Category: MARKET

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:

1. 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.
2. 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.
3. 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.
4. 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.

“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.

1. Is there one particular period from the past that you find yourself clinging to?
2. Are you frustrated with where you currently are in life?
3. What causes you to be anxious for the future?
4. 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.

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!