Entrepreneurship and Wellbeing – 23 Feb
3 questions – Infinite possibilities.
With every new start comes feelings of hope and new possibilities – a new year, a new city, a new job, a new relationship…we always tend to believe [or hope] that this time will yield a different and more positive outcome. With this, comes the pressure to succeed. So often, it doesn’t which can largely be attributed to our habits which make it difficult to sustain us until we reach our new goals and aspirations.
We must acknowledge that for many South Africans, poverty and financial insecurity, are not of their doing. Many people in this country live in extreme poverty and will never, no matter how much financial knowledge they have or however many budgeting spreadsheets they compile, find their way out of it unless some serious structural change occurs in our economy. For the rest, their financial situation is because of their consistent behaviour with money – their habits with money, in other words. As we begin the new year, ask yourself these 3 very important questions. Assess the many answers to these questions to help you reach a better place, financially.
This article was featured in the Financial Planning Institute of Southern Africa’s website. To read the rest of it, please follow this link – 3 questions. Infinite possibilities – My Money 123 (fpimymoney123.co.za)
Don’t let tax get you down
We all know that the only two certainties in life are death and taxes. Even after we’ve gone, taxes are still levied against our estate. The more money we make, the more money the taxman looks to take.
Tax can be a serious stumbling block in our financial mindset, especially when we think about all the ways in which we are taxed, where that money goes and how it is ultimately invested into our community, whether it’s local or across the entire country. As we also know, most of our success in life happens in our head; how we think and what we think about are crucial to making healthy decisions and choices. So, if there’s a mental stumbling block, we need to flatten it or learn how to jump it.
First, we can change our perception of tax and accept that there are elements that we will never fully agree with. This is because tax is not just for us, but for everyone else too and whilst you can keep some of the people happy some of the time, you can’t keep all of the people happy all of the time.
We can think about our country like a country club. Every country club offers benefits to its members, and in order to enjoy these benefits, membership fees need to be paid on time. This keeps things equal, and it keeps the country club in a position to keep providing benefits to its members. The committee that runs a country club needs to account for ensuring that the ideals of their community are upheld and maintaining the facilities with the membership fees paid.
It’s a simple illustration, but it’s a helpful way to understand that when we choose to live in a country, we too need to pay the fees to maintain the resources, infrastructure and ideological leadership. The complexity with tax is that we move from a couple of hundred people in a very similar demographic to millions and millions of people across multiple demographics. But at its core, if we understand that tax is designed to help us contribute to shared resources, we can start to flatten or jump this mental hurdle.
Second, we can change our behaviour when it comes to earning money and paying taxes. Life is already so busy and complex, if we don’t pay regular attention to our money and our taxes, we will always find ourselves rushed and stressed over the tax season. Here are a few things to do differently this year:
- If you’re not money savvy (most of us aren’t), find a financial adviser, planner or coach who you trust and make sure you have regular meetings with them.
- Keep track of your income and your spending. This is the fundamental basic law of good money management; your financial adviser will help you with this.
- If you don’t pay tax every month, keep a small savings account active where you can pay your estimated tax. Smaller monthly amounts are far easier to stomach than bi-annual or annual payments. You’ll also accrue interest on the saved money, which will help you when payments are due.
- When you check in with your financial adviser, stay up to date with tax exemptions or tax-free savings initiatives to maximise your financial potential, both in the short and long term. These options and rulings are often updated in annual budget speeches and will affect how you move towards financial independence.
Being tax savvy is not about working hard at the end of the tax year; it’s about understanding that tax is part of our daily financial planning. If you need to chat – let’s set up a time and ensure your financial situation is at its healthiest.
The importance of being intentional
If we don’t stand for something, we will fall for anything. Essentially, our actions will either result from what we choose, or what is chosen for us.
Our days are packed full of communication and actions. From the moment we engage with our mobile device or open our emails, messages begin to stream in and affect us. We will either be triggered into action by what we engage with or choose to follow our own intended plan of action for the day.
When we look deeper into how and why we are triggered, we enter a complex world of psychology and psychoanalysis, encountering things like our ego, our hidden self and our true self. There are excellent resources and coaches to help us understand our personality and strengths. Ultimately, we arrive at a state of being more mindful and intentional.
When we consider intention and how it impacts our future self, it’s helpful to consider the difference between making choices and making decisions. A choice can be seen as the result of intentional mindfulness, and a decision can be expressed as an intentional response to consequences.
Choices connect us to our desired intention, values and beliefs and speak to rights, power and opportunity. Decisions connect us to behaviour, performance and consequences and focus on the act of needing to make up our mind about something. Neither approach is wrong, one is merely premeditated whilst the other is responsive; both can be intentional.
If we want to be successful in our choices and decisions, we need to assess our habits and our cheerleaders.
Habits are at the root of all of our worst and best decisions. It’s often said that it’s not the markets that make us wealthy, but our habits. This is true for every area of our lives – not just our finances. Our habits are so powerful because as we stand at the helm of our life, we determine the direction we will take. If there’s a storm, we can navigate around it or through it; if there’s land, we can go towards it or away from it. We make our habits, and our habits make us.
Our cheerleaders are those standing beside us to help us navigate and manage the ship. They’re our closest friends and family, our colleagues and our coaches. They’re the ones we choose to listen to, and their messages will either reinforce us or ruin us. They can help us see our blindspots and help us identify strengths.
However you want to enhance or improve your life, take the time to be intentional about how you choose what you will stand for.
Four ways to measure your fortune
We often don’t worry about something until we realise that it’s limited. If we have lots of something, it’s a fortune. If we don’t, it can become a focus of concern and anxiety.
Young children generally don’t worry about much if their needs are met. With access to their parents’ love, attention and confidence, children have much of the social affirmation they need. When school starts and they are placed in a room with lots of other children with similar needs and only a handful of adults, they quickly become aware of social capital.
Within a few years, money becomes more of an issue. Realising we can’t have everything we want, when we want it, awakens us to the importance of financial capital. As soon as we are old enough to start earning money, we jump at the opportunity, whether babysitting, washing cars, a paper route, waiting tables or any other casual position.
With increasing age, our good health becomes harder to maintain. It can happen for some in childhood years; for others, it kicks in around their twenties and thirties when weight gain is the first sign of an ageing body. And, with significant health scares or ageing, our acute awareness of how little time we have left leaves us aware of our time wealth.
If we want to know just how wealthy we are, we need to consider all four of the types of wealth above:
- Social Wealth
- Financial Wealth
- Health Wealth (Physical & Mental)
- Time Wealth (Freedom)
Social Wealth
The amount of support for and from others that we enjoy is our social wealth. Investopedia defines social capital as a set of shared values that allows us to work together in a group to achieve a common purpose effectively. The idea is generally used to describe how members can band together to live harmoniously.
In a way, our social capital is our most important as it allows us access to the finances, health, and time of others in our social sphere.
Financial Wealth
Indeed, money doesn’t make us happy, but having access to financial resources to build and grow is essential to the contributions we can make in our social circles, in protecting our health and affording us freedom of our time.
Health Wealth
When we assess our financial portfolio, we often see health in terms of medical cover for emergencies and chronic illness. But it’s so much more than that. It’s physical, mental and emotional, from every bite of food we eat to every word we read and repeat, from how we manage anxiety to how we manage our sleep; our health wealth is integrated into every choice we make.
Time Wealth
We had absolute freedom of time in our first few years of life, and we didn’t realise it until we traded it for schooling, working, and maintaining our health. We need to be intentional about reclaiming our power in this wealth area, and we do this through building our social, financial and health wealth.
Our fortune is not just the balance at the bottom right of our monthly bank statement or acquired total assets. It’s so much more meaningful and purposeful when we can see the areas in our lives that accrue and attribute value and make us fortunate.
The best time to live
“Remember the past, plan for the future, but live for today, because yesterday is gone and tomorrow may never come.”
The best time to live is in the present. It’s easy to get lost in a daydream of how life could have been different or how good life used to be. It’s equally easy to succumb to the speculative dreaming of what might happen in the future.
Believing in a better future is hope, and being confident of what we hope for; that is faith. Faith is grounded in the reality of the past; hope is looking to the anticipated reality of the future. In this way, to truly live with purpose today, we need to remember our past and plan for our future.
But there is a difference between thinking about the past or future and living in it. Sometimes we live in the past because it’s familiar; we know what happened; there are no surprises. So too we might live in the future because we are deeply dissatisfied with where we are.
When we dwell on thoughts to the point that they consume most of our energy and attention, this is when we move from thinking to dwelling. As the old proverb goes, “home is where the heart dwells”.
When the past was really good, we can be tempted to live in our memories because just thinking back on it gives you a feeling of comfort and happiness. And, if the past was really bad, we can live in the future seeking the same comfort and happiness.
We need to identify this in our lives because we can’t change the past and we cannot predict the future. The only place we can make changes is in the present moment. No matter how certain our plans might be, if some major event happens, that can all dissipate into the ether with the snap of a finger.
Being present to our present is where we regain and maintain control of our power to choose. When you speak to people with children or people on their deathbed, a common regret is missing their kids growing up or wishing they’d spent more time with their loved ones.
If you feel like you’re not quite focussed enough on the present, grab a journal and a pen and jot down one of these questions on each page. When your mind wanders and you find yourself dwelling on something that is taking you away from the present moment, jot it down on that page. This will help you release it from your focus, but still, be able to recall it to help you in your planning.
- Is there one particular period from the past that you find yourself clinging to?
- Are you frustrated with where you currently are in life?
- What causes you to be anxious for the future?
- What are you most grateful for in life?
Whilst these are helpful life questions, they’re also rooted in the core motivations for how we work with our money. When we can slowly break these questions apart and work through them, we can start to understand our money better and embrace what it means to remember the past, plan for the future and live for today.
Catastrophising and how to manage it
Have you ever gone down a rabbit hole on social media? You know, that moment when you see something triggering and you click on it, and then scroll down through the comments, becoming wholly engrossed in a conversation that turns out to be a waste of time and emotional energy. While we’re in that moment, we’re often completely unaware of how it’s affecting us. Catastrophising is a little like that.
We can all be affected by catastrophic thinking to differing degrees. It happens when we ruminate about irrational worst-case outcomes, assuming that the worst will come true.
For example, when we get a sore throat, we might leap from one disastrous medical condition to the next, ending in our impending doom from some rare and awful disease. Or, when someone doesn’t reply to our text message, we immediately start to assume the worst and run down a track that ends in our removal from every social group.
Perhaps there is a significant crash in the markets, and we assume our investment portfolio will be wiped out, or we lose a large client, and we think our business will crash. If these patterns sound familiar, don’t panic – you’re not alone.
Many of us engage in this type of self-sabotaging thinking at very manageable levels, we snap out of the catastrophe-coma and vow to never do it again (until the next day…) and carry on with life. However, there are times when catastrophising can become a debilitating reality. Various research has linked this more profound experience of catastrophic thinking to other conditions, such as chronic pain, chronic illness, or poor mental health.
If we are prone to depression or high anxiety, then catastrophising might very well be much harder for us to identify and manage. If we are in constant physical pain, this too will impact our mental health and render us more vulnerable to crippling thoughts. Some articles have shown that it’s not just psychological as it can affect the physiology of the brain.
The first step to managing catastrophising is to identify it. Many of us do it without realising it, so the sooner we can observe this behaviour, the sooner we can change it. As with most mental concerns, therapy is beneficial, and so are mindfulness practices and meditation. These are reflective processes that break down our repetitive thought patterns and allow us to decide which habits we should develop and which to abandon.
We can also intentionally surround ourselves with people who help us make better decisions, who understand what is important to us and can lovingly support us when we fall down the inevitable minefield of rabbit holes ahead of us. Most of the battle ahead is fought in the mind; if we can take steps to protect not only how we think but who we allow into our headspace, we will be stronger, safer and happier.
Ask yourself these questions BEFORE switching funds
As financial planning conversations deepen and explore more value, we find ourselves moving from the empirical to the emotional, from processes to perceptions and from products to people. It’s an enlightening journey that takes us away from numbers and allows us to reflect and reconstruct our future planning approach.
But, it’s also extremely challenging as we find questions we can’t easily answer; but, that’s still healthier than having answers we can’t question! This point of reflection helps us form questions that enable us to navigate the flow and rate of change around us. The questions empower us to see choices more clearly and engage with our life and financial plan in a significant and impactful way.
But, before we make any changes to our investment portfolio, there are some helpful questions to ask. A recent article from fbfs.com offered several questions; here are some of them.
Am I working with a financial adviser I can trust?
In the same way, our personal and professional relationships depend on strong bonds of trust; our relationship with our money needs the same foundation. And, this begins by working with a financial adviser we can trust.
We all have blind spots (which is why financial advisers ALSO NEED financial advisers for their personal portfolios!), so it’s not just about working with someone our bank recommended; it’s about working with someone who we know, like, and trust.
How have my circumstances changed?
Some life changes are apparent, and we don’t need someone to help us spot them, but other life changes are slow and gradual. When we’ve been working with a trusted financial adviser, they can help us track and identify the gradual changes that will impact how we invest and plan for the future. Not all life changes require a shift in funds, but some might. This is how we build an investment strategy that consistently reflects what is important to us.
Has there been a change in my risk tolerance?
Various factors influence risk tolerance, but one of the most significant is our investment horizon. Ask yourself: “Has my financial timeline changed?” For example, if you’ve decided to move your financial independence (retirement) date, this might change your investment strategy. Your financial situation or a change in your risk preferences could also trigger tweaks to your investment portfolio.
Are any of my funds underperforming?
This is probably the question we ask ourselves most… but it’s also one of the most detrimental if not answered correctly. A bad week, month or even year may not be a valid cause for concern for long-term investment strategies. However, consistent poor performance over several years may yield a legitimate concern and reason to reflect on your fund selection. But, even so, it still needs to be taken in the context of the entire portfolio and the outcomes for which we’d hoped.
No matter how much we plan and how meticulous we might be, things generally never go directly according to plan. So there will always be reasons to feel like we need to switch funds; some will be valid, others won’t be. Hopefully, this blog helps you prepare for your next financial planning conversation!
To save or not to save
So often we meet clients who tell us that they cannot afford to save because ‘school fees are really expensive’ and ‘looking after family members is derailing their savings goal’….and the list of reasons is endless. If we are really honest, life has changed dramatically in the past year and a bit. Things are not as black and white as they have been, and we cannot continue living as if death and financial insecurity is not a part of our lives.
Many of us are experiencing anxiety and real fear about our immediate and long term wellbeing and we cannot brush that aside. If this is you, know that you’re not alone in all of this. And your fear and stress are justified.
While we are trying to keep our heads above water, we need to consider a few things. In the event that we make it through the next week or year or decade, what will our financial situation look like? In the event that we make it to retirement, will we be able to sustain ourselves on what we have saved over the years? Current statistics suggest that we won’t as only approximately 6% of retirees in our country are financially secure. The rest are either forced to continue working or are dependent on family or the state for their survival. While our mortality may be in question, our survival is also very likely and we must try our best to plan effectively for it, if it happens.
So what can we do today to try and better our situations, given the mess the world is in right now?
Here are a few pointers that may help:
- The first and really important step is to acknowledge your feelings. It’s ok to be feel the way you do. Be gentle with yourself because this is really a difficult time we’re in
- Be honest about your spending habits. Many people think they know how they spend but don’t really. When we work with clients, we almost always find money they had no idea they had, simply because they don’t really keep track of every cent they spend. If you do anything in the next few weeks regarding your finances, understand where your money goes – ALL of it. You’d be surprised at what you discover during that process
- TALK. Talk to your spouse, your children, your extended family members that you support – talk to them about money. Talk about what you have, what is possible and what is not. A lot of anxiety and financial strain can be alleviated through honest conversations. Try it
Once you’ve done all the above, you may discover that it is possible to start your savings/investment journey. Even if it’s with very little money. But the important thing is that you actually start. With time, and we see this often with clients, you gain momentum and are encouraged by the balance you build up which then gives you the desire and willpower to continue to accumulate more. Remember that there are two important ingredients of wealth accumulation and that is starting early and consistency. Both are in your control.
Be well.
Financial advice in a crisis
The past year was dreadful, to say the least. What has made it even more difficult is that it was collective as the whole world suffered immensely in many ways in the past year. Amy Underwood, a Behavioural Economist, spoke at a recent webinar about trauma and how we, as humans deal with it. She mentioned that, generally, we tend to go through it at different times, allowing us to call on our network of friends and family for support and comfort. What made the events of 2020 even more difficult for all of us to contend with is that we were all experiencing the trauma simultaneously, which meant little to no external support was received.
With the loss of financial security for many, the importance of financial advisors’ work was in the spotlight. It has become clear for many that keeping good financial habits and having a good financial back-up plan is vital, particularly in times of turmoil.
The financial planning industry, in general, has come a long way from a product focus to behaviour management. Talking numbers and drafting a financial plan is only half of the solution and possibly the easiest part of the journey. The hardest part of financial advice is understanding clients’ emotions in all phases of their financial journey, and particularly in times of distress so that the right kind of advice and intervention can be provided to clients that will help them navigate their way through the peaks and troughs with perspective and confidence. That is why, from the initial meeting with clients, they get to understand that no matter how great the financial plan is, life happens and there will be the temptation to veer off course. Emotions must be understood and addressed to avoid making mistakes that will be regretted in the future.
his article was featured in the Financial Planning Institute of Southern Africa’s website. To read the rest of it, please follow this link – https://www.fpistaff.co.za/FPI/News/Financial_advice_in_a_crisis.aspx