This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.
Lisa Frink knows firsthand how quickly financial stability can devolve into financial catastrophe.
Frink and her husband checked all the boxes -- they went to college, worked hard, bought a house and started a family. When Frink was set to return from maternity leave in June, the first blow struck. Frink's husband lost his job.
Now, with only one income, the Frinks are juggling a mortgage, medical bills and everyday expenses, and they fear they're one layoff away from collapse.
And their story hits home for many of Americans who are still battling pandemic-related hardships, while simultaneously facing a volatile stock market, record-high inflation, rising interest rates and stagnating wages. And as macroeconomic tailwinds point toward a recession (whether it's already here is up for debate), concerns over finances are taking an even heftier toll.
"When you have a newborn baby, it adds that extra layer of anxiety and worry that I had never experienced before," said Frink. "It's very overwhelming and anxiety-inducing, more than I have ever felt in my life."
Kimberly Gonzales -- a Colorado resident who lost her previous business during COVID-19 -- often loses sleep over money, especially after her husband got cancer and she had to start relying on credit cards to pay for essentials. Before that, as a single mom, Gonzales felt anxiety not knowing when the next dollar was going to come in. "I will wake up in the middle of the night and stress about taking care of our finances for the house," Gonzales said. "I count every penny, I'm nervous."
The financial anxiety that the Frink and Gonzales families are feeling isn't unusual right now.
According to an April survey conducted by Bankrate and Psych Central, 42% of US adults said money negatively impacts their mental health. Lower-income households, women and millennials (who face unobtainable housing prices and high student debt) suffer the most from financial concerns.
For workers in industries with lower job security, or households without savings or accumulated wealth, an economic downturn can be devastating and have long-lasting effects.
Preparing for a recession means more than just securing your income streams or establishing restrictive spending. It's also about getting your mind in the right place to weather the storm. We spoke to experts about how to cope with the fear and anxiety that comes with economic instability. Here's what they said.
Accept that we have little control
A lot of anxiety stems from attempting to control the uncontrollable. We can't control when a pandemic hits. We can't control when a recession hits. "I think the last few years have certainly shown us how little control we have over so many things," said Jennifer Dunkle, financial therapist and founder of New Awareness Therapy.
Frink said her life is like a house of cards, where everything could be in jeopardy if just one piece comes loose. "There are so many people in that position where it's just one knock away from completely uprooting their life," she explained.
A central part of Dunkle's work is to help her clients realize what they actually do have control over, namely how to prepare for and react to adverse situations. Many of the people she works with have anxiety about layoffs, especially when there's widespread job insecurity.
Fear of being unemployed is particularly acute for the Frinks. Her family was getting on the right track in building up savings and investments, but things started spiraling after her husband got laid off. Frink knows that if she loses her job, that also means losing health insurance along with everything else. "We'd be done. We wouldn't be able to keep the house, our savings won't last as long as it used to because of inflation."
While an individual can't change the job market, Dunkle emphasizes approaches that you can take into your own hands, such as trying to live within your means, and doing whatever possible to build up three to six months of living expenses. Having some kind of emergency fund to carry you through a tough time is critical to coping with the panic surrounding a job loss. "That way, you know you have enough money to last a little while," Dunkle said.
Building up a robust nest egg isn't easy. Nearly two-thirds of Americans are living paycheck to paycheck, according to a recent study. If you're starting from nothing, aim to save a little each month and slowly scale up. That can help keep you motivated and better off in the long run.
Cope with financial trauma
Many people are still holding onto the trauma of the last major financial crisis and reacting to fears from that suffering, according to Allison Baggerly, founder of the Inspired Budget. When the housing bubble burst in 2008, millions of Americans were forced to sell their homes or lost their homes to foreclosure, relinquishing trillions of dollars in total wealth. One in five employees lost their jobs at the beginning of the crisis, and many never recovered or got real work again.
"Today, people are reacting emotionally to what they experienced then, or what they saw their parents experience," Baggerly said. "Being able to recognize that, I think, can really help, but it's hard to do."
The Great Recession was caused by a uniquely toxic combination of poor or even downright shady practices within the housing and finance industries, sparking one of the most severe economic downturns in US history, second to the Great Depression. But it isn't 2008 anymore, and even if things get worse, some experts don't think it'll be as bad as it was then.
"Even though GDP has been negative for two quarters, there are many other aspects of the economy that are still strong and in much better position than what the situation was in 2008," explained Anjali Jariwala, certified financial planner and founder of Fit Advisors. Though many external factors may affect the future, "I think the storm will be hopefully mild and won't be as long as what some people perceive it will be," Jariwala said.
Forecasts aside, traumatic stress can be enduring, and there are many things you can do to confront it, according to the American Psychological Association, which provides tips on coping with trauma.
For example, discussing a traumatic event with someone you trust can be immensely helpful. Ask your friends and relatives if you can lean on them, and for help with tasks or other obligations that might relieve daily stress. Frink described how talking with a therapist and having open communication with her partner about money releases the pressure valve. "It's helpful to know you're not alone," she said.
Another way to cope with trauma is to stop avoidance behaviors. Stress or anxiety often reveals something you're deeply worried about, and avoiding your feelings can prolong your stress and keep you from healing. Approach your feelings with curiosity and explore where they stem from. Once you've pinned that down, focus on the things you can control now and not the things you can't.
Gonzales confronts feelings of anxiety by putting them all down on paper. She recommends writing down your money worries to map out how you might change your mindset and go from there. Then you can really try to "face everything and to rise from it."
Lastly, prioritize self-care. Physical activity, nutritious eating and adequate sleep will help your mood and energy. Another approach to healthy coping strategies is to do what you enjoy -- meditating, going outdoors, painting or playing an instrument.
Establish mindful money habits
With inflation high for basic essentials such as gas and groceries, Frink said that her family has to do more planning and budgeting than ever before. "It's a complete lifestyle change," she said.
One way Gonzales's family adjusts to rising food costs is by using their garden as a resource. They grow just about everything they can, and also learned to preserve their food to make eating more affordable.
"Tighten up if you need to during this time," said Baggerly, noting that priorities can change and cutting back on spending often happens when times are tough. But, she added, you don't want to take it to an extreme. "I don't think that means you can never spend money on what you love. I think that just leads to binge spending."
In fact, professionals often tell their clients to watch out for excessive spending, which can be a result of initially cutting out too much. That's why the first thing Carrie Rattle, financial therapist and founder of Behavioral Cents, recommends to her clients is to avoid deprivation.
"If you deprive yourself, part of you is going to rebel somewhere," said Rattle. "I recommend short-term fun and long-term thinking, because you and I could get hit by a bus tomorrow. It's about finding your personal balance."
To establish some stability in your finances, map out a spending plan. You'll want to make sure your basic necessities are covered (including what you need to work, like an internet connection), and go from there, making decisions about where you might curb spending. Make the hard choices about eating out, streaming services or travel. Then decide how much you want to spend on other items and how much you want to save with any remaining money.
Rattle also recommends writing down your expenses for the next 12 months to see where your income is going. Being aware of those numbers can help us be more intentional about our financial choices -- that's the "mindful" part of mindful spending.
"It's natural for humans to want instant gratification," Rattle said. "So, you have to override the natural programming and go from there."
Adopt a long-term perspective
What happens when the stock market gets wildly volatile or hits a decline? Investors start to panic, which can drive them to make costly mistakes with their money.
More than half of Americans own stock, according to recent Gallup research. That means that before and during an economic downturn, a large portion of the country might feel the impulse to cut losses and sell low after buying high. But experts say you should avoid making big changes to your portfolio, if at all possible.
"You want to stay the course," said Jariwala. "Anyone who's investing for a long-term time horizon should not be making any big adjustments to their portfolio right now." This same advice goes for your savings: When uncertainty shows up, make sure your fundamentals are taken care of. Try the best you can to avoid pulling money out of your savings or retirement accounts. In fact, Jariwala recommends pouring a bigger percentage of your income into your savings.
In these situations, the best thing you can do is leave everything alone. The reason? Jariwala points to history. From the 1920s on, we've seen numerous dips in the market. They're typical and part of the market cycle. But the longer you invest your money, the longer you have to realize gains. By staying the course, you're actually giving yourself time to recover and rebuild.
The overarching principle right now is to avoid hunting for short-term gains, or making financial adjustments out of fear. If you can, ride out these tumultuous times by continuing to contribute to your savings and retirement accounts, and don't abandon your investment goals.
Focus on facts, not emotions
Recessions create financial hardship, and with hardship comes fear, self-doubt and anxiety.
No matter what anyone says, you can't simply overcome difficult conditions by repeating the mantra to think positively. Still, Rattle recommends "adopting a positive attitude toward success as opposed to fearing failure." To that end, try to tackle what you can one step at a time rather than panicking.
It's a scary time, which means your psychological well-being is even more critical. "Make decisions based on facts not on emotions," said Baggerly. And just like previous financial crises, she assures us, "This too shall pass."