Feeling stressed about another rate rise? You're not alone

As another interest rate rise looms, many Australians are finding the psychological toll as difficult to manage as the financial impact.

Another interest rate hike could be just around the corner, and many Australians are feeling the strain.

With all four major banks expecting the Reserve Bank to lift the cash rate to 4.6% on September 29, and some economists predicting further increases, borrowers are once again facing uncertainty about their finances.

For many, the challenge is not simply higher repayments.

It's also the mental burden that comes with trying to make sense of competing advice, economic forecasts and financial decisions at a time when household budgets are already under pressure.

We hear from a growing number of people who feel overwhelmed by information and paralysed by choice.

As anxiety rises, clear thinking can become harder, increasing the risk of poor decisions at precisely the moment confidence is needed most.

Why money uncertainty drains your mental energy

Paralysed as they attempt to analyse information, they don't feel as if they completely understand, and they're unable to think clearly in the dizzying noise of choice.

Anxiety is on the rise, interrupting sleep and consuming cognitive energy.

The reason we experience anxiety is to heighten awareness of potential danger and ready us for action - to do something.

If we don't know what the best thing "to do" is, our anxiety persists and we become paralysed by fear, particularly the fear of making the wrong choice.

Starting out as concern, it quickly escalates to a state of apprehension and worry.

You learn as much as you can, but if this takes too long, you get exhausted and move into the overwhelmed state, getting lost in the sea of new and complex information.

This leads to the highest level of anxiety - panic, where you tend to lose any rational control over your actions.

Anxiety is an emotion that needs to be released by action, so when you become paralysed by choice and fear your instinctive brain takes over, making all sorts of illogical and counter-productive decisions.

In this state we often take our cues from what other people are doing. They are also often acting from their survival instinct.

The power of the herd is strong when we don't know what to do. Think of a run on the banks, wild stockmarket fluctuations and panic buying during the pandemic.

What anxiety does to your decision-making

Physiologically, when you feel anxious, the stress hormones in your stomach stimulate "butterflies" and can make you feel sick.

It indicates something in the environment is wrong, different or new.

Blood is directed away from your hands and feet, making them clammy and sweaty as your heart works hard to pump blood to arms and leg muscles ready for escape.

Sustained stress often tires your limbs due to over-stimulation, making you feel lethargic and exhausted.

Anxiety does not discriminate between different types of change and uncertainty.

So, when you feel you are starting to become paralysed by analysis and panicking about what to do, remember that uncertainty is uncomfortable, but it is also temporary.

You will be okay.

Take a breath, have a break and keep reminding yourself that the answer will reveal itself eventually with time and focus.

Three ways to stop overthinking and take control

1. Create time and space

I have been in many negotiations where we've requested an overnight break.

Not feeling rushed reduces the sense of immediate threat and allows for more cognitive energy to be spent solving the problem at hand.

2. Rename and reframe the emotion

This is an old trick that comes from sports psychology.

When you feel the butterflies of nervousness and stress, tell yourself that you are actually excited and full of anticipation about the challenge ahead.

Nervousness and anticipation look exactly the same in the brain, so simply reframing what the feeling means can have a huge impact on your performance, energy and attitude.

3. Externalise the subject matter

Think of the issue as someone else's problem that you are advising on.

This allows you to reduce the level of personal threat and better consider new or creative solutions.

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