Hi guys,
I'm currently in my second year PhD and I AM LITERALLY LOSING MY SHIT RIGHT NOW! I was always a hardworking kid but it's like I don't know who I am anymore. How should I finalize on a topic? I have been working on entrepreneurship and psychology but how should I formulate my research questions and variables? I have tried multiple methods, looked at gaps, papers...but I feel I'm getting nowhere. I don't know how to make sense of all the variables and give it a direction. I haven't been able to focus at all and every day just passes by in guilt! It's already my second year! Please help :(

The best advice I can probably give is a bit generic, but...

Take your head out of the books/web. Accept there is no perfect RQ. Think just based on your intuition for a few minutes about what's interesting in the topic area - or even just what you don't know. Scribble down the first few ideas you have no matter how bad you think they are.

Then take a second look at them, with some limited web searching and literature scanning. Your criteria needs to be not 'is it perfect', but 'is it reasonably ok'. Reasonably ok is a PhD. Aiming for perfect is a guaranteed fail after wasting 10 years of trying. Leave it to other people such as your DoS to try to tear it down, don't do it yourself.

A lot of PhD students waste countless amounts of time and effort trying to find the 'perfect' RQ or the 'correct' topic. Often when interrogated they actually have a half-dozen perfectly viable RQs but are actually stressing because, either consciously or subconsciously, they're trying to pick the 'best' one when there's no such thing.