Fight the fear

When life doesn’t go according to plan, our first response will often be one of fear. Unfortunately, life generally never goes according to plan – so we encounter fear a lot!

Since fear cannot be avoided, we need to develop tools to cope with it so that we can allow it a constructive space in our lives, and not let it be a destructive force if left unchecked.

Hopefully, this brief article can spark conversations that will help us all learn to fight the fear in our daily lives and begin to explore our own unique reactions a little closer.

This blog is how we recognise our stress responses to fear, accept them and move past them.

If you ask most people what the typical responses to fear are, they may reply with ‘Fight or Flight’. But what many of us don’t know is that there are two more responses, these are Freeze and Fawn. None of these are good or bad, they’re just typical responses that we lean towards to cope with our fear.

With the help of trauma-informed treatment specialist, Patrick Walden, (LICSW), here are some brief overviews that he shared in an interview with The Mighty.

Fight (anger)
Those of us who tend toward the fight response innately believe power will guarantee the security and control that we may have lacked in childhood.

“Fight looks like self-preservation at all costs,” Walden told The Mighty, adding that this trauma response can manifest in explosive outbursts of temper, aggressive behavior, demanding perfection from others or being “unfair” in interpersonal confrontations.

He also noted that while we typically associate the fight response with men, women can also struggle with anger, though in many cases they direct their anger inward at themselves instead of toward others.

Recognising our default response to be angry will help us temper this response and create space to calm down before making any decisions or hurting people around us unnecessarily.

Flight (anxiety)
This fear response usually shows up in people who are chronically busy and perfectionistic. They may believe “being perfect” is a surefire way to receive love and prevent abandonment by important people in their lives.

“Flight can look like obsessive thinking or compulsive behavior, feelings of panic or anxiety, rushing around, being a workaholic or over-worrying, [and being] unable to sit still or feel relaxed,” Walden said.

Taking time to meditate and reduce anxiety is helpful for those of us who tend towards this type of response.

Freeze (avoidance)
Some of us who experience the freeze response are often mistrustful of others and generally find comfort in solitude. The freeze response may also refer to feeling physically or mentally “frozen” as a result of trauma, which people may experience as dissociation.

“Freeze looks like spacing out or feeling unreal, isolating [yourself] from the outside world, being a couch potato … [and having] difficulty making and acting on decisions,” Walden said.

If you feel like this when fear hits, having a few people you trust and can encourage you to take action would be helpful to overcoming your fears.

Fawn (accommodating)
Fawning is perhaps best understood as “people-pleasing.” According to Walker, who coined the term “fawn” as it relates to trauma, people with the fawn response are so accommodating of others’ needs that they often find themselves in codependent relationships.

“Fawn types seek safety by merging with the wishes, needs and demands of others. They act as if they unconsciously believe that the price of admission to any relationship is the forfeiture of all their needs, rights, preferences and boundaries.”

If you’re a ‘YES’ person and struggle to enforce boundaries, remind yourself that it’s okay to say ‘NO’ and put yourself first. If you don’t work on yourself you will have nothing to give others in times of crisis.

Remember, we will all experience fear – every day in fact. Most of the time the fear that we experience is easy to cope with, but when fear becomes debilitating we need to bring it in check so that we can move forward and not find ourselves stuck in our fear or reacting in fear.

For the full article on The Mighty – click here.

Understand what you need in your adviser

Here’s the thing about a 20-minute DIY job: it never takes 20 minutes.

Either you don’t have the right tools, or the right skills… or the materials turn out to be too hard, too soft, too big, too small etc.

On the rare occasion, it might take you 20 minutes or less. You might be perfectly suited to it, and have all you need on hand. For most of us – it doesn’t turn out that way.

The same is true for our financial planning. It’s not about relinquishing control, it’s about maintaining a fresh perspective on how you manage your money and making sure it’s being done in the best possible way.

A mentor once said that it’s easy to build a bridge – just pour an excessive amount of cement into the valley where you want to cross. When we think about this ridiculous idea, we realize how important engineers are.

Again – the same applies to accepting the need for a financial adviser, planner or coach. You can spend your money on whatever you want, but is that going to work out well for you? You can choose any risk or investment products you want online, but will those work out well for you?

If your money was cement, and you had to build a bridge to your future self, wouldn’t you want to have plenty of cement to make it across safely without running out of supplies in the first four meters?

A financial adviser will help, but you need to know what kind of adviser will suit you best.

Independent vs tied financial advisors
An independent financial advisor is someone who offers advice on products from multiple service providers. They usually work for themselves or are part of a group of independent financial advisors.

On the other hand, tied financial advisors will only provide advice on products their company offers. They typically have a deeper knowledge of a narrower set of products. There may be convenience or rewards related benefits when dealing with a single provider.

It’s important to identify which type of financial advisor you’re dealing with before signing any contracts with them.

Commission-based vs fee-based rates
Commission-based advisors are paid a commission on the products they sell. They are paid when the investment is made or the insurance policy is taken out and their advice is tightly coupled to the products they sell. However, they don’t charge a fee for meeting you.

Fee-based advisors charge a fee for advising you regardless of whether you purchase a product. There are advisors who operate a hybrid of these two structures and will benefit from both giving advice and selling products.

Fees will have an impact on the value of the investments you make and the insurance premiums you pay. Although they may sound burdensome, they are usually negotiable, so it’s worthwhile having a conversation about.

Don’t wait until you have lots of cement… uh, money.
You don’t need to be wealthy to have a financial advisor – this is a common misconception. You do however need a solid stream of income and a positive commitment towards making your money grow over time.

(Definitions from 22seven)

Financial wellness mindsets for life’s autumn

Autumn is a precious time of year and is perhaps an altogether more positive metaphor for another special time: the tail end of middle age when we are far from elderly, but far from young.

You look up one day and realise that while you were busy building a life with your family, or perhaps pursuing a fulfilling career, the years rolled by more quickly than you thought. There’s still time on the proverbial clock, but you’ve now reached the autumn of life. What can you do to ensure financial stability?

Just like autumn, this age is a time of rich maturity and transformation, pausing to enjoy the comforts of life you’ve stacked up for yourself and settling in for the winter.

The ‘autumn of life’ also, however, requires a completely different financial strategy and mindset. Here, some top tips for navigating your own ‘autumn’:

Hold to a relatively firm budget

By the time you’re in your mid to late fifties, the kids have most likely flown the nest to build futures of their own and if you’re fortunate, you may have already paid off your bond. This newfound financial freedom might tempt you to spend more extravagantly but now more than ever, a level head will be your best asset.

When you’re out with friends, entertain modestly and resist the urge to pick up everyone’s tab for the sake of appearances. At this point, you shouldn’t feel the need to impress those in your social circle.

Another important thing to bear in mind is that while you’re still an active member of the workforce, you should increase contributions to your retirement fund as much as possible.

Be an adviser to your children, but not an endless safety net

If you have kids, your natural inclination will always be to help them in troubled times, no matter how old they get. While admirable, your parental instincts must be balanced with a pragmatic approach to the shifting realities of your own life.

The fact is that very few older parents are in a position to act as an eternal wellspring of material resources and even if you are, the better course of action is to raise children with the strength and independence to stand on their own feet.

Never be afraid to learn something new

If there’s one tip that older professionals should consider taking from their 20-something counterparts, it’s the value of being willing to adapt to change and acquire new knowledge. With the plethora of reliable educational resources available online (often at low or zero cost), self-driven learning has never been easier.

Retirement expectations are changing fast too. With a combination of well-earned experience and some freshly developed skills, you might even be able to bolster that retirement fund with an entrepreneurial endeavour that only begins in your sixties.

Make your life easier – Part 3

Don’t avoid digital help. Whilst there are many dystopian stories about how robots will take over the world, those projected realities are highly unlikely to ever manifest.

AI, big data and cloud storage can be our friend in making our life easier – which is what technology was always intended for!

Granted, we can easily become disconnected from the material and relational world around us if we immerse ourselves too completely in the digital world, so balance is always crucial – but still, we can be astute in how we use it.

These tips are all about how digital space can create more space in your life

USE CLOUD STORAGE

Everyone seems to talk about ‘the cloud’ as if we all actually understand what that means. If you’re feeling left out, here’s a quick explanation. Storing information in the cloud means that you’re using someone else’s computer (called a hosting or cloud server, like Google Drive) to store your information, and that computer is always online. This means that you can access your information through the internet, from any device, in any location at any time – provided you have internet access.

Google, Microsoft, Dropbox – these are all good examples of cloud servers but there are literally hundreds of options.

The ultimate advantage to you is that your information is kept off-site. So… when you spill coffee on your laptop, a power-surge blows your desktop or you drop your phone in the loo, you don’t lose your data. You can store photos and family videos in the cloud. You might want to scan and save important documents – the options are limitless.

It also helps if you run a business. Instead of having an expensive local server, you can share all information in the cloud so that your team can access what they need. And again – should anything happen to a device (or everything in your office), you can keep valuable business information safe and accessible.

USE A VIRTUAL DIGITAL ASSISTANT (VDA, VA or DA)

Most smartphones come with a built-in DA (Siri and Alexa are great examples), but we use them to do fun things like finding out the time in a different country and playing a specific song.

But, you can use your DA to set up tasks and reminders. This can range from phone calls that you need to make, emails you might need to follow up on in two to three months or everyday tasks like managing your shopping list.

If you couple this tip with cloud storage, you can create shared lists that anyone in your family or team can update. From shopping lists, monthly budgets and wish lists for holidays, birthdays and home improvements, integrating your use of Siri in your daily life will make your life WAY easier.

If there is something in your life that is causing stress because it’s clumsy or cumbersome, see how you can change it to make your life easier!

Make your life easier – Part 2

Every time we say ‘YES’ to something new, it seems to just make our life more complicated down the line; more events to attend, increased responsibilities and less time to relax and do what we really want to do.

Finding just the right amount of order in your life is one of the secrets to making your life easier (learning to say ‘No.’ is another secret…)

Whilst we can’t just stop growing and adding more to our lives, we can look at ways to make other things in our life easier. From planning our budget to organizing our laundry, no task is too mundane to refine and review!

There are so many great ideas on the web – but here are some of them from www.harvardhomemaker.com.

THE THREE BAG LAUNDRY SORTER

Whether you run a household of seven or live the single life, laundry has to be sorted. It seems completely pedestrian to ‘plan’ your laundry sorting – but it will save you time and frustration which ultimately opens up space in your life.

Set up three baskets or bags – one for whites, one for darks and one for colours. Label it and make sure everyone in the house knows what’s potting. This way – when one bag or basket is full – that’s the load you do. You’ll save loads of time on every load of washing!

THE DOUBLE-COOKING PLAN

When you’re cooking a pasta, rice or curry dish – prepare double the amount that you need and freeze the leftovers. This requires two levels of discipline – the first is in the planning and the second is in the eating!

Cooking double what you need DOESN’T cost you double. In fact, it costs you less: buying ingredients in bulk, using electricity once, and cleaning up pots and pans once. It does require some forethought, it’s not something you can easily do at the last minute on a Tuesday night. Many people who employ this trick will plan and cook meals on a Sunday for the week ahead.

When it comes to dishing up, only put out half of the food to avoid the temptation of having seconds simply because the food is there. Once in the freezer, you can easily enjoy that savvy meal up to a week later.

THE FILING CABINET

These are not just for work! When you receive statements in the mail, have important documents (IDs, passports and certified copies) or information packs that come with your digital devices (these also often have important codes that you may need later), have a filing cabinet or draw where you can store them vertically (like a concertina file).

When you have easy access to this information and the space to store it you will be more likely to file it away safely instead of piling it on the nearest counter to fall over and cause frustration in your life.

Making your life easier is not about changing one thing, it’s about learning how to adjust to the constant change in your life.

Offshore investing and the new expat tax

As of 1 March 2020, an amendment to the South African Income Tax Act will have definite ramifications on the lives of South Africans living and working abroad.

Now that this infamous ‘expat tax’ is in effect, SA expats are now obligated to pay up to 45% of their foreign income to the taxman when it exceeds R1 million per annum, which includes any fringe benefits provided as part of the job.

But what about investors? How does ‘expat tax’ change your investment strategy and how should you approach offshore earnings being taxed from an investment perspective?

Please remember that the following does not constitute financial advice.

Offshore investments and the expat tax

First, the somewhat good news: investment income is still considered passive income and, if you are residing in South Africa and a citizen but have offshore investments, dividends and the like will be taxed just as they always have been and not under the new ‘expat tax’. Same goes for rental property owned overseas, shareholder earnings and so on. As long as it’s passive, you should be fine.

Active income and expat tax

But what if you do work overseas, at least some of the time? Even for those with stable and reliable employment, maintaining one’s life in a second city can be costly.

In this situation, your choices are frustratingly few. You can either return to SA, find an offshore structure in which to invest those earnings, or formalise the process of financial emigration. Each of these options comes with significant consequences.

For many expats, particularly those who have lived elsewhere for an extended period and thereby assimilated into the culture of their host nation, the idea of returning to South Africa and all its social and political instability is not a welcome one.

If you are a skilled professional with good standing in the other country, the concept of financial emigration may best suit your needs. At a very basic level, this is making the official decision to sever your connection with South Africa and surrender your status as an ordinary resident. Beware though, because doing so will impose strict limitations on what you can do with locally remaining assets, impede your ability to acquire more in the future, as well as having serious implications on capital gains tax. Furthermore, depending on how and when you choose to relinquish citizenship, your actions may be assessed with a distrustful attitude. Especially now, after 1 March.

Two of the main reasons for choosing this route are if you are certain you have no intention of returning to South Africa, or if you stand to receive a substantial inheritance in the years ahead – R10 million or more. Once you’re no longer an ordinary resident, any inheritance should potentially be paid to you directly in the foreign jurisdiction, without the need for approval from the South African Reserve Bank or clearance from the South African Revenue Service, both of which apply to South African citizens.

Investment solutions

Other ways to protect your foreign earnings would be to establish a formally recognised company in a tax-friendly location, through which to invoice your employer, though taking such a path would mean you’ll need to pay very close attention to the specific conditions and requirements, in order to comply with international law.

Finally, it could be an option to put those earnings into an offshore investment platform somewhere the tax codes aren’t so harsh, thereby limiting your exposure to penalties and estate duty. Whichever option you pick, none will be particularly easy or stress-free, but decisions must be made to ensure you have legally compliant structures in place to protect your current lifestyle and future prospects.

Ultimately, the laws surrounding taxation are a quagmire at the best of times, and become infinitely more complex when different countries’ laws are at play simultaneously.

The ‘expat tax’ situation highlights the need for sound professional financial advice within a good understanding of South African offshore investment vehicles, fiduciary laws of the countries in which you earn and what your particular financial goals and needs are.

Make your life easier – Part 1

Every day our lives get a little more complicated. That’s the reality of the world that we’re currently living in. It’s not easy to keep order in your life – even if you’re one of the few who excel in keeping things in line!

Finding just the right amount of order in your life is one of the secrets to making your life easier (learning to say ‘No.’ is another secret…)

When you can find what you’re looking for, quickly and easily, you will have more time to be creative and work on projects that will help you grow, but you also won’t need to go out and ‘buy another one’…

There are so many great ideas on the web – but here are some of them from www.harvardhomemaker.com.

USE ONLINE GROCERY SHOPPING

Think about it: do some clicking in the comfort of your own home at night; select your delivery option – and it’s done. The groceries magically appear – you (and your family) don’t even have to get into your car.

Most of the local online grocery options also enable you to order previously purchased products, keeping a list of your popular items – making it quicker and easier to top up your fridge and pantry each time you log on to your account.

Both Pick ‘n Pay and Woolworths offer great options.

USE HANGING SHOE HOLDERS – NOT FOR SHOES THOUGH…

Whether it’s behind the bathroom door for extra toiletries and medicines, hanging inside the broom closet with your detergents or in the garage with tools, paints, chemicals and odds and ends – these simple, ridiculously-cheap, organizers can be hidden away and hung almost anywhere discreet and give you considerably more shelf space – and allow you to see the full scope of what you have.

You’ll never buy too much jik, or lose your spare razor blades again!

USE A TASK SCHEDULER THAT IS DIFFERENT TO YOUR EMAILS

This is great for your work ethic!

When you’re trying to be super productive at work, nothing is more disruptive than an email coming through that is asking you to ‘quickly’ do something. It breaks your creative work flow, slows you down and increases your stress levels.

Many of us allow our emails, texts or phones to govern our task scheduling. We start off the day with one project in mind – and then if a message comes through, instead of prioritising and scheduling it for later, we deal with it now because we know that if we close that message… we might forget.

Asana and Monday.com are great tools to use – the former has a free version whilst the latter is a paid-for solution.

Having a task programme that is separate to your emails, allows you to transfer requests, schedule them and stick to the job at hand. And you won’t miss a beat.

Hopefully these ideas help to make your life a little easier and less complicated!

The NHI: What we know so far

South Africa has just had its annual Budget Speech, with one of the many controversial topics not addressed being the National Health Insurance scheme. Yet President Ramaphosa stated very recently that he expects it to be fully rolled out within the next five years.

The NHI was initially to kick off on 1 March 2020 but is currently years away from full implementation, with much still unknown about how NHI will actually work.

So, what do we know? Here’s a list of answers to common questions about the NHI in order to keep you up-to-date with the latest facts.

What happens to my medical aid and insurance when NHI kicks in?

Much has been made of the fact that medical aids may not legally cover anything the NHI will cover. While this doesn’t necessarily mean the end of medical aid schemes in South Africa, it’s a major disruption and medical plans will be significantly restructured or made obsolete.

What about other insurance? Currently, there isn’t any obstacle for insurers, particularly life insurers, covering what they already do. So, financial protection in the event of a temporary or permanent disability, a critical illness like cancer or a fatal accident or condition will most likely all still be covered in exactly the same way.

Should I even bother with insurance then?

Government has insisted that NHI will be “comprehensive”, but no list of services has yet been released and, with “comprehensive” being very much open for interpretation, this is unclear. So, at this stage it’s really too early to tell.

Sophisticated treatments such as oncological treatment for cancer patients would likely not be covered (again – this is not confirmed). This is where life insurers would step in, especially as medical aid schemes may have their hands tied by the NHI. A dread disease benefit, for example, would pay out 100% for something like cancer or a heart attack to pay for or contribute towards that person’s oncology bills and the other financial strains associated with critical illness.

Will I have to go to a government hospital under NHI?

In theory, the aim of NHI is exactly the opposite of this – for those who have been forced to make do with government hospital experiences to be able to now access private medical healthcare practitioners.

In practise, all South African citizens will be required to register at their nearest NHI-accredited primary healthcare facility and be limited to primary healthcare only at that facility. Whether those will be private clinics like Netcare, your usual GP or state hospitals is currently anyone’s guess.

Going anywhere other than this has to be officially recommended by the doctor or medical staff at that registered facility and approved – which may make seeing specialists like orthodontists, gynaecologists, oncologists and paediatricians a lengthy red tape experience.

When is NHI coming into effect?

No one knows when exactly NHI will come in. It is currently expected to be fully operational as soon as 2022. This is still the target date for more vulnerable citizens like the elderly, disabled and children.

The National Health Insurance Bill states that the NHI fund must be in action some time in 2026. It remains to be seen whether this will be the case, though. Many medical aid schemes, like Discovery for example, maintain that NHI will take far longer to come into full effect.

How much will I be taxed for NHI?

Again, we don’t yet know. The biggest portion of funding is likely to come from an increase in personal income tax. As medical aid contributions come to many via their jobs, payroll taxes for employees will also likely foot the bill. On the government’s side, what Treasury currently allocates to provinces through provincial equitable shares and conditional grants under the system as it stands now will probably be reallocated to the NHI Fund.

There may also be another bitter tax pill to swallow where the NHI is concerned: no medical aid tax deductions.

While much is still murky when it comes to NHI, many experts believe that the insured population, who are already members of comprehensive medical schemes, will keep paying private medical aid fees anyway to avoid the long waiting lists, queues and restrictions on specialists and GP visits likely to manifest once the NHI does. However, they won’t get any tax deductions for it anymore.

So, the average policyholder will likely pay twice – for NHI and medical aid – and get none of the money back they currently are.

Can I choose my participation in National Health Insurance?

Unfortunately not. All South African citizens and permanent residents will be mandatorily enrolled from the state’s side once NHI comes into effect. There will be no choice involved.

At present, as much is unknown about National Health Insurance as is known – which is understandably worrying for the average policyholder. All of this is even more reason to pay regular attention to your portfolio.

Does your wealth creation strategy need more love?

February is the month of love, but it’s also the first real month of the year for most of us, once we’ve got back into our routines and come back to grips with life after the holidays in January. As a result, you may be thinking of how to get your 2020 goals going, especially your financial goals, rather than romance.

However, there is a way to think of both. In honour of the month of love, we’ve made a list of things to ask yourself on behalf of your investment strategy, based on some of psychologists and marriage counsellors’ favourite questions for couples to ask each other.

Do we want the same things?

What do you truly want out of your relationship with your money? What’s your ultimate goal – to retire well? Or be protected from unemployment? To have your loved ones protected after you’re gone?

The reason to ask yourself this is to lead on to another question: do you have the right products for your investment strategy? If the discretionary fund you’re in is geared towards offshore investing with the ultimate purpose of retirement, yet you want income coming from that, you and the products you have may be at odds. This is why it’s helpful to review your portfolio regularly and make it’s still working well for you.

Are we spending enough time together?

The key to making any relationship work is spending quality time together, and the same goes for your investments. Life tends to happen and, often, the whole year can go by without most of us revisiting the status update on our investments. In general, it’s a good idea to revisit your investment strategy and see how investments, annuities and the like are all doing between two and four times a year, or whenever a major life event like buying property, marriage, the birth of a child or divorce occurs.

What do you really need from me to make your dreams come true?

Some of us can be tempted to treat our financial goals like a wish list or creative writing exercise, summoning up whatever dreams our hearts desire and then setting aside whatever funds, effort and time we deem they have available, without stopping to really calculate whether it’s a realistic picture. Again, this is where it helps to have a financial adviser in your court!

It’s important to frame a realistic and achievable investment strategy, armed with information and ideas you need to really achieve those goals.

What are my habits that you do not like which I should stop?

We all have bad money habits. All of us.

There may be some that are hurting your money more than others and, when stopped or cut back, will lead to a blossoming of your relationship. Not sure what your bad habits are? A good place to start is with our piece this month – ‘What’s the state of your budget?’

Ultimately, a wealth creation strategy is a relationship between you and your money. You get good relationships, ones that go the distance, and you get bad ones. And just like any relationship, it takes hard work and honesty.

Coffee, makes you think

After owing its name to the mindful Fransciscan monks, the Capuchin friars, many of us overlook our daily cappuccino (or other frothy delight) and how much we spend on these little luxuries in life.

One of the best ways to add meaning to our money is to be mindful about how we spend it, and our financial well-being is closely linked to how we feel about our money and what it means to us.

If we use the example of buying a daily cup of take-away coffee (this could be from Woolies, Starbucks or your local hipster cafe) – we can learn a lot about our spending habits and bias.

Many people savour the flavour of this power drink each morning, and many caffeine addicts can happily knock back a few in a row. However, some calculations show that if you’re willing to give up just one of those daily cappuccinos, you could save nearly R40,000 in five years and over R90,000 in a decade.

With the ominous effects of inflation and the cost of living on the rise around the world, it can often seem impossible to save more money without the help of a big bonus or salary increase. However, Hildegard Wilson, a member of the Actuarial Society of South Africa’s investment committee, is quick to ascertain “that you can save without compromising your overall standard of living. With the power of compounding, where growth on your investment earns additional growth, these kinds of ‘breadcrumb’ savings can turn into large amounts over time.”

If you buy a cappuccino from Monday to Friday at an average cost of R25, your coffee habit is costing you roughly R500 a month. If you opt to forego the cappuccinos, you could alternatively commit to investing R500 a month in a multi-asset high-equity unit trust fund. Over the past decade (calculated up until March 2017), high-equity funds have delivered average annual returns of 8.2%. Although this figure offers no guarantee of future performance, if your investment were to achieve an annual average return of 8.2%, you would have just over R37,180 after five years and R93,130 after 10 years.

Foregoing just one cappuccino a day, you could generate a significant lump sum, which could make a serious dent in your debts, or top up an education or retirement fund.

The goal is not to give up a cappuccino, it’s to be mindful of how you use your money and acknowledge that the little things all add up in the end. So… next time you order your beverage of choice, hopefully it makes you think!