table to identify the risks you are willing and unwilling to take;
- creating a timeline for both gathering information and setting a deadline by which to make a decision
It doesn’t have to be fancy and elaborate, but without a decision-making framework, you limit your ability to reverse engineer how you arrive at the choices you make.
Plus, you run the risk of evaluating the validity of your choices purely based on the outcome…and not also on the process that influenced the outcome.
Having rules and following a process is how you minimize the noise of distractions and procrastination – the two things that can frequently get in the way of even the best decision maker from time to time.
Clutter
Clutter can reveal itself in a variety of ways: visually (think: social media), physically, digitally, mentally and/or emotionally. When it comes to money, it shows up in how you handle (or don’t) financial statements and notifications and decisions. And sometimes, even purchases.
Clutter is a form of financial noise, too because of how its presence can block your ability to see and think clearly.
Noise, in whatever form it takes, and however it shows up tends to cause confusion and frustration. But from my perspective, your job (and mine) isn’t to block out the financial noise around you. It is to acknowledge its existence and to be aware of what financial noise is for you – what does it usually look and feel like. And then to create buffers to turn down the volume of said noise.
Hmmm…that’s interesting
I don’t know the intent of the person who posted on social media about “recession proofing your business.”
But if you are concerned about a possible recession and how it might affect your business, life, and money, please keep this in mind: We’ve had seven (7) recessions in the last 52 years in the U.S.
Though painful, recessions are natural.
Everything in business and life, and with money and the economy ebbs and flows.
And underneath any talk about a looming recession is really a concern about uncertainty.
But, uncertainty comes with living and it is something you and I encounter and have to navigate every day.
So, instead of fearing a possible recession. Aim to be as prepared as possible as you manage uncertainty. Especially when you also need to counter the negative effects of financial noise. How?
- By increasing your cash on hand;
- Keeping an eye on and leading with your goals; and
- Staying invested through the market’s ups and downs.
If you are looking for a solution that will help you feel financially safe in any economic environment (including one possibly headed toward a recession), what I’ve shared today is how you can lower the volume of the financial noise you take in.
