Estate planning, done properly

Yesterday, I attended the funeral of my client, Noeleen, who passed away unexpectedly.

I knew that we had recently updated her Will, and that the original document was securely stored in our Chartered safe – what a sense of relief for me after the initial shock at hearing the sad news! I also recalled that her husband, Gerald, had money in his own name, and immediate access to it.

I am aware that, at a time of loss and change like this, clients may depend quite heavily on us, their Financial Planners, to support them through this traumatic time.

With Chartered’s philosophy of retiring successfully, we, of course, plan for all the wonderful things that our clients’ money can do for them. In our RetiremeantTM Planning, we tend to focus on helping our clients live their most fulfilled lives – we plan for when things go well.

Noeleen’s passing reminded me that we also need to plan for when things don’t go well.

Frequently, an expected event is the sudden passing of a spouse. Because this can be an emotional time, it’s best to have an early discussion with client couples about what would happen if one of the spouses were to die: what assets would be sold, would they continue to live in their current home, and what changes need to be made in their Estate Planning.

The Estate Planning process, which on the surface can appear to be quite simple, is sometimes not as simple, as it turns out. When I sit with my clients and work out in Rands and Cents what their Wills mean, oftentimes amendments are essential.

In one instance, a client had inherited money from her parents, and she wanted this money to pass on to her children on her death, and not her husband. She only held two assets in her name – the investment housing this inheritance, and their family home. When I pointed out that if she left the entire inheritance to her children, her husband would have to come up with the money to pay the costs in her estate, and possibly risk losing his home. We changed her Will to rather leave the family home to Alan, and the investment, after paying all the estate costs, to the children.

Recently, I have been working with another client with a large estate who has minor children. He only came to me asking for investment advice, and did not think there was any necessity to consider Wills or Trust Deeds. Once I started delving more into these details it so happened that there were major concerns regarding his estate planning. No Guardian or Custodian had been appointed in his Will, there were errors on the Trust Deed, and those errors could have caused major problems had he died unexpectedly.

Asking clients to consider what things would look like after their demise is not an easy conversation to have. People do not like to think of their own mortality. Proper planning and honest conversations, though, help avoid unnecessary trauma when things do not go well.

When my salary stops, how do I draw an income in retirement?

Professional older women with short hair in suit jacket in boardroom for profile photoRetirementor and CFP® Pat Blamire is asked this question so often by her clients.  From years of planning for their future security, she understands that clients need to know exactly how drawing an income from their retirement savings works … for their peace of mind. Her article which follows here explains exactly how this happens.

In the build-up of your retirement savings, the tax treatment of these monies is predominantly split into two major categories:

  • Monies that you can claim tax relief on the contributions (such as contributions towards your company pension or provident fund, or contributions towards a retirement annuity). We refer to such monies as your “non-liquid investments”; and
  • Monies that you earn after tax, and save in different investments such as fixed deposits, unit trusts, endowments or tax-free savings accounts. We refer to such monies as your “liquid investments”.

The balance between liquid investments and non-liquid investments in retirement is within your power, and is a very important decision that needs to be made. Your Retirement Specialist will help you make this decision. This graphic may help you understand the difference between the two types of assets.

Your “non-liquid investments” have certain rules and regulations, and are not flexible. Your “liquid investments” are usually flexible, and, in retirement, are used to provide you with lump sums, say, to purchase replacement motor vehicles, pay for holidays, and can be used to top up your monthly income.

At retirement (any time after age 55), you can retire from your “non-liquid investments” and start drawing an income from these retirement savings.   To encourage people to save for their own retirement, tax legislation allows certain tax relief on lump sums that you draw from these investments: the first R500,000 of a lump sum is tax free; amounts between R500,001 and R700,000 are taxed at 18%; amounts between R700,001 and R1,050,000 are taxed at 27%; and amounts in excess of R1,050,001 are taxed at a flat rate of 36%.

You can then use the untaxed portion of your “non-liquid investments” to buy yourself either a Compulsory Annuity or a Living Annuity.   A Compulsory Annuity is provided by an insurance company or your company retirement fund, and they undertake to provide you with an annuity (pension) for the rest of your life, and usually for your spouse also (in most instances, the spouse’s pension is reduced to 75% of your pension).  When the surviving spouse dies, this pension then dies with them.

A Living Annuity is an annuity (pension) where you decide how much income you want to draw from your “non-liquid investments”.  Legislation requires you to draw an income of between 2.5% and 17.5% per annum of your Living Annuity, and this is paid to you monthly.   On your death, your surviving spouse (or beneficiary) will have the choice of either continuing to draw an income from your Living Annuity, or cashing it in, and receiving a lump sum, after-tax amount.   As your Living Annuity is untaxed money, if a beneficiary decides to cash it in, these monies will be taxed before being paid out to them.   No monies are ever left behind in a Living Annuity after your death, and will always be paid out to your beneficiaries.

Income drawn from either a Compulsory Annuity or a Living Annuity is taxable in your hands, and taxed according to the tax tables.   Investment growth within a Living Annuity is taxed at 0%, and it is therefore a very tax efficient investment vehicle.  On your death, it does not form part of your estate for estate duty purposes.

These are very important decisions to be taken when you get to retirement, and your retirement specialist will guide you through this process.

Write your own money script

Blond woman on couch in front of bay window

Over the years, I have come to understand that your relationship with money reflects the relationship you have with yourself. In many ways, money issues mirror your mindset, your ethos, the things you believe about your life.

This relationship you have with money can either be constructive and healthy, or it can boycott your personal (and financial) wellbeing. I have met clients who simply believe in abundance and this impacts how they approach money and their lives. I have also met clients with deep-rooted fears about money that often stem from their early childhood years. This destructive relationship with money becomes their reality and writes the script for their money stories into their retirement years.

Your money story is the subconscious tale you tell yourself about what money means to you and it determines the relationship you have with money. How you think, feel and engage with money represents your personal reality.

Unfortunately, uncertainty in the economic and political arena can often trigger emotional and behavioral responses rooted in fear. We start worrying about our savings and investments and start making irrational money decisions based on anxiety.

I am constantly reminded how challenging money stories can be. To fully understand your money story takes some introspection – it is hard work try to make sense of the psychology and the personal drivers behind your particular relationship with money.

Bruce Lee expressed it so beautifully by saying “As you think, so shall you become.” And this is true for money stories. We are the ones that give meaning to money, and the meaning we give to money manifests in our self-statements and behaviour. Once we understand our money stories and can extrapolate how this has formed our relationship with money, we can begin to understand the money patterns that are governed by our stories.

The goal is to get to a place of deciding whether our relationship with money serves us, or whether we need to make changes to the story.

If you are feeling anxious about how you are transacting in the money space or would like to do some introspection on your relationship with money, I invite you to read the money story articles that form part of my Courageous Currency blogs. It is a series of six articles taking you through the journey of understanding, taking ownership, assessing and changing your money story. The links to these blogs are listed below:

Making sense of money stories

Your money story

Taking ownership of your money story

Assessing your money story

Live your new money story

The brave new you

Understanding our money myths – our stories – are essential if we’re wanting to know ourselves a little better and make sure that we make the best decisions going forward.

Best wishes,

Take advantage of tax benefits of Retirement Annuities before 28 February

Now is the time to chat to your financial planner about making a lump sum investment into your Retirement Annuity, with the end of the tax year (28 February 2019) fast approaching.

We are regularly reminded about the tax efficiency of Retirement Annuities. You may not be fully aware, however, of the benefits and restrictions of this kind of investment vehicle.

Why choose an RA?

Your contributions to a Retirement Annuity are tax deductible, subject to certain limits. The deduction is limited to 27.5% of your taxable income or remuneration, subject to an overall maximum cap of R350,000 per year. There is no tax on the investment growth within your Retirement Annuity.

When you retire from your Retirement Annuity, there are additional tax benefits. Although you can only take up to one-third of the fund in Cash, this is taxed according to the Retirement and Death tax tables where the first R500,000 is tax free. Amounts in excess of R500,001 and less than R700,000 are taxed at 18%; amounts in excess of R700,001 and less than R1,050,000 are taxed at 27%; and any amounts over R1,050,001 are taxed at a flat rate of 36%. These tax rates are sometimes a lot lower that your normal marginal rate.

On death, your retirement annuity is paid out to your dependents, without going via your estate. This saves on Executor’s fees, and ensures that your dependents receive the proceeds without having to wait for your estate to be wound up.

Your dependents can either draw an annuity (pension) from your Retirement Annuity, or cash in your fund, or a combination of an annuity and cash. If your dependents take a cash amount from your Retirement Annuity, tax will be withheld from this payment. If your beneficiaries choose to receive an annuity, they will pay income tax on the income they receive from the annuity.

Generally, the proceeds of your Retirement Annuity are not subject to estate duty. There is an exception where, if you have made contributions towards your Retirement Annuity that are not tax-deductible, this amount is subject to estate duty in your estate.

Should you go insolvent, your Retirement Annuity is generally protected against creditors.

RA restrictions

The disadvantage of a Retirement Annuity is that it cannot be accessed before the age of 55. The exception is if you emigrate officially, you can take your Retirement Annuity savings before this age.

At retirement age 55, or later if you choose, you can draw up to one-third of the fund in cash, and the balance of two-thirds must be used to buy yourself an annuity (pension). If your full fund value is less than R247,500 you can take the full amount in cash.

Any contributions in excess of 27.5% of your taxable income, or R350,000 per year, are not tax-deductible and will be carried forward to the following tax year. If they are still not deductible then, they will eventually be tax-free on retirement, thus increasing the tax-free lump sum you can take. Any non-deductible amounts, however, will be included in your estate at death.

Your Retirement Annuity is not protected on divorce. Your ex-spouse can claim against your retirement fund in terms of section 7 of the Divorce Act. There are also certain restrictions as to how your Retirement Annuity may be invested, in terms of Regulation 28 of the Pension Funds Act.

Section 37 of the Pension Funds Act removes your freedom of testation regarding who your monies may be paid out to on death. It obliges the trustees of the Retirement Annuity to pay the death benefits to your “dependents” as defined in the Act. Trustees may overrule your beneficiary nomination, and may pay this amount to your dependents as they deem equitable. You have no control over how the assets in the fund will be distributed on your death.

A Retirement Annuity is a very efficient tax and estate duty vehicle. Be aware, though, of the limits on the tax-deductibility of contributions, and on your access to your savings. In addition, on your death you cannot control the distribution of the funds.

A Retirement Annuity is one of the few ways that you can make investments into a unit trust that are tax deductible, but you should invest knowing all the issues.

If you are considering making a lump sum investment into your Retirement Annuity, we suggest that you consult with your financial planner.

Pat Blamire is a CFP® and RetiremeantTM Specialist at Chartered Wealth Solutions. Pat has Advanced Post Graduate Diplomas in Financial Planning, specialising in investments and in Estate Planning. She is a member of STEP (Society of Trust and Estate Practitioners) and holds their TEP designation.

Five tips for fair money management

Love, as they say, makes the world go around. To go places, do things, this love does need money!

Speak kindly to each other, talk gently and considerately about money and you will be a formidable team in making your life dreams go places!

I have compiled a list of five tips that I have learnt while doing Life Planning.

1. It’s never too late or too early to have courageous money conversations

We so often avoid just talking about money in our relationships.

These conversations are difficult, emotionally charged and often come from a place of extreme discomfort and fear.

This is because we all have a different relationship with money. Each of one us has our very own money story that was formed in our childhood, and often, we still carry the same emotions and beliefs about money in our hearts through to adulthood.

I have learnt to talk about money when the relationship is going well. Don’t confuse relationship troubles with money troubles. Have regular conversations and integrate these conversations into your married life.

The resentment and conflict are often precisely because we don’t have these conversations. Keeping your emotions and feelings in check because you are too afraid to speak about money is not healthy.

2. Share your money beliefs

Everyone has a different relationship with money, and even if you believe that you and partner have most things in common, it is unlikely that you have the same money story.

Our relationship with money starts when we are young and the money messages we hear from our parents shape our money story. By the time you reach adulthood, your money story is so ingrained in your belief system that it functions on autopilot.

Partnering with someone who has a very different money story to you can make things even more complex.

Consider asking your partner these questions:

  • What is your first memory around money?
  • What formed your relationship with money?
  • What is your fear or money trigger?

The answers to these questions will help you understand how the money memories from childhood impacts on your partner’s belief around money today.

If you take the time to understand how each other’s relationship with money was formed, you will have a much clearer picture of how this impacts their behaviour and choices around money today. And importantly, you will understand what their money fears and triggers are.

3. Plan your goals and dreams

This is where you get to have some fun together.

Work on a list of goals and dreams together and have fun doing it. Just by having the opportunity to talk about your life goals makes it feel attainable. And listen to your partner’s goals and dreams.

Perhaps you will find some common goals, and perhaps you will find yourselves more easily accepting of each other’s dreams, even if they are different to yours.

If you both know what you as a couple want to spend money on, or how important saving is, or how much time you want to allocate to enjoyment and having fun, or even what your Bucket Wheel items are – and if you both buy into the plan, then you can start working towards common goals.

4. Money is a combined responsibility

Responsibility can be a burden, especially if you take it on alone. It’s the same with money. It’s unfair to make one partner responsible for the financial well-being of the entire family.

Work together, work towards the same goals and dreams.

Your Financial Plan must enable the life you envisage together. And if you are not comfortable with financial management, learn and empower yourself.

Support your partner by engaging and participating in the financial responsibilities.

5. Don’t manipulate and control with money. 

Remember, money has no power other than the power we give it.

Using money for this purpose, either by withholding it, as a means to punish, to show love or as something to be respected for, is the wrong place to put money in your relationship.

Money is just money – it has one purpose only, to enable the life you and your family dream of having.

What money fights are really about

Money troubles are the leading cause of marital problems in South Africa. This is not new to us; we have all heard the statistics before.  

Prifle photo of blond woman in corporate attireBut in my more than ten years of interviewing clients in Life Planning meetings, I have come to realise that couples don’t actually argue about the amount or lack of money they have. It is not the money they are fighting about. It is the power that goes with it.

Money and happiness
As I reflected on a recent Life Planning meeting with a married couple, I realised that there is much to learn about the role of money in relationships. And, that you are never too young, or too old to learn how your relationship with money can impact on your relationship with a loved one.

Just for fun, I decided to research the happiness factor of lottery winners, and visited the Ranker web-site, a digital media company in Los Angeles that holds one of the largest databases of opinion polls in the world. According to the Ranker opinion poll, 43% of people who win the lottery say the money has not improved their state of happiness in any way. At least 90% of lottery winners lose friends due to jealousy and resentment.

So yes, money certainly does not buy happiness, but how can we manage money in our relationships to ensure that it does not lead to a breakdown of our happiness?

The Call to be Courageous
Back to the Life Planning meeting with the married couple. This couple has been married for over 40 years, and for the first time in her life, the wife admitted that she has never been included in their financial planning process as a couple. She felt that she had no value to add, and had handed over the responsibility of their financial affairs to “others”. I am always surprised in client meetings how valuable it is to put courageous money conversations on the table. Sometimes I feel that clients are more at ease having these conversations with a Retiremeant™ Specialist present, as a mediator and safe-keeper of emotions.

colourful Wheel of balance with 8 areas: Relationships, Money, Learn, Health, Purpose, Play, Work, Give BackThis one meeting had such a profound impact on my day, and reminded me once again why we do what we do at Chartered. A marriage cannot be built on money, but as surely as it cannot buy happiness, it can so easily destroy a relationship. And it’s not the money that destroys the marriage. It’s the meaning we give to money, the emotions that come with money, the beliefs we have around money, and the expectations about money.

And so, with SA marriage week coming up from 1-7 September, maybe it’s time to have a heart-to-heart with ourselves and our partners about the role of money in our relationships. As the saying goes: You live and you learn – and luckily for us, we are never too old to learn.

Warm regards

We teach what we learn – unintentionally

We have a wonderful opportunity to teach our children responsible and healthy money lessons.

Imagine the possibilities for your children if they grow up with a healthy relationship with money – one where they don’t measure their self-worth by how much money they have … or don’t have. Over the years, many clients have expressed to me their various regrets and happiness around unhealthy and healthy money lessons they had learnt from their parents, and in turn, taught their children.

Some are proud of, and others regret the money messages shared.

As parents, it is our duty to teach our children right from wrong, but at the same time, be aware of not teaching them to be just like us. I am sure many parents have deliberated on messages and behaviours they would like to pass on to their children. And I guarantee you that no parent wants consciously to teach their children bad behaviour and unhealthy habits. or to pass on low self-esteem.

If you had to ask most parents what their number one wish for their children is, the answer will most probably be “happiness.” So how do we teach our children and perhaps grandchildren about money to inspire happy lives?

You can teach your children unintentionally or intentionally. Most communication to our children is probably unintentional. Children learn from what they hear, see and experience while growing up, and if your relationship with money is based on fear, loss and anxiety, then this is the message that you are unintentionally passing on. And in all probability, these were the messages passed on to you by your parents.

Would it surprise you to hear that recent research tells us that children’s money habits are formed by age seven? And that, as adults, we operate on a subconscious level 95% of the time? This means that our conscious mind is really only working 5% of the time while our subconscious mind runs the show most of the time!

Intentional teaching is sharing thoughtful money messages. We as parents can only teach thoughtful messages if we are aware of our own money story, understand our relationship with money and have the wisdom to change the behaviours that don’t serve us, and keep the ones that enable our lives in a positive way.

Real-life examples

I recently participated in a Life Planning meeting with a father and son. The father reflected on the money messages he heard while growing up. His father taught him to work hard for his money, and with hard work, comes reward. You may consider this to be a positive money message, but reflect for a moment if the message would have been more powerful if it had been about “earning money by adding value”? This father, now 70 years old, is still working hard for his money. He fears that if he is not working hard, he is not adding value and therefore not deserving of earning.

The father unintentionally passed this same message on to his son. He also works incredibly hard but expresses the wish to be able work “cleverly,” so that he can shape a more balanced life for himself. Father and son wholeheartedly agreed that this is a cycle they would like to break. They don’t mind working hard, but recognise the need for balance: more time to laugh, relax and just living the life they were meant to live. I am sure that the constraining message will not be passed on to future generations in this family.

Ingrid is a client who reflects on a very positive and empowering money story passed on to her by her father. Her father empowered his girls to be independent; he supported and sponsored their tertiary education at a time when most women were not encouraged to study. He instilled a belief in them that anything is possible. This belief Ingrid’s father had in her capability and ability to succeed served her well. Because of this, Ingrid has had the courage and determination to follow her true purpose in life – and make a success of it!

It astonishes me how powerful father and son relationships can be. In honour of Father’s Day this month, I would like to share one more father and son story that has inspired me as a mother of two boys. The son shared with me that his father always asked, “How much pocket money do you feel you deserve for the time it took to do your chores?” This money message has had a wonderful positive impact on the son’s life. Today, he sees earning money as an exchange for time. His most precious commodity in life is “time”. He will therefore always compare the value of his time versus the money that he is earning for his time. He is now planning to retire early from his formal career and re-invent his work so that he and his wife have more time to explore some of their unfulfilled dreams.

My parting thought on learning and teaching is a money message about saving and investing – the value of compound interest. This could be a fun activity to do with your grandchildren. My advice is not to just establish a savings or investment account for them, but rather to involve them in the process, engage with them on how it works – in this way you are helping them to take ownership from a young age.

Wishing you many happy – and intentional – courageous currency conversations in your family!

Kim Potgieter - a money message about saving and investing – the value of compound interest.

Small change for big change

I recently met with a client who retires in 13 months’ time. If you’ve read anything I’ve written, you’ll know I distinguish between the concepts of “retiring from” and “retiring to”. So, true to form, the discussion came up: “What is it that you are retiring to?” I asked.

My client is excited. He has an idea for a consulting business that will see him using what he’s learnt over the last 20 years, offering his skills and services to the private sector. It’s something  inspiring for him to retire “to”. But it won’t be on a full-time basis – and it won’t give him the equivalent of his current income. This means that he’ll need to start drawing an income from his investments.

It’s about more than the money
This is the where the real acceptance needs to kick in. In my experience, there’s an emotional adjustment that has to be made. This sounds simple enough, right? Because we all know that the day finally does come. Isn’t that what we’ve been planning towards for the last 40 years?

Trust me when I say this: no matter how prepared you are, retirement still comes as a shock. Regardless of how much you save, you have to be up for the change. Or changes. There’s a mental adjustment: you’ve spent decades saving and now you need to start spending it.

Then there’s the emotional – and financial – reality around the probability of you never working again. And even if you do work, chances are you’ll earn far less in retirement than you did while formally employed.

Another emotional shift is our sense of worth and how we perceive the value we add to our families. If you’ve been the provider for many years, you might struggle with how you derive self-worth. If this is you, please be encouraged: you only have the money you have now because of your foresight and discipline. The value you add continues into the future because of this very fact.

But the money is important
Another financial shift you’ll need to make? Realising that there is no point in drawing from your investments – only to put savings aside from that. It’s financially unwise, so just draw down less to start with.

My client admitted that some of these challenges are going to be real for him. He reminded me of his first money memory. It was something his dad taught him – that a fool and his money are soon parted – and it weighed heavily on him. What if he acted foolishly? Could he wisely manage drawing down from his investments?

This is why having an actual RetiremeantTMplan – and not just a string of investments – is essential. You need to know that you have enough so that the fear of running out doesn’t stop you from living.

But I promise you: this will not be enough to convince you – regardless of how disciplined about saving and investing you’ve been. You’ll still need to be open to change. But it takes time to accept a new reality, so be kind to yourself. It takes time to amend a mindset that has served you so well all these years. Remember, though, why you saved and invested in the first place – so that one day you could have the freedom to choose what you were going to do with your time, your money enabling that life. In the bigger scheme of life, your money is the “small change” that sets the tone for the big change – changes – you’ll need to embrace.

Change is hard. Not many people like change. But you are not alone as you face what’s ahead. If you don’t feel ready for the retirement road ahead, please book some time with me. Let’s talk small change – and big change – over a cappuccino.

The persistent popularity of property

Chartered Wealth Solutions’ RetiremeantTM Specialist and Certified Financial Planner®, James Carvalho, assesses the value of rental property as an investment.

Over the past ten years or so, I have been party to numerous conversations that have debated the merits of rental property. I have frequently wondered what lies at the heart of this affiliation to property.

I have concluded that it is most likely the ability to own something tangible – you can see and touch it. (You seldom hear braai-side talk of share portfolios or unit trust portfolios!)

While property is certainly a viable option for investing, what many may not realise (if unprepared for the rigors of renting out property) is that this investment can be a source of persistent headaches.

The case for diversity
In 2011, in the wake of the 2008 global financial crisis, one of my clients was overwhelmed by her emotion in our meeting.  She owned eight properties and suddenly, four of them were standing open. Three of the tenants had lost their jobs and one of them had moved to Cape Town.

Rental payments from her remaining tenants were barely covering her bond costs, and she still had three bonds over the properties.

For years, I had been encouraging her to diversify her risk in her investments.  But, as so often happens, she was lured by the exaggerated returns in the property market, based on the promise of the boom years from 2002 to 2008.  And the unfortunate consequence has been that, at present, she has managed to sell only two of the properties, and her rental incomes are not beating inflation, and nor is the annual growth on her property.

Still a sound investment?
Through a planning process, we as financial planners would establish what the optimum investment return would be for your money to sustain your lifestyle and to last the term of your retirement.

Generally, we find retired people aim at achieving a return of approximately inflation plus 4% with their funds.

In light of this goal, I note some of my clients’ responses, when I ask by how much their rental fees had increased.  “Nothing this year; it’s been a tough year for my tenant,” or, “My tenant just lost his job so I am giving him a contribution holiday.”

Perhaps the most concerning comment was that the tenant would not pay and possession equals nine tenths of the law.

Despite these tales of rental regret, there are still many investors whose investment in property has given a positive return.

I would suggest that, if you are thinking of buying property to rent out, you consider the following:

  • Buying off-plan is appealing as there are no transfer duties. Transfer duties is a sunk cost: it is doubtful that you will recover this cost.
  • Schedule fixed rent increases in your lease – it obviates having to negotiate these every year.  Rent should increase by more than inflation every year.
  •  Establish a lease of twelve months, renewable with three months’ notice, thereby allowing you time to find a new tenant.
  • If you are a tax-payer, bond your rental property so that you can write off the interest against the rent.
  • Rental income is taxable and needs to be added to your tax return.
  • When you sell a property, other than your primary residence, it will attract Capital Gains Tax.
  • You need to be able to pay for repairs to the property; as a rule of thumb, you should keep 10% of the rent aside for maintenance.
  • If you don’t have the patience to deal with tenants, use an agent to rent out the property.  This usually comes at a cost of 10% of the rent, but it is often money well spent.

In conclusion, I reiterate the timeless sound advice to ensure you diversify between all assets when investing:  shares, cash, property stock, and corporate and government bonds.

And, remember, that your financial planner is always at hand to guide and advise you.

Mind over money over matter

We are living in uncertain times. Both globally and locally, our political and financial landscapes are shifting, leaving many people anxious about the returns on their investments. This type of anxiety can affect our emotions. And, making decisions based on how we feel is never a good recipe for financial planning, long term.

In the face of fear, many people are tempted to convert their investments into cash. But once you do that, how do you know when to re-enter the market? What if you shouldn’t have got out of it in the first place? A move like that brings a whole set of new questions, making us even more anxious than we were before.

So it is that we find ourselves fuelled by fear and living our worst – instead of our best – lives.

Something that can put our thinking back on track here is an illustration by Carl Richards, who produces a weekly sketch for the New York Times. It consists of two overlapping circles. The first circle represents things that matter, the second, things you can control. His advice is simple: the only place to focus your energy is where the circles intersect. In other words, what is it that matters to you that you also have control over? Carl’s view is that uncertainty equals reality. And he’s right. Unpredictability is the new norm. So, the best thing we can do is make peace with the inevitable risk of being alive.

In essence, we just cannot control everything. Something as simple as the Serenity Prayer can be your mental calm in a storm. Your soul is searching for the serenity to accept the things you just cannot change, the courage to change the things you can and the wisdom to be able to tell those things apart (my article on the Serenity Prayer can be found here:

Here are some Top Tips for Uncertain Times:

  1. Don’t fight the fact that we live in an uncertain world. It’s a reality that we all need to accept.
  2. When you feel overwhelmed, try to cut out some of the negative noise. Choose carefully what news you follow and every now and then, take a break from it altogether.
  3. If your stress levels are affecting your health, get help. Stress is dangerous and too much of it compromises your body.
  4. Take some time out to reflect. Could your panic be a trigger from the past? A childhood memory sitting beneath the surface of your stress? Dig deeper into the belief you’re holding. Is it true? And is it serving you?
  5. Make a list of what matters to you that you can control. Keep your mental attention there.
  6. Your financial plan was designed for the long-term. Have a long-term approach to it and stick to your plan.
  7. Spend within the plan you’ve agreed on with your planner to make sure your money lasts.
  8. Make daily decisions to make sure you are living a meaningful life.

It’s not just our financial plans that are long-term commitments. Life is a long-term business too. So, take the time you need for developing the mental fortitude to outfox your financial fears.