Election Years Are Primed for Financial Mistakes. Here’s What You Can Do About It

I don’t need tarot cards, a crystal ball, or a glittery shawl to confidently declare that you’re feeling stressed about the upcoming presidential election.

Sixty-two percent of Americans were already worn out by election news by April, and most Americans report being tired or angered by politics—numbers that I suspect have only grown as we inch closer to November.

Unfortunately, research suggests politics is increasingly becoming a stressor not only during election years but also during our daily lives. In turn, this stress has been found to have a negative impact on our physical and mental health, causing us to lose sleep and feel depressed and anxious.

And it makes sense we are stressed about politics; we can be negatively affected by who is in office, but our toolkit is limited. And ultimately, you will never have the final say of who gets into office and who does not.

So, what do we do about this stress? Often, we look for things that we can control. In behavioral science, we have a name for this propensity to want to do something, anything, under duress: action bias.

Action bias makes us want to do something to affect the outcome of an event, even if we have no direct control over it. And while taking this direct action may temporarily give us a sense of relief, it can be problematic when it leads us to doing things that are contrary to our best interests.

Why Election Years Are Primed for Financial Mistakes

One domain people worry about each election cycle is how a presidential hopeful will affect their finances. Will they raise or lower my taxes? How will they handle Social Security? Will their economic policies help or hurt my investments?

We see these fears time and time again, even though expert analysis suggests people largely should keep their investments the same and not let elections affect their financial plans. After all, the president doesn’t actually control the economy, and most of our investments have a longer time horizon than a presidential term.

Still, the stress of the unknown can tap into our action bias. And because we tend to feel like we have more control over what happens to our investments than who becomes president, those investments are where we focus our energy—even though there is no guarantee anything will happen to the market at all and even when it would be better to do nothing.

Morningstar research finds year after year that investors eat away at their own investments by making too many trades instead of leaving their investments be, and that about half of investors touch their investments in the face of market uncertainty, potentially derailing their long-term financial plans. An election year can spell similar problems for investors. Because we’re stressed, we’re grasping for control. Experts in investing may tell us to do nothing, but that’s easier said than done.

3 Simple Ways to Handle Election Stress

I believe telling a person who wants to do something to do nothing is akin to telling someone to not think of an elephant: It’s counterproductive.

Instead, by preparing what you are going to do when faced with election stress, you can take preplanned, constructive action.

1. Make a game plan. This applies to both the election and your finances in general. When it comes to preparing for the election, take the time to look up your ballot, inform yourself on your options, and make a plan for election day (for example, determining when and how you are going to the polls). For your finances, review your financial goals and ensure you are on track to achieve them. If you don’t feel like things are where they should be, consider seeking out advice from an advisor or a robo-advisor. Finally, make a plan for how you are going to cool down if you feel the desire to deviate from your plan (for example, you may make yourself wait three days to make any changes to your investments). Creating a plan will not only feed that desire to act, but it will also give you something to execute when you are feeling stressed.
2. Step away. There’s a reason why this comes second. If you followed the advice in step one, you’ve already done all you need to do to handle the election and your finances. Any further engagement will likely be counterproductive, so give yourself permission to step away from political and financial news during this election season. If you’re like me, you might set a lockout timer on the apps you use for the news. Or if you receive print news, limit yourself to reading it during your morning coffee. A lot of news is eye-catching but meaningless in the long run (just look at the market volatility earlier this month), so consuming too much of it can do little more than add to your stress.
3. Find a positive outlet. With your plan in place and news consumption reduced, you may still be looking for an outlet for your desire to act. It may sound hokey, but a good option is to give back to a cause that is important to you. Connecting with others who share our values has been found to help alleviate some of those negative health effects associated with political tension. This work will put you in contact with others who can serve as beneficial social ties during this time. Plus, it may keep you busy enough that you forget the urge to mess with your finances.

Remember, none of us have the clairvoyance to know what will help this election cycle or afterward. But by having a plan in place, you can rest easier knowing that you’ve done what you can for your finances.