Several years ago, when I was walking back with my popcorn between the drive-in movie double feature of the original "The Hills Have Eyes'' and "The Texas Chainsaw Massacre,'' my wife jumped out from behind our car. I threw the popcorn in the air, jumped in the vehicle, and started to drive away, almost leaving my wife and taking the speaker with me.
Yet there is a difference between being scared and being afraid. Scared seems to be a reaction to an immediate event. Afraid seems to be a more all-encompassing, even suffocating, feeling. During these difficult times, I think that it is normal to feel scared; I caution you against being afraid.
Each of us reacts in our own way to the events around us. These days you can respond to bank failures, a housing collapse, unemployment, the stock market or the tone of the current political campaigns. But when we move from the immediacy of our scared reaction toward a general state of being, we are now afraid.
In his book "The Science of Fear," Daniel Gardner writes that "news stories routinely say there is a possibility of something bad happening without providing a meaningful sense of how likely that bad thing is."
We are not about to enter another Great Depression. In fact, Federal Reserve Chairman Ben Bernanke's playbook for handling this current crisis is a result of his extensive study of that terrible time. While we are in a global recession, it is not a global meltdown. If we aren't overleveraged with our investments, we are suffering from a Three-Mile-Island-like leak, not a Chernobyl event. This distinction is important -- one was a scare, the other a disaster.
Governments around the world have stepped in to unlock credit. Our bank deposits are insured up to $250,000. While some of us have lost jobs, the unemployment rate is significantly lower than it was through much of the 1980s, a time of tremendous stock market growth. Times are tough right now, but times have been tough before. We are going to see some fundamental changes because of this economic cycle, but neither this cycle nor the changes will be permanent. Things will keep changing. The thing to think about is what you can do until things get better. We don't know when the markets will improve, although they certainly will. But there are several steps you can take right now.
Review your cash flow. This is the time when you can perform your own line-item veto of extraneous things that are simply not making a big difference in your life. Little things like changing your cable television package, bringing your lunch to work, eating at home more often or reviewing your insurance deductibles don't seem like much, but many of them add up to some pretty significant savings. This also is a great time to strongly negotiate on larger purchases that you don't wish to put off.
Rebalance your portfolios. You should now be adding to your stock position in your retirement plans. Your bonds have most likely fallen less than your stocks, so you want to calibrate back to your original ratio. Also, this is a great time to do tax swaps of mutual funds in your nonretirement accounts. If you are holding a mutual fund with a loss, you can sell it and buy a similar but not identical fund. This will keep you invested but give you a tax write-off.
Talk to people. Many of us are experiencing similar feelings. Don't go it alone. Your spiritual home may be offering support groups. Encourage leaders at your work environment to create a place to talk. This is an important time not to isolate yourself. If you are spending your days surfing the Net or glued to CNN, you are filling your time with information way scarier than Texas Chainsaw Massacre's Leatherface.
Remember that fear is false evidence appearing real. Time spent in the land of "what-could-happen'' deprives you of your life today. While you need to create plans for different scenarios, it won't help to wait for them to come.
I was talking with a friend about his daughter who had returned to an active life after surgery. She went through extensive rehab and is now ready to participate in sports again. She will either get injured or she won't. If she gets injured again, they will deal with it. If she doesn't, then they can enjoy her athleticism with her. But they can't stop living because of what might happen. None of us really know what the future holds. Uncertainty is our only certainty.
Reach out to others in need. Give a little something to charity. You would be surprised at how this will loosen some of the money grip that has its hold on you.
It isn't a question of if things will get better, it is merely a question of when. Stick around for the second movie. It probably won't be nearly as scary.
Spend your life wisely.
Ross Levin is the founding principal of Accredited Investors Inc. in Edina. He is a certified financial planner and author of "The Wealth Management Index." His Gains & Losses column appears on the fourth Sunday of each month. His e-mail is firstname.lastname@example.org.