Category: MARKET

No one likes to plan for a time when we might not have enough money to make ends meet. Often, when we plan or make financial decisions, we assume that our future self will have enough money to pay for the decisions we make today. Sometimes this turns out to be accurate, but sometimes it doesn’t.

And, if the economy slumps and we have a cost-of-living crisis, the pressure on our finances can be debilitating.

Before we look at how to cruise through a cost-of-living crisis, it’s helpful to remember this…

It doesn’t matter how much money you have, what savings you have or how frugal you can be; inflation affects everyone. Every. One.

The first thing we need to do in a situation like this is to acknowledge that we’re not alone. We are pressured to make certain purchases and live a particular lifestyle because we think everyone else is managing and coping fine. But, truth be told, most of us have to make serious adjustments to our budgets and financial decisions when times are tight. If you feel you can no longer afford your bills, there’s a good chance that you’re not alone.

This is helpful when we need to look at other strategies to reduce spending or realign our finances to weather the stormy volatility of increased living costs. Everyone needs to think differently in order to spend and live differently under a strained economy.

The upside to this is that necessity breeds innovation. We learn to make do with what we have. But, it’s not just about making ends meet. In hard times, people unite in extraordinary ways to support and encourage each other. Relationships are forged, communities are strengthened, and our stories are coloured with wonderful, unexpected experiences.

Downgrading a home, moving in with others, selling a car or changing schools are hard things to do, but they can create memories that we will cherish forever. And, it all comes down to our attitude.

This is how we cruise through a crisis; by adopting the right mindset.

Sure, we can scrutinise spending, scale back on expenses, renegotiate debt repayments and look for savings, but ultimately, it’s how we allow challenges and changes to grow us and make us better people. You’re not alone. Let’s chat.

We often think of things like stocks, bonds, mutual funds, annuities and assets as investments. But, investments are a broad area. According to Investopedia, an investment involves putting capital to use today to increase its value over time. An investment requires putting capital to work, in the form of time, money, effort, etc., in hopes of a more significant payoff in the future than what was initially put in.

With the increased use of technology to communicate and distribute value, the world of investing has grown to include many more opportunities than existed a few short decades ago. What we know now, and what we can do now, is leagues ahead. Just consider how Airbnb and Uber turned empty homes and idle cars into sources of income.

One of the more recent trends in alternative investing has been in the fashion industry, with people finding ways to create an income from their second-hand clothes. A decade ago, you would have struggled to offload second-hand clothing, let alone get paid for it, and emptying your closet meant a trip to a charity shop.

In a recent article in the Economist, we read that:

“Once Airbnb and Uber had propelled the idea of a sharing economy into the mainstream, firms turning used clothing into an asset class were not far behind. As with accommodation and transport, not just resale but rental was revolutionised. By Rotation and Rotaro act like sharing-economy apps for wardrobes. Now, whether people are reselling knick-knacks, lending out old clothes, renting a spare room or picking up passengers in their spare time, they are making better use of their assets than before.”

We are literally moving from old bags to new riches. Living in a time where we can be so profoundly connected to how we create and experience value is exciting.

We don’t have to simply invest in a long-term savings account; we can become fully immersed in the grassroots investing of our money. The boredom of covid-19 lockdowns may have boosted resale by giving people time to clear their wardrobes and browse second-hand fashion online. According to estimates from GlobalData, last year saw over 33m new buyers and 36m new sellers of old garb.

The very thought that an item might be rented out or resold in the future changes how we approach buying it in the first place. From Meta (Facebook) groups and Telegram channels to apps and blockchain platforms that allow us to exchange value like never before, the future of finance and our economies are colourful and dynamic. Anything can happen.

When the purse strings are pulled tight, it’s challenging to look at your statement and see monthly amounts deducted for insurance payments. Whether the risk policies are for health care, income protection or the protection of assets, seeing them come off your account can be painful.

As a result, many of us cut these policies quickly to create immediate relief to our finances because it feels like one of the few things we can control. But if we do this out of panic, and not strategic intent, we may very likely regret the decision.

If we miss a payment or cancel a contribution, our policy will be in danger of lapsing. Different companies and countries have various rulings on the timelines for this, but the general guideline is that if you stop paying, you will lose your cover within 30 days. A lapsed policy could mean more than just the loss of cover; it could also be linked to other integrated products in your portfolio.

We all know that life can become complicated and uncomfortable without notice. We can lose a job tomorrow, or receive a dread-disease diagnosis next week; we’re not in control of what will happen. But, we are only in control of how we will respond to life taking a turn for the worse. 

This is where we can become powerful and push through the tough times to emerge stronger and better than we were before. Here are a few strategic decisions that can help you make healthy decisions and avoid lapsed policies.

If your finances have become constrained, it’s possible that a reshuffle or reduction of your policies could be beneficial. Rather than cancelling them without a second thought, you can look to reduce costs or change options. This is where, together, we can help you make powerful choices to keep some cover in place and identify critical areas of focus.

It’s also essential to remember that cancelling a product now may mean that you will no longer be eligible for it again in the future. Many legacy products in the financial sector cannot be reinstated after they have been cancelled or lapsed. Make sure you know what you’re letting go of – especially if it’s linked to a rewards programme.

Another beneficial strategy is to engage (sometimes through your financial planner) with the product provider and ask for a payment plan or a payment holiday. Communication is immensely valuable in a crisis, and it’s often the hardest thing to do when we’re feeling overwhelmed and vulnerable. 

Before you lose out, reach out. Let’s touch base and see what the best steps forward will be to keep you in the most beneficial position possible.

Whilst it’s good to have someone on your team (your financial adviser) who knows what’s happening in the markets, it’s not always helpful to relay all that information to you and have you make decisions about it. We can’t control the markets, but we can control our conversations about money.

That’s why it’s not always helpful to ask what is happening in the markets; it’s more beneficial to ask what problems we can work on in our own lives, that we can choose to influence or overcome.

Because these will always, always, affect our money.

In some of the most recent financial planning conversations, we’re trying to focus on some of the most common emotional, behavioural and financial problems we can help our clients solve.

EMOTIONAL PROBLEMS

1. Anxiety
2. Fear
3. Uncertainty

It is empowering to talk about and plan for what could or might happen, it’s not always pleasant (because it’s so filled with anxiety!), but it’s necessary. Through this, we can deal with and confront what is happening at any given point and become comfortable with uncertainty, helping you paint a more understandable and accessible future.

BEHAVIOURAL PROBLEMS

1. Risk Management
2. Control
3. Confidence

We live in an era that is pleading with us to be kinder to ourselves, and it’s a wonderful space in which to be present. It’s not about ignoring pain or problems, but it could be about planning to be less wrong tomorrow. We can reduce the big blow-ups and mistakes and let the boring be beautiful! This helps us gain a better sense of control and restores confidence in bucket loads.

FINANCIAL PROBLEMS

1. Do we have enough?
2. Paying too much tax
3. Giving

This first question here is one that often needs as much reframing as the one in the title of this blog! Our challenge is to deal with the intersection of enough vs more and align money and time with what’s most important to us. This then helps us with some of the more practical concerns, like minimising tax and finding a way to make our money expand, and not reduce, our legacy. It’s powerful to be able to give with a warm heart, not a cold hand.

If you want to explore these questions more, and change how you engage with your money and how it affects your quality of life, let’s chat!

“Genuine travellers travel not to overcome distance but to discover distance.”
James P Carse

Investing money is always a paradox: it’s simple, complex, straightforward, challenging, mathematical, and unpredictable. It’s because of our emotional influence that plays a significant role in every decision we make.

When investing in the markets, many have said it’s all about time in the markets, not timing the markets. When trying to time the markets, our emotions can offset our mathematical thinking and trigger our unpredictable, irrational thinking. Just like the genuine traveller, who would more often choose the scenic route than the shortcut, we cannot allow panic to have us second-guessing and looking for a shortcut to sustainable wealth.

Seasoned investors, like genuine travellers, know that the markets will always have twists and turns, hills and valleys. They often choose the road less travelled because it’s about discovering, not overcoming. But it’s also not always about taking a longer route as much as it is about realising that the course may have unexpected scenery, delays or alternate routes.

Another helpful comparison from this analogy is that successful, memorable trips often have a navigator and a map. In our financial journey, when the road gets hairy or it looks like we’re heading off course, we need someone to help us check in on our map to either assure us that we’re on the right road or quickly find alternatives for us.

The markets and your investment strategy will always have you second-guessing; that’s simply the nature of important decisions. Every big decision we make will always present many alternatives and that’s why it’s helpful to have relationships with people we trust and respect to help us make and stick to our best decisions.

When the effects of inflation are being felt more than ever, and global economies are stuck in a state of recovery, it’s common for us to sit down and review our monthly expenses in a fervent drive to reduce our expenses. As we scroll through our bank statements or budgeting apps, we will start to question every payment – and insurance will always catch our eye and have us asking if it’s really necessary.

The answer is not always “yes” or “no” to insurance. More often than not, it’s about how much cover we need and can still afford, and then attempting to find a comfortable balance between those two amounts

Each choice affects the whole of our portfolio; none can be taken in isolation. This is why these conversations and questions become more complex and overwhelming because we start out wanting to know the solution to one problem, and then find ourselves working through a host of other concerns.

Car insurance is no different and carries a myriad of budget-influencing factors. It doesn’t matter who you bought the insurance through, or are considering, it will impact your financial plan, and that’s why this conversation is relevant.

There are many blogs and articles written about car insurance. Still, this one aims to bring in some high-level considerations to help you understand and ask better questions about your insurance and how it impacts your overall financial portfolio.

First off, car insurance is not just about covering you in the event of an accident; it’s also designed to offer cover if your car is stolen. Whilst you may think that you drive well and avoid accidents (which is unfortunately impossible, no matter how carefully we drive), you need to think about the implications of having your car stolen, especially if you have taken finance to purchase your vehicle and/or have a balloon payment plan.

As Bertus Visser from PSG says, car insurance is not only about your driving abilities but also about safeguarding against everyday hazards outside your control.

Regarding the types of cover available, it’s always beneficial to work with an adviser or broker on this as the options are extensive, and they’re never as clear-cut as comparing apples with apples.

But it’s helpful, beyond your car payments and insurance premiums, to consider how excess will work, what roadside assistance is available, if you’ll need to hire a car whilst you’re without one (either from an accident or theft), and if a balloon payment is covered in your short-term insurance portfolio. Should you claim on your car insurance, the amount of money needed to clear your excess, or anything else not covered under your policy, will either eat into your savings or force you to incur more debt.

Viewing your vehicles and related insurances within the bigger picture of your financial future is essential. A car, for many, is not simply a luxury – it could be a vital means of generating an income, running a business and helping your family live the life you choose.

And that, is worth insuring.

One of the frustrations that we often experience is the feeling of being stuck. We repeat the same patterns, day in and day out, forming habits that we seem unable to shake. From unhealthy eating, exercise and money choices to self-sabotaging social media, phone and relationship habits, it’s easy to find ourselves living a life that feels stuck in time. 

As most coaches will tell us, it’s because we have blindspots to the choices that keep us stuck. We can see that we’re stuck, and we can see some of the obvious bad choices that we’re making, but we can’t see the stepping stones, or triggers, that keeps us in the cycle of bad choices.

We all have blind spots, and by definition; we can’t see them. And because we can’t observe them, we can’t change them.

If we want those different results, we need to learn to observe our blindspots. In fact, before we can even observe them, we need to acknowledge that they exist. Otherwise, we will be totally uncoachable when it comes to dealing with them.

If we truly want to make changes in our lives, then, we need to stop doing the same things over and over again and expecting a different outcome. As Albert Einstein once said: insanity is doing the same thing over and over and expecting different results.

The solution is to be coachable. We need to find, and then listen to, other people who can see our blind spots.

So – if you’re feeling stuck in any area of your life, you need to ask someone you trust to help you look for your blindspots in that area. Then, when we identify them, and here’s where most of us get lazy, we need to write them down.

This helps us observe the patterns in our lives so that we can then choose to change the ones that we’re not happy with, or that we can trace to unhealthy outcomes. Keeping a journal also helps us track change, and this can be a significant motivator to keep on moving forward in a healthy direction.

This applies to every area of our life, it doesn’t just have to be a food journal or a financial budget. It can be an emotional journal or a memory journal; depending on the work we’re ready to do to bring about change in our lives, journaling helps us observe our blindspots and our habits so that we can regain our power to choose them or release them. Everything is connected and the moment we start to break down and rebuild one area of our lives, we’ll find it starts to open up more opportunities in other areas too. And, the more we can observe, the more we can control.

Most people don’t enjoy financial planning. It’s a practice filled with stigmas of confusing concepts, complicated products, and expensive choices. But the fact is that none of us can live without it costing us money. Even if we simply want to go for a walk, we need to buy the time to do that.

We need to earn enough money during our working hours to buy the freedom to choose what we want to do in our downtime. And to do this, we need to have a plan (however basic it might be) in place.

You don’t need to know everything, but you need to know some things. Here are some ideas from the team at 22seven to help us hold a bird’s eye-view of our financial plan.

1. What are my financial goals? 

Save money, have enough money to live comfortably, make work optional… 

These are reasonable goals if you’re taking the broad-brush-stroke approach. Still, it’s vital to have smaller, more tangible goals along the way that will give you a sense of accomplishment and motivate you to continue on your personal financial journey. 

Your smaller goals can’t be vague – they have to be clear and concise so that you know exactly what you have to do to achieve them. For example, your goal might be: ‘I want to save 10% of my income each month’ or ‘I want to increase my net worth by 5% over the next five years.’ 

2. How much debt do I have? 

Debt doesn’t have to be the millstone around your neck. If you know how much you owe and what the interest on the debt is, you can make a plan to reduce it and ultimately get rid of it.

Make a list of every loan and how much you need to repay each month. If you want to speed up your repayments, allocate extra money to the accounts you wish to pay off quicker – maybe the account you owe the most on or the one with the highest interest rate. From there, you just have to stick to your plan.

It’s not impossible – you can do it! 

3. What is my net worth? 

‘Net worth’ sounds like a fancy term, but it’s just everything you own (your assets) minus everything you owe (your liabilities). An increasing net worth indicates that your assets grow faster than your debts. That’s what you want! 

Net worth is a valuable snapshot of your entire financial situation, so it’s worth checking every now and then.

4. Am I covered when things go wrong?

What if something happens and you can no longer work and earn an income? As depressing as it is, you need to plan for the worst. Some examples are disability cover, dread disease cover and income protection cover. 

This bird’s-eye view is aimed to help you maintain a high-level grasp on your financial plan. Still, each point above has many deeper conversations that help us craft and leverage your financial plan to suit your personal needs and ever-changing circumstances. If you need specific help before our next meeting, please feel free to reach out and let’s keep you in the best position possible to thrive in life!

When life gets a little out of hand, we might say that things are blowing up! Sometimes it comes out of the blue, and other times we can see it coming, but generally, when we look back at how events unfolded, there were signs of a crisis looming. Inflation is much the same; it’s happening all the time, but every now and then, we suddenly feel the effects. Just like the aging process, it happens slowly and then all at once!

Inflation is a measure of how much more expensive things are getting. And, as we know, things just keep getting more expensive, which is why we cannot afford (literally) to under-inflate, or overlook, the effects of inflation on our financial planning.

As always, when it comes to money, we have two choices: earn more or learn to work with what we have. Whilst we can always explore ways to generate more income, it’s not always possible, which is why it’s so important to remain connected and engaged with our financial plan.

In a recent blog from the team at 22seven, they offered a few ways to address inflation head-on and adjust our financial planning as needed.

Planning

Planning is key to cutting costs and being budget-savvy. Let’s use fuel as an example. By planning ahead, you can save on fuel by driving when traffic isn’t as hectic, going to the grocery store closest to your home or office, or making sure you only make one or two trips a day by writing down all your errands and plotting a strategic route. Many people also realise the benefits of having groceries delivered, finding that they spend less on fuel, save time and spend less on unnecessary items.

Change the way you buy

The first step is to overcome brand loyalty. You might need to look for cheaper alternatives or buy in bulk to cut costs. As economies adjust to the war in Ukraine and inflation at a 40-year high in America, prices are likely to keep rising. 

Cut back on costs you don’t need

It’s sad but true – some expenses will have to leave the building. Rethink your streaming subscriptions and other non-essential expenses. Learning to live more frugally might be what gets you through. 

Keep on investing 

It might seem counterintuitive to put away some of your hard-earned money when you’re already anxious about cash flow, but investing will ultimately grow your wealth, even if it means that you have to sacrifice certain small pleasures right now. 

At the end of the day, keeping the ship afloat means keeping it balanced. Talk about your financial situation with your family and friends so that they can help and support you. Sometimes it’s as simple as knowing that you can’t eat out as often, or perhaps your regular holiday plans need to be pushed back or changed to something more cost-conscious.

Whatever you do, don’t underestimate the effects of inflation, especially when they’re higher than expected, and you see your monthly budget being worth considerably less.

We need to be strategic about growth and not just hope it will happen organically. Through a recent interaction with business coach Grant Newland, the importance of this was brought to the fore of our conversation. But it is not just about growing businesses; it’s about developing people, families, and communities.

It’s easy to think that growth will ‘just happen’ organically, but if we don’t have a growth mindset, it probably won’t happen at all. Change happens organically, but not growth, and change can mean many different things. Dave and Hester Vaughan, business and life coaches at Lifestyle Coach, often say that we need to go through a process of construction, deconstruction and reconstruction. This process helps create a high-level view of what a growth journey could look like.

But what does that look like on a practical level? How can we start ensuring that we’re on a growth path? 

Newland suggests that we simplify this process by looking at what’s holding us back and focusing on fixing those things. We articulate the problems, blindspots, biases or stumbling blocks, and then we take action to address them (construction, deconstruction and reconstruction). 

In short, we articulate and act.

 

Understanding this is the first step; putting it into action often requires guidance, help and accountability – which is why advisers, coaches and mentors play such a vital role in our growth journey. In reality, when it’s your life, family or business, you will probably find many things that need fixing.

In the journey of articulating what’s holding us back, we need to perform a sort of triage where we identify what we need to address and work with first. The whole point of deconstruction and reconstruction is so that we can build back better. We need to deep dive and do what many coaches call “the hard work”. But, if we try to fix multiple projects simultaneously, we can become overwhelmed and ineffective.

James Clear, the author of Atomic Habits, said, “Choosing the priority is as important as working on it.”

Creating an effective, life-changing plan involves articulating what needs to be done and then putting it into action, whether it’s a business, life, financial, or any other plan. If we don’t, we will not see the growth we hoped for, and we will be in exactly the same place a year, two, three or five from now.