Category: Blog

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I’m not sure I want to know

There’s a story that was told many years ago (it may or may not be true…) about a Microsoft call-centre agent and their call with a deeply irate customer. Having recently purchased a computer that came pre-installed with Windows, the customer called to find out why his computer would not respond.

It goes a little like this:

Call-center Agent (CCA): Thank you for verifying your purchase; how can we help you today?

Customer (C): My computer isn’t responding, and I’ve tried everything!

CCA: Thank you for that feedback. What do you see on your screen?

C: Nothing!! Absolutely nothing!

CCA: Please press control, alt and delete together. Has that helped?

C: No – nothing has happened. I’ve tried all of this already!!

CCA: Is there an error message on your screen?

C: No – the screen is just black.

CCA: Is your screen on? Do you see the power light on in the bottom corner?

C: No – there is no power light on. (becoming more amiable) I don’t think the screen is on.

CCA: Is it plugged into the back of your computer correctly?

C: Hold on, I’ll follow the cable and check. (a few seconds pass) I can’t see behind the computer; it’s too dark.

CCA: Are you able to turn the lights on to check?

C: No, I can’t; we’re currently having load-shedding.

Sometimes, our biggest problems are our most basic problems. And, we can’t always see them ourselves until someone else reminds us. When it comes to financial planning and managing our money, it’s easy to become side-tracked by big ideas, fancy strategies, forecasting and spreadsheets, and overlook the basic starting blocks of budgeting. We miss what’s happening right in front of us.

Budgeting helps us stay connected to what’s happening with our money right now. So – why don’t we do it religiously?

Carl Richards, a regular contributor to the New York Times, shares some reasons for why we allow this to happen.

1- It’s not fun.

True. But remember, as Stephen Covey says, “If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster.” Budgeting is how we make sure our spending ladder is leaning against the right wall.

2- I already know where my money is going.

No, you don’t. Sorry. Unless you track your spending, you don’t have a clue where your money goes. Everyone I’ve ever seen go through the process of tracking spending for 30 days usually ends up saying some version of, “I had no idea I was spending that much on X.”

3- I’m not sure I want to know.

I think this is the biggest mental hurdle. The reality is that as we become aware of what and how we’re spending, we’ll find some things that surprise and bother us. Then we have to decide: Do we want to change?

Carl goes on to suggest four ways to get back to the basics of budgeting:

1- Try tracking your spending for 30 days.

2- Don’t stress about what app to use.

3- Just carry around a pen and a little notebook, and each time you make a purchase, write down what you spent and how it made you feel.

4- At the end of the month, go back through your notebook and just notice. Become aware. That’s it.

The glamorous side of managing our money is making purchases that make us feel better – not in tracking our spending. But, the feel-good side of managing our money is in regaining and maintaining control of what we can do with our money, which starts with budgeting.

As Carl said, it’s not about making significant changes. At first, it’s just about becoming more aware and noticing what’s going on, noticing things that we may have missed or overlooked. 

The result is that we will be more mindful and have more control over our money; and that’s worth knowing.

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How to do it in the 4IR

“But we didn’t need it, and we turned out fine.” 

We hear this line more than we should. From tap water to technology, from diets to devices, from gender identification to genetic modification, from schooling to selecting a coach or advisor, our peers and mentors can often throw this line in our face – but we didn’t need it, and we turned out fine.

It can leave our sails windless and stall our engines before we’ve even selected a gear.

But here’s the thing: the Fourth Industrial Revolution (4IR) poses one challenge that previous generations have never had to meet: prolific access.

Access to what? Everything.

One of the significant changes that we’ve seen in the world around us over the last two decades is the overwhelmingly enlarged access to information. Before the profuse use of mobile technology and cloud-based servers, data was stored in books and brochures, libraries and archives, making it harder to access. Now, we literally have the world (wide web) wirelessly at our fingertips. And those born this century have not known anything different.

Information is now so readily available that we have a new challenge: how do we find the valuable information that is relevant to us right now? On top of that, we have comparisons that we could never quickly draw before; like how the stock market performed last year, in 2008, 1998 and 1928. Heck, we can even compare the Bitcoin bubble to the Tulip bubble in 1636.

DIY is no longer about putting up new bookshelves in your bedroom; it’s about choosing, managing and prevailing on virtual shelves (platforms) for social engagement, investing, shopping, job hunting, learning, travel and just about anything else you’d like.

We are overwhelmed, our parents are overwhelmed, our children are overwhelmed.

The expectations are no longer what they were in 2004. Our opportunities are considerably more expansive, and the perceived consequences of ‘getting it wrong’ are infinitely more shareable. Now, the most dangerous words are: “We’ve always done it this way.”

We need to encourage each other to do things differently, to rely on experts, advisers, mentors and coaches to help us navigate this new revolution. These helpful people are not just for the wealthy or well-connected; they’re for all of us.

As our connections grow, we need to be willing to do the inner work of building our character and protecting our values. It’s not about changing fundamental truths; it’s about changing our perspectives about how big the truth really is.

Making decisions in the 4IR is no longer about extracting one choice, it’s about engaging in conversations.

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Are you money-mental?

The simple answer is: Yes, we all are!

In a recent blog, we looked at five financial trip-wires and glanced over the term ‘mental accounting.’ Introduced in 1999, it’s a concept that refers to the different values we place on money. These values are often based on subjective criteria; sometimes, this subjectivity benefits us, and sometimes it doesn’t!

Mental accounting enables us to create emotional connections with our financial plan. When we consider investment strategies or risk cover, an emotional connection to the outcome, or the goal, is established and we are more likely to continue contributing money to that account.

The perceived importance of the outcome causes us to view the money involved differently. However, money is the same, no matter where we put it or how we spend it. There is a technical term for this universality of money; it’s called fungibility. Fungibility essentially speaks to the equal value of assets.

We learn about this very early in life – just think about kids in the sandpit who are learning to share. If one has the spade and bucket, and the other has the castle mould, they will very quickly figure out that swapping the mould for only the bucket, or only the spade, is not a fair value exchange. A fair trade would be both the bucket and the spade for the mould. 

As we grow up and start to trade with money, we conform to the commercial conventions of our society. We exchange money for products or services, and if we pay one price for an item in one place, we expect it to be similarly priced everywhere else. If it’s more expensive, we would expect to receive more value for that item.

This is where it gets more complicated, and we learn that value is highly subjective. Something that I consider valuable may not be something that you consider valuable. Mental accounting comes into play, and we assign a different value to inherently fungible items.

In an episode of the hit series Friends, Monica discovers that Chandler (her fiance) has a large amount of money invested that could pay for her dream wedding. Chandler initially refuses to spend all that money on one event because he had other plans for the money, long-term plans that included a family and a home. After sharing these thoughts with Monica, she understands his perspective, and they make a new plan together.

According to Investopedia, mental accounting often leads people to make irrational investment decisions and behave in financially counterproductive or detrimental ways, such as funding a low-interest savings account while carrying large credit card balances.

To avoid the mental accounting bias, individuals should treat money as perfectly fungible when they allocate among different accounts, be it a budget account (everyday living expenses), a discretionary spending account, or a wealth account (savings and investments).

Mental accounting also affects our approach to long-term investing and our risk cover. When we are young, it’s harder to invest for retirement – but as we get older, this becomes a higher priority. When we are healthy and strong, it’s harder to pay for life cover or income insurance because we can’t emotionally connect to the possibility that we will need those products.

There are many other areas where mental accounting skews our perspective, like when we receive a windfall (an inheritance, a tax refund or an unexpected gift) or finish paying off a large debt. The sudden availability of money that ‘we didn’t have to work’ for seems to have a different value than the money we receive through our salary, wages or investment payouts.

It’s not easy to simply say – it’s just money. When we are emotionally engaged in our finances, we need to have the space to talk about our options (like Chandler and Monica and the kids in the sandpit) and have a third party (your financial planner) to help us find a healthy balance.

A rational approach doesn’t mean we don’t enjoy our wealth; it means we can be more intentional with our wealth. If you’re feeling a little money-mental, maybe it’s time we had a chat.

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If our feelings could talk

Epictetus, the Greek Stoic philosopher, was the first to say it. “We have two ears and one mouth so that we can listen twice as much as we speak.” But listening is not always about what we hear; it’s what we can begin to intuit. When it comes to our feelings, we have to learn to become more intuitive and listen to what our emotions are trying to tell us.

Our mental health is increasingly under attack, it’s hard to find the time for our own personal growth, development and rest. As our brains get tired, our emotional intelligence and physical stamina both take a knock. The global lockdowns of 2020 held a microscope over our mental and emotional health as we saw startling changes in every system, from healthcare, education, commerce and politics to social engagement restructuring, with sports clubs, gyms, and extra-curricular activities mostly grinding to a halt. 

With very little external social input (and outlet) and reduced creative engagement, we were forced to find purpose and meaning outside of everything we once considered unshakable. We were forced to look inside and discover a host of emotions that are not often talked about outside of therapy. It’s helpful to take these conversations further and find common spaces to change how we think about things that may have a negative connotation for us.

Identifying and talking about our emotions helps us think differently and enables us to act differently. How we make, spend, insure and invest our money are all actions that are strongly influenced by how we feel.

Epictetus also said that we are disturbed not by things, but by the view which we take of them. This means that changing how we think can impact how we feel. Here is a short list of common emotions and an accompanying action that we can choose to employ instead of going out and spending (blowing) money or making poor financial life decisions.

    1. Sadness might be telling me to have a good, long cry. Letting out the tears is a healthy physical release to process what we’ve lost.
    2. Loneliness might be telling me I need connection. It is not about how many ‘connections’ we have on LinkedIn or Twitter, or Facebook. It’s about establishing a conversational connection with someone I can identify with, relate to and trust.
    3. Resentment might be telling me I need to forgive. Forgiveness is more about releasing myself than the other person.
    4. Emptiness might be telling me to do something creative. Rather than going out and buying more stuff, I should take a moment to explore my creative energy.
    5. Anger might be telling me to check in with my boundaries. Checking my boundaries is a proactive way to avoid the same thing happening again.
    6. Anxiety might be telling me to breathe. Breathing slower and deeper helps me become focused on what I can control.
    7. Stress might be telling me to take it one step at a time. I don’t have to do everything at once; I can break it all down into manageable, bite-sized chunks.

Learning to listen to our feelings is an excellent skill for handling all sorts of problems, not only our financial frustrations. It is a skill that will also help us notice what others might be feeling and grow in our empathy and sympathy for them.

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Hold the line

“It’s not in the way that you hold me
It’s not in the way you say you care
It’s not in the way you’ve been treating my friends
It’s not in the way that you stayed till the end
It’s not in the way you look or the things that you say that you’ll do

Hold the line
Love isn’t always on time.”

If you have the tune of Toto’s yacht-rock hit from 1978, Hold the Line, stuck in your head, then you’re welcome! It’s an iconic tune that reminds us that showing love is not in one act or moment – it’s in everything we do.

It also reminds us that we can’t control the timing of events in our life – and this is why financial planning is so important.

From earning to protecting to investing to enduring, most of us want to know that we’re leaving more than just a fleeting memory behind. Most of us want to know that we’ve found meaning and lived a life of purpose, and are leaving our loved ones with means and opportunity.

Creating this opportunity for them is not easy, which is why we need to hold the line. In most financial plans, there are different ways to provide for your family, one of which includes life cover. Even if we have assets and investments that can provide an income after we are gone, expenses and debt need to be paid back first (remember, we can’t control the timing of life events…). 

Taxes and estate costs also eat into these calculations, which is why life cover is beneficial to boost the financial reserves to take care of the responsibilities for which you currently provide.

Holding the line (holding onto your life cover) benefits the integrity of your entire financial plan, but it’s also harder (and sometimes impossible) to replace this cover when you’re older. New risk calculations, amended products, and penalties will have a more significant impact on your net worth should you cancel your life cover early, hoping to start up later in life ‘when things get easier’.

There are a few ways to alleviate financial strain without forsaking this vital product in your portfolio. These have been shared many times before, but it’s always a good reminder to revisit them:

1. Reduce your monthly expenses

Cut back on items that aren’t essential, such as streaming subscriptions and data contracts. Critically evaluate your budget and examine what is needed and what is simply a nice-to-have. Remember, this is not forever; it’s about prioritizing your financial security.

2. Re-negotiate your debts

Try approaching creditors or your bank to negotiate the terms of any repayments. They may be willing to accept smaller sums over a longer period or help you consolidate loan accounts.

3. Negotiate your premium payment pattern

Request to change to an escalating-premium pattern for your life cover, which means your initial premiums will be lower and increase over time. (this could be product provider dependent)

Holding the line includes ‘the way that you stayed till the end’ – and when it comes to life cover, this cannot be more poignant. If you feel like you need some options to release financial tension or want to initiate life cover again, let’s have a chat and see how we can update your financial life plan.

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Me, myself and Ikigai

From the stoics to the sentimentalists, most have one question in common: What is the meaning of it all?

Searching for purpose and meaning helps us come up with a reason for living. As Aristotle always said, our ability to reason is what makes us different to other animals. This sits at the core of Ikigai, the Japanese concept that speaks to our lives’ direction, purpose, and meaning. 

Quite literally, iki means “to live”, and gai means “reason”.

Ikigai = reason to live

It’s a beautifully simple idea that becomes increasingly complex as we investigate precisely what motivates us, guides our passions and helps us make a difference within our communities. In the Western systems of life, we often follow the expected path that is conditioned into us through our education. We don’t get to ask ourselves why, and more importantly, we don’t always have the structure to know how to deeply interrogate our lives to know what will lead to fulfilment.

Ikigai offers us this structure.

Ikigai is a systematic and cyclic way to explore the abstract concepts of satisfaction, delight, fullness, comfort, excitement and wealth.

The four entry questions we can ask ourselves are:

  1. What do I love doing?
  2. What am I good at?
  3. What does my community need?
  4. What can I get paid for?

For many of us, we only really ask the fourth question even though our colleges, universities and trade schools try to answer the others. But sometimes, it’s not the answers we need, but the permission to ask the questions.

Yuval Harari said that questions we can’t answer are far better for us than answers we can’t question. All the wealth in the world cannot help provide delight, excitement and fulfilment if we aren’t able to ask ourselves what we love doing, what we’re good at and discover what our community needs.

This is where we can begin to define and differentiate our passion from our mission, our profession from our vocation and see how we can integrate them all for a purpose and reason to live. 

This integration enables us to dive deeper into our life and financial planning, giving us key pointers and motivations for our decision-making and helping us communicate with our loved ones. We can decide what is truly important to us and why!

They say that if we want to know what we truly value, we must look at where we spend our money. If this aligns with our Ikigai, then we know we’re creating a healthy structure for a meaningful life.

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Discovery and discomfort

It’s nearly impossible to make it through an entire week without glancing at a blog, social media post or newsletter that reminds us about the pervasive and perpetual change in our lives. Hopefully, this blog won’t be one of those to add to the list. Instead, it will help us to identify the benefits of the challenges that we face.

Change can be sparked in so many ways, some of them are by our personal choice, and others are simply the way that life goes. When initiating change through personal choice, we can quickly feel like things should be getting better. We have chosen change that we believe will release us from unhealthy decisions and make our life easier.

But we immediately start to feel the discomfort.

Our journey of discovery, whilst exciting and new, is always accompanied by a level of discomfort. It can feel counter-intuitive. We’re making changes because of discomfort, and as we’re implementing and discovering the change, we’re exposed to further discomfort.

This feeling of discomfort is not bad.

When we’re tired and lacking energy, the discomfort can add to the overwhelming elements of life, but it’s not always a sign that we’re doing the wrong thing. As kids, learning new things is always hard. We accept that there will be a level of discomfort, from riding bikes and learning to write, to adjusting to social expectations and managing changing friendships. And through this, we learn and grow.

As adults, we should never stop embracing the discomfort of learning and growing.

Planning and preparing for change needs to include the anticipated discomfort that we will encounter to bolster our resolve to sustain the change that we want to see in our lives. When we sign up to study, we know that there will be the discomfort of writing tests and exams and presenting our ideas and research to panels of critics.

When we choose to be committed to a long-term relationship, there will be the discomfort of releasing our independence and learning to share our schedules, our hobbies, our interests, our money and our friends with someone else. The same is true of becoming a parent: we prepare for the sleepless nights, the sharing of our home and the increased financial responsibilities.

Any change that is worth the long-term benefit will have this wonderful journey of discovery and discomfort. Changing our spending behaviour, keeping to investment decisions during market volatility, and having better conversations with our family and our money all require personal journeys of discovery and discomfort. We mustn’t let the discomfort deter or distract us from continuing to learn and grow.

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Five financial tripwires

If you’ve ever seen the mayhem from the middle of the trading floor of the New York Stock Exchange (NYSE), you can be forgiven for thinking it’s a warzone! Whilst most stock exchanges around the world now trade electronically, having cleared out their trading floors, NYSE still hosts the traditional tussle of the floor traders’ open outcries.

But this is not the only place where money mayhem can cause a right kerfuffle. Every day, in all our lives, we face financial tripwires that are linked to our choices. Behavioural finance helps us identify and understand these hidden traps. Financial decisions around things like investments, payments, risk, and personal debt, are greatly influenced by our emotions, biases, and cognitive limitations.

There are five ways that our behaviours can hold back the growth of our wealth; call them blindspots or tripwires, they’re often hard to see, and we need to work on them.

Mental accounting

Nobel Prize-winning economist Richard Thaler introduced this idea in 1999. This concept refers to the different values we ascribe to money, based on subjective criteria, that often has detrimental results.

Herd behaviour

This tripwire is easier to understand, but it’s often hard to avoid due to peer pressure. Herd behaviour occurs when we choose to follow the crowd rather than make decisions based on our own analysis. When our friends, family or colleagues are making specific spending and investment choices, it’s not always easy to make a different decision.

Emotional gap

The emotional gap occurs when we allow extreme emotions or emotional strains (such as anxiety, anger, fear, or excitement) to guide our decision-making process. Often our emotions are a prominent reason why we do not make rational choices.

Anchoring

When we create a benchmark in our financial planning that is based on an arbitrary figure or traditional expectations (because it’s what our parents did) and make decisions around that benchmark, we’re anchoring. This is not necessarily negative, but if the benchmark is not realistic for our personal situation or holds us back from reaching our potential – it can be a tripwire for our financial future.

Self-attribution

Self-attribution refers to a tendency to make choices based on overconfidence in our knowledge or skill. Self-attribution usually stems from an intrinsic skill in a particular area. If we are naturally talented or highly skilled in certain areas of life, we can run the risk of thinking our ability to achieve in those areas will flow into other areas. This is seldom the case, which is why we thrive in a community and not in isolation.

Having a financial adviser is a sure way to identify these tripwires in your financial plan and help you navigate them safely to secure a healthier, happier financial future.

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Bias and your bank balance

When it’s a question of money – everyone is of the same religion, or so said Voltaire. Like religion, there are many different perspectives on how it helps (or hinders) us. It’s probably one reason why people always say you should never talk about money, religion or politics at the dinner table. There are so many differing views!

It is not to say we should never discuss money; instead, it’s helpful to be selective about our timing and our company. Whilst we may all abide by the same transactional value and guidelines of currency, we will have very different cultural and emotional connections with money.

For this very reason, it’s a powerful conversation focus for relationship counselling, in the same way, that religion is. Our views on money impact every choice we make, including raising a family, spending and retirement.

But it’s not always the views we can see that influence our choices; it’s also the views that we can’t see. These are our biases. And they can profoundly affect our bank balance.

A modern, integrated religious thinker, Brian Mclaren, outlines a number of biases on his blog to understand just how complex our decision-making processes are and help us begin to ‘see what we can’t see’.

Most of us have experienced several, if not all of them, at some point in our lives. Here are a few of Mclaren’s biases.

Confirmation Bias: We judge new ideas based on the ease with which they fit in with and confirm the only standard we have: old ideas, old information, and trusted authorities. As a result, our framing story, belief system, or paradigm excludes whatever doesn’t fit.

Complexity Bias: Our brains prefer a simple falsehood to a complex truth.

Community Bias: It’s almost impossible to see what our community doesn’t, can’t, or won’t notice.

Complementarity Bias: If you are hostile to my ideas, I’ll be hostile to yours. If you are curious and respectful of my opinions, I’ll respond in kind.

Competency Bias: We don’t know how much (or little) we know because we don’t know how much (or little) others know. In other words, incompetent people assume that most other people are about as incompetent as they are. As a result, they underestimate their [own] incompetence and consider themselves at least of average competence.

Consciousness Bias: Some things simply can’t be seen from where I am right now. But if I keep growing, maturing, and developing, someday I will be able to see what is now inaccessible to me.

Comfort or Complacency Bias: I prefer not to have my comfort disturbed.

Conservative/Liberal Bias: I lean toward nurturing fairness and kindness or towards strictly enforcing purity, loyalty, liberty, and authority, as an expression of my political identity.

Catastrophe or Normalcy Bias: I remember dramatic catastrophes but don’t notice gradual decline (or improvement).

Cash Bias: It’s hard for me to see something when my way of making a living requires me not to see it.

Conspiracy Bias: Under stress or shame, our brains are attracted to stories that relieve us, pardon us, or portray us as innocent victims of malicious conspirators.

It’s a hefty list, but if we can begin to identify and observe biases that keep us stuck in unproductive behaviours and patterns, we can ask ourselves: How can I start to let go of that?

This is a journey of progress, not perfection, made richer and more rewarding by the relationships we enjoy and share. By working on our own biases, we will not only improve our bank balances, but we will enhance our relationships and have considerably less cause for indigestion at dinner time!

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The premium time to review your premiums

When it comes to financial planning, risk planning, estate planning and investing, many of us like to “set and forget”. Our lives are full of things to remember, for work, family and the communities in which we’re involved – often, the last thing we want to review is our financial portfolio.

As a result, it’s easy to forget why we have some of these financial products in the first place. The complexity of financial planning and investing (and the very reason why having a financial adviser helps) means that keeping tabs on changes and updates is nearly impossible for those who don’t work in the industry.

When it comes to short-term insurance, the different product providers are highly competitive and frequently update their rewards or affiliate partners and benefits. This means that comparing one premium with another is not as simple as comparing apples with apples. It also means that if you haven’t checked in on your short-term insurance recently, you could be overpaying, underpaying (and receiving less cover than you need) or simply be paying for a product that is no longer suitable for you.

Whichever situation you find yourself in of these three, it means that your financial portfolio is no longer optimised in your interest. It’s like going to a tailor in your thirties and having your clothes cut and fitted to your measurements, and then thinking those clothes will fit you perfectly for the next thirty years.

We all know that “a penny saved is a penny earned”, and this applies perfectly to the situation of paying insurance premiums that are either too high or not suited to your needs any more. Either – you will be able to save on premiums and invest more now or allocate those saved pennies elsewhere, or – you will be miss-insured and have to pay out more pennies in the event of a claim.

A sure way to reduce the strain on your financial plan is to check in on your short-term insurance at least once a year or whenever there has been a significant global event (like a pandemic or stock-market crash). At these times, changes are made to policies that could affect both the cost and the outcome of your cover. Reviewing them will either free up unnecessary expenses or lock in the benefits that you genuinely need.

Shopping around for better quotes, keeping your credit score in the positive and updating a list of your household items and assets are all good ways to keeping yourself in a stronger financial position. You can easily do this all yourself, but as mentioned above, the complexity of financial planning and related products means that having a financial adviser who can give you independent advice could save you in the long run.

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