Retiring is dangerous. Who would have thought? While people may initially report improved health after retirement due to lower stress levels, studies show that the risk of death increases by as much 20%; and the risk of suffering from a heart attack or stroke increases by as much as 40% after retiring.
It is not surprising that retiree’s health suffers given
what we know about the link between emotional wellbeing and health. Losing your
job through retirement could also mean losing your social contact, your daily
routine, your mental stimulation and your meaning. It could mean losing your
marriage and your mental health. And of course, losing your financial
stability. But it doesn’t have to.
It can be a whole new lease on life, provided you consider
it in advance. If you plan to work on your friendships, your marriage, your
health and your purpose long in advance – while you prepare for the end of
formal work – you’ll have a chance. You need to work on these as much, if not
more, than working on your money. These facets of your life are all intertwined
– the one cannot go without the other and it cannot go unplanned.
Retirement planning focussed on money alone is outdated.
Retirement planning is now about whole life planning.
You believe in yourself. You have done your homework. You go for it.
Go big or go home, is what they say. After all, Warren Buffett said “diversification is protection against ignorance. It makes little sense if you know what you are doing.”
You think it’s certain. You are in control.
You are wrong.
And so is Warren Buffett in this instance. Many people followed his advice thinking that it meant they should back only themselves or a few well-researched ideas, yet his own company held a widely diversified portfolio of investments. Clearly, he didn’t follow his own advice.
I’ve been in too many of these conversations before. ‘I believe in the South African story, I must back myself and I don’t need global investments,’ or ‘My company has delivered superior returns on all the portfolio investments. At least I know the risks here. I am not diversifying.’
The world is full of glory stories of people who took big risks, who backed themselves. Just look at the biographies in airport bookshops. However, there are more untold stories about those who have failed, and I have personally seen too many of those play out.
What if you are wrong? What is the price of your failure? How long can you afford to wait for success?
You can back yourself, but be wise about it. You don’t have to allow failure to ruin you. Said another way, plan for it to not. How can you limit the fallout? Can you put money into an emergency account before you start a business? Can you take out insurance to ensure your family’s future when their whole future is dependent on your life? Can you take your dividends to build an offshore portfolio? Can you take time to go for a medical? This is not rocket science, yet it is frustratingly far too common!
You can back yourself….but not only yourself. Yes, diversify.
Perhaps it came unexpectedly, perhaps it’s been hovering for a while. The shock is the same…you’ve just lost a significant person in your life.
Saying goodbye is traumatic. Apart from the emotional distress of the passing, there is the added anxiety of having to make funeral arrangements and handling personal affairs. It’s an endless whirlpool of things to think about and paperwork to manage.
If you are a surviving spouse, partner, or relative, we’ve compiled a summary of items that you need to think about after someone passes away. It brings order to a difficult time and allows you to focus your attention on yourself and your family instead.
Things that need immediate attention:
Organ donation.
Try to establish if your loved one was a registered organ donor.
If you’re not sure, contact the Organ Donor Foundation’s Toll-Free Line on 08200 22 6611, and they will check against the ID number of the deceased.
If the deceased was a registered donor, let hospital staff know immediately. If the death occurred outside a hospital contact your nearest hospital. Organ donation is extremely time-sensitive, so this item is at the very top of the to-do list.
2. Notify friends and family.
Notify other family members and friends and provide emotional support for one another.
3. Wishes for burial.
Check for a funeral policy and contact the funeral home (or if there is no policy, contact a funeral home of your choice). They will take your loved one’s body into their care, while you decide on burial or cremation options and make funeral arrangements.
Also, they usually take responsibility for submitting the notification of death to Home Affairs and obtaining the death certificate. Check that this is the case. If not, they will guide you on how to apply for this yourself.
If you are religious, it’s a good idea to contact your pastor/minister/religious counsellor, who will guide you through this process.
4. Arranging care for dependents and pets.
If your loved one was responsible for the care of dependents or animals, arrange temporary care for them while you figure out a long-term solution.
5. Take care of the physical property.
Make sure that the property of your loved-one is secured. If he/she lived alone lock the house and the cars. Notify the security company that the property is empty and ask them to set the alarm remotely from their offices.
Similarly, if the deceased was a tenant, let the landlord know that the property will be vacant for some time.
6. Letting the office know.
If your loved one was employed (or actively volunteering somewhere), call their employer to let them know that he/she has passed away.
7. Finding the will & contacting the Executor of the Estate.
Locate a copy of the will to determine who the Executor is. He/she will take over the administrative aspects, such as filling out forms and dealing with the Master’s office.
If you are the Executor, be warned that these aspects can be a big administrative burden. Don’t rush to start and finish the documents immediately after the passing (other than the notification of the death in step #3 above).
Things that need attention in the following days:
In the days after the passing, several items require your consideration. The following items will require a joint effort between the family of the deceased and the Executor of the estate.
Think about your immediate financial needs: if you were dependent on the deceased for financial support, how will you make ends meet until death benefits are allocated to you?
Report the death to the Master’s office within 14 days: the Master’s office will issue a Letter of Executorship that will allow the Executor to handle all necessary paperwork. The Executor must be appointed as quickly as possible because he/she will have authority over the deceased’s affairs, such as bank accounts.
Notify life insurance companies: most life-cover policies pay out a small portion of the total benefit (in the first days after the death) to help beneficiaries cover the cost of the funeral and their own short-term living expenses.
Speak to the short-term insurance broker: this is a high-risk aspect that needs to be addressed as soon as possible. Policies in the deceased’s name need be identified to ensure that cover over assets (house, cars, household content) do not lapse.
Reach out to financial advisors: let your financial advisor know of your loved one’s passing so that they can continue to look after the best interests of the investments (or portfolio) while they wait for the Executor’s instructions on how to proceed. The transfer of ownership, or distribution of proceeds, happens at the end of the estate administration process – often 6 months or more after the deceased has passed away. It is important that investments are properly managed in this period, in consultation with the Executor.
Notify the medical aid: particularly if you are the dependent of the medical aid where your loved one was the main member. They may already be aware of your loved one’s passing, but you must nevertheless notify them so that arrangements are made for your own cover to remain in place.
Identify important invoices or accounts: share this list with the Executor, so that he/she can arrange payment. It’s crucial that the Executor handles this aspect since payments made must be recorded in a certain manner and reported to the Master as part of the winding-up of the estate.
Check the deceased’s house more thoroughly: If he/she lived alone, throw out food that will expire, water the plants, turn off the geyser and water supply (if possible), and look out for anything that may need regular care.
Items that you need to be aware of, but will be handled by the Executor in the early days:
Opening an estate bank account.
Notifying the deceased’s bank.
Contacting the tax practitioner.
Closing credit card accounts.
Things that need attention once the dust has settled:
In the month or two after the death, the Executor should now firmly be in charge of the administration of important matters. You will still need to tackle less-pressing issues once you are ready. These include:
Updating your own will, and beneficiaries of policies.
Memorialising social media (Facebook, Instagram).
Closing email accounts.
Contacting the Post Office and notifying them to forward all mail to the Executor.
Cancelling memberships of organisations (such as the gym).
Cancelling subscriptions for newspapers and magazines.
Cancelling driver’s licence.
Notifying the Electoral Commission (IEC) to remove the deceased’s name from the voter’s roll.
Organising and distributing your loved one’s personal belongings.
Having the Foundation…
At Foundation Family Wealth, we believe in having a strong basis for the inevitable: we believe in planning for death.
We undertake rigorous estate planning and prepare thorough wills, but we also know that there will be plenty of aspects that you will have to think about, or manage, yourself.
We encourage our clients to keep a checklist with important documents and related contact details in a single folder so that survivors (and Executors) will be in a better position to do whatever is necessary after they lose their loved one. No time wasted on mindless details.
Contact us if you would like to revise your estate planning or will, or if you would like a copy of our template for organising your affairs.
Help your family be prepared for the day when your goodbye happens.
<Foundation Family Wealth is an Authorised Financial Services provider>
“I prefer questions that cannot be answered to answers that cannot be questioned” – Richard Feynman.
How much offshore is enough? This is not an easy
question to answer, because so many factors may influence the answer. In this article, I’d like to share how we
approach this pressing issue with our clients – an approach we have developed
through our academic training combined with decades of experience in offshore
investments.
Let’s start with a reality check. South Africa is
not in a good place. We face many serious
structural challenges that define the long-term future of this country.
These challenges are:
Education – we are
failing to provide our children with quality education.
Unemployment – a
symptom of poor education and insufficient economic growth, it is especially
prevalent amongst our youth.
Work ethic – there is
no culture of self-motivated upskilling and working hard to achieve more.
Instead, there is a culture of “how can I earn more for doing the
same?”
Social unity – poverty
and unemployment (especially amongst the youth) is a ticking time bomb. We have
already seen an increase in social unrest and it is likely to escalate.
Rule of law &
property rights – there is a pervasive disregard for the law and consequences
for breaking the law. We need to see clarity on the issue of property rights in
order to move forward.
Unless we see policy shifts and strong leadership
around these issues, we remain negative on the long-term future of South
Africa. It is against this backdrop that
we believe it is important to continue to externalise funds and invest
offshore for the foreseeable future.
However, we need to balance political risk with other risks such as
running out of money in retirement and having access to your money.
How much is enough?
To guide us, we need to start with an important
financial planning concept called “asset/liability matching”. Simply put, the currency of your assets needs
to match that of your expenses. The “funding
bucket” that provides for children’s education, lifestyle and ultimately
your retirement needs to be predominantly invested in the country in which you
live, in order to protect yourself against currency and inflation
movements. In other words, you do it to
protect the purchasing power of your money. As difficult as it is to currently imagine
that the Rand may strengthen, history has shown us that there are long periods
of currency strength and weakness in all currencies, including the Rand. If all
your money is invested in US Dollars and you live here and for whatever reason,
the Rand strengthens against the US Dollar, you will become poorer.
If you have a rough idea of what your future
expenses will be, you can determine the size of the “funding bucket”. Then ask
yourself where you see yourself living in 10 to 15 years’ time? Where do you see your major expenses? THIS
is where your “funding bucket” needs to be invested!
If it is South Africa, the “funding bucket” gets
invested here and within this, you need
to ensure that you have a healthy offshore exposure of at least 30%. If the answer is another country, the “funding
bucket” needs to be externalised and invested in a global portfolio over time,
preferably in the currency of your future home country.
What to consider about retirement products?
Pre-retirement structures limit you
to 30% offshore exposure. This is the most
efficient exposure determined by most mathematical models. However, many South African investments within
your retirement products may include offshore elements such as global companies
listed in South Africa (for example, British American Tobacco, Naspers). Your actual offshore exposure may, therefore,
be more than 30%.
You may retire from
pre-retirement structures at the age of 55.
Funds can then be transferred to a traditional life
annuity or a living annuity. Many opt to
“retire” as early as 55 for the following reasons:
A living annuity, which
has more flexibility, allows you to invest 100% in offshore funds.
There is a possibility
that the government may in future prescribe how you invest your assets in
retirement products but living annuities would not be affected if prescribed
assets had to come into play.
Before doing this, there are important factors to
consider:
Not all insurance
companies offer the facility to invest 100% of your living annuity into offshore
funds.
Once you convert to a
living annuity you have to draw an income between 2,5% -17,5%. This income stream is taxable.
You may be getting
global exposure through offshore funds, but you are not physically
externalising your money. The best protection
against political risk is to externalise discretionary funds.
If you formally
emigrate:
You may withdraw and externalise funds within pension/provident,
retirement annuity and preservation funds.
You may NOT withdraw and externalise a living annuity, but you can draw
the maximum allowable limit of 17.5% per year for several years, effectively
emptying your living annuity.
What about money outside of this “funding bucket”?
Any savings that fall outside of the “funding bucket” can be invested in various ways and
this will differ from client to client. For
any South African client with additional capital, we would aim for a holistic
global exposure of at least 50% or higher.
We understand the political risks in South Africa. There is a certain probability that things
may get worse but there is also a certain probability that things may get
better. It’s important to have a
balanced view and take all these probabilities into account when making
investment decisions. Because of this,
we are not of the view that all your money should be offshore.
Younger wealth accumulators struggle to determine the true size of future expenses and therefore may not know what size the “funding bucket” needs to be. What then?
Our younger generation needs to plan for a longer
time horizon in which many things can change.
Because of this, our approach would be as follows:
Save towards
retirement and make use of tax deductions.
Limit your debt. It
may mean limiting your property aspirations.
Externalise (invest
offshore) any additional savings.
Aim for the 50%
offshore target. Good global exposure
gives you optionality in life.
We do a GAP analysis
for our younger clients to determine whether their savings towards retirement
is sufficient.
How do I externalise funds?
If you have the option, avoid Rand denominated
offshore funds. Physically take the
funds offshore and invest in USD, EUR or GBP. South Africa has relatively relaxed exchange controls
for individuals.
The following rules apply:
Any taxpayer in good
standing, over 18 years may make use of the allowance.
R1m discretionary
allowance per year.
R10m offshore
allowance per year. For this allowance,
you need to apply for a tax clearance certificate from SARS.
What other factors influence our decisions?
It’s important that we understand what is driving
your decision to take more funds offshore.
Often the concern is driven by behavioural biases which can distort your
thinking and may lead to irrational decisions. Over the past 5 years, offshore markets
delivered significantly better performance whilst South African politics faced
some of its biggest challenges in decades.
Therefore, many South Africans are investing funds offshore, sometimes
even cashing in pension funds to do so. We need to check whether these
decisions are driven by sound investment and risk guidelines or whether it’s
driven by emotion.
Of course, advisors also suffer from behaviour
biases and the way they view the world will influence the advice given to
clients. Our team frequently check in to
see if we’re giving advice based on a known behavioural bias.
These are some examples of biases currently at play:
Recency bias: remembering something
that happened recently and extrapolating this into the future.
The example below shows how a fund’s recent performance
influences the flow to and from the fund.
If the fund does well (2016) money flows into the fund, and if the fund
performs poorly (2019) funds flow out of the fund.
Source:
Allan Gray
The next example shows how investors move from poor-performing
funds to better performing funds. Over
the past 5 years, SA equity funds underperformed income funds. Because of this, SA Equity funds suffered a
total outflow of R120bn in 2019 alone.
When this happens on a large scale, a bias like herding (where
investors tend to mimic the crowd) could also come into play.
Source:
Coronation
Confirmation bias: favouring information that confirms your existing beliefs.
This is an interesting one that affects South
Africans in a big way. If you are
worried and negative about the country, you will find many sources confirming
this belief. It can be so convincing
that even optimists start wondering if they have it wrong.
I think the risk of making big, irrational
decisions that can impact your finances significantly is critically high
now. We need to be honest about the
long-term structural issues and build protection into our portfolios. This needs to happen is a systematic way
because knee-jerk reactions can destroy capital. This is especially true when markets are
particularly under or overvalued like now.
Below is a table showing past returns and expected
returns for each asset class. Over the
past 10 years, global equity has significantly outperformed local equity (16.6%
per annum vs 11.1% per annum). Over the
last 5 years, the difference has been even more dramatic (13.5% per annum vs
3.7% per annum). As discussed above, one
of our biggest temptations is to extrapolate the recent past when looking to
the future. Switching local equity to
global equity now means you lock in
years of underperformance relative to global equity AND you possibly give up on
future outperformance.
At Foundation Family Wealth we want to address each
client’s concerns and identify risks. Externalising
money to de-risk is a priority. We, however,
prefer to do this in a systematic and balanced way. We consider various biases
and possible outcomes. We want to ensure
that you have peace of mind, but also that you participate in future
opportunities. Our goal is for your
holistic portfolio to provide you and your family with optionality.
<Foundation Family Wealth is an Authorised Financial Services Provider>
At the beginning of every year, it is my custom to write a review
concerning the last year in our business. I like to stand still and reflect on
what has happened, but also on what we anticipate and want to happen.
This last year has been a year of extremes for us at Foundation Family Wealth. It was probably one of the best years in financial growth for our clients and our business, but it was also filled with sadness as our team lost many clients, family and friends to death.
Many of these clients were clients long before we started Foundation. We journeyed with them through many years of life. We took some of them through retirement and lived through the death of spouses. It has been difficult to say goodbye. And now, we are working with those left behind, helping to pick up the pieces and plan. We believe that intergenerational wealth protection can be achieved if the heirs are educated, informed and involved in the planning. It is why we have launched an incubator service for younger clients. This service helps set up the children of our clients, right from their pocket money through to their first salary check. It is important that they become experienced in the money world and financially independent in their own right before they inherit, but that they also develop an understanding of how to deal with their inheritance in the future.
It is what we believe good financial planning is – being
there throughout and beyond the lifetime of a person and their extended family.
Financial planning is so much more than selecting good product or ensuring good
growth of portfolios. Good financial planning is about ensuring that wealth
brings you rewards throughout your life and beyond.
Over the last year, we have seen the benefits of this kind of thinking positively realised for our clients as disruption has made the world more uncertain and the complexity of life has continued unabated. Financial planning is not about forecasting the future but about planning for a future regardless of what the future brings. If we do not plan, there is only a slim chance that the future will resemble anything like our dreams, hopes or even our smallest expectations.
Over the past year, we have lost clients to emigration. Many families no longer see a future for themselves or their children in South Africa and emigration is a hotly debated topic. We have seen that proper financial planning can help our clients navigate the emigration transition better. Typical to most transitions, it is fraught with many pitfalls for wealth destruction. As emigration continues and clients need more advice during the decision-making and implementation phase, we will expand our services in this area and team up with legal and tax specialists to provide solutions for clients.
Last year, I spoke at the inaugural Humans Under Management
conference in South Africa, which brings together industry colleagues to
discuss the human factor in financial planning. My talk, Humans Under
Transition, was the culmination of many years of work with clients going
through a divorce, loss of a spouse, retirement or retrenchment. We now believe
that we have very specific skills for helping people navigate transition. In
stressful times, like now, we believe we can make a difference to those processes
by bringing our skills and experience to the table. In 2020, we will offer a
new workshop for those going through a transition. It will focus on helping clients
strategically think through the impact of transition on their money and their
lives.
Despite South Africa still hovering around recessionary conditions, our clients’ portfolios showed handsome returns over the past year, bringing their long-term returns to satisfactory inflation-beating numbers. These returns were helped by the healthy global exposure of our clients’ portfolios but also by the disciplined asset allocation methodology and fund choices of Portfoliometrix. The team at Portfoliometrix were once again recognised as the Best Discretionary Fund Manager in Londonby winning Citywire’s Wealth Manager Regional Stars Greater London award, highlighting their advanced expertise even in the global arena.
The local political and socio-economic conditions remain
concerning. While the media and popular commentators focus on immediate risks
such as a credit downgrade and the fixes for the tragic state of SOE’s, we are
more concerned about the long-term risks. High unemployment, poor education
(which leads to low productivity), disrespect for the rule of law, the attack on
property rights and most of all, the huge gap between rich and poor in the
country are all factors pointing to increasing social unrest and the high
probability of populist policies. Financial planning should take these risks
into account, not only by high global exposure in portfolios but in all areas
of planning.
Added to this is the challenge of investing in developed
markets, which has seen some of the best returns in decades recently. Although
we are acutely cognisant of the risks of local investments, we think that the
local market may surprise when value unlocks from these depressed levels. We do
not agree that one should sell from South African investments at any cost. A
disciplined diversification process is far more likely to generate the best outcome
for clients.
Further to the local challenge, is that of dealing with the uncertainty caused by disruption through technology, demographic trends, climate change and the shifting global order. These challenges, of which we wrote about last year will disrupt our clients’ careers and saving patterns. We are already seeing shorter careers. This, coupled with our increased longevity, means we need higher savings. It will require a different approach to financial planning – planning will intersect with career coaching and lifestyle coaching to ensure the longevity of income generation.
Another trend, which has taken hold and is concerning for
wealthy families, is the increased scrutiny by global authorities into the
source of wealth. Not only does it make investing more cumbersome, but it
sometimes requires financial advisors and bankers to divulge personal
information about the persons behind investment companies or trusts, and in
some cases, that information is now made public by authorities. It puts wealthy
families at risk as targets for criminals. Cyberattacks, extortion and
kidnapping are real risks for the wealthy – it has also come very close to us
in the last year. We actively advise clients to become more discreet in their
display of wealth, to protect them from becoming a target. The loss of privacy and increased danger is
the price we pay for the increasing and unsustainable difference between the
rich and poor in the world.
Another price is in increased taxes – in South Africa, we
will feel this in the coming years but globally it is also likely that taxes
will increase as governments pick up the tab for all the disruptive forces at
play. The most noticeable is likely to
be climate change and large-scale job losses due to technological advances.
All these forces will increase the need for financial
planning done well. We are now seeing the convergence of financial advice,
wellness and coaching in this space – and in response, we have put teams around
some of our clients to support them through difficult transitions. We will
continue to see this trend develop. It’s why our team is participating in
coaching training this year and why we continue to build our ‘soft’ skills.
Traditional financial planning may likely be taken over by artificial
intelligence, but the human factor will still be necessary as we help fellow
humans navigate through these changes and work to more individualised planning.
We see an increased need for refined financial planning and coaching, and we derive purpose and energy from our life-changing work. We are acutely aware of the privilege of our amazing work: the privilege we have, every day, of supporting our clients through these challenges and planning how their wealth can be used to positively shape their lives.
<Foundation Family Wealth is an Authorised Financial Services Provider>
The dreaded three-letter word that everyone loathes. Tax.
Tax is money people pay to the government in exchange for public services. In
South Africa, the general feeling is that we are paying way too much for the
services we get.
Over the past decade, there have been several changes
to tax law, mainly increased rates passed on to the taxpayer. It is worth
noting that most of these changes impacted wealthy individuals. We list some of
the biggest changes below:
In the latest statistics from SARS, we noted that 67%
of personal income tax collected came from 16% of taxpayers that earn more than
R500 000 per year. The wealth taxes listed above exhausted the options the
revenue service had for taxing the wealthy and potentially led to the increased
VAT for everyone in 2019.
Tax revenue has grown year on year but at a declining rate. The graph below illustrates how tax revenue growth declined over the last 10 years. Tax compliance within South Africa has been on the decline and SARS has identified this as a major concern. With a new commissioner at SARS, it will be interesting to see how they tackle this in the coming years.
Source: Tax
Statistics 2019, National Treasury
In the past aggressive tax planning could be done
using structures such as trusts and retirement annuities. However, SARS has clamped down on these structures
and people abusing certain tax provisions.
These days it’s much harder to find a worthwhile tax break, but there
are still a few great tax planning tools you can use.
Tax–deductible savings
Contributions to a pension fund, provident fund or
retirement annuity are tax-deductible! You can contribute up to R350 000
per annum (or 27.5% of your salary). The best way to save for your retirement
would be through these structures.
Endowments offer significant tax
relief for high-income earners
If you have a long-term view and fall in the top
income tax bracket using an endowment to house investments can significantly
reduce tax and complexity. Within the
structure, you are taxed at 30% on income and 12% on capital gains. It’s taxed within the structure therefore all
withdrawals will be after tax.
Global endowments offer similar advantages for funds
externalised. We recommend using a global endowment rather than buying feeder
funds on local platforms. If you buy Rand denominated global (feeder) funds you
are taxed on both capital growth and Rand depreciation. In a global endowment,
the tax is much lower, and you are taxed only on capital growth.
Riskier assets are more tax-efficient
Having a large amount saved in cash is very tax
intensive. Any amount over R340 000 will attract tax at your marginal
rate. Investing in equities attracts capital gains tax or dividends tax and is much
more efficient from a tax standpoint. If you want to balance your risk rather
increase your cash and bond holdings within your retirement assets where there
are no taxes.
12J structures are an interesting option for high net worth families.
Investors with high tax bills due to bonuses, share incentives or the selling of a company can explore the option of a section 12J investment. Your contribution is tax-deductible in year one and taxed as a capital gain later. You can save as much as 27% in tax. You will, however, be locked into the investment for 5 years and exposed to the South African economy.
Tax-Free Savings accounts ideal as an education fund for young children
For younger investors, a tax-free savings account is
an option. Even though contributions are capped at R33 000 per year and
R500 000 over your lifetime, you can save a great deal of tax if you
invest for the long-term. This product is perfect for longer-term goals such as
children’s tertiary studies that are still a long way away.
As investors, we often try to limit the taxes paid and
look for products and opportunities that are less tax intensive. Although this
is a major part of investing, it is not the only thing to consider. A lot of
these options are limiting in what you can invest in. Choosing the correct
investment for your needs should be the primary driver when making these
decisions. Choosing the correct tax structure should be secondary.
Steve Forbes once said, “The politicians say we can’t afford a tax cut, maybe we can’t afford the politicians.”
Until such time, we should use what tax breaks are available.
<Foundation Family Wealth is an Authorised Financial Services Provider>
When babies come into the world, they are naked, vulnerable, all wrinkly and truth be told, ugly. Similarly, people typically leave the world vulnerable, wrinkly and yes, ugly. In a lifetime, we gather our possessions, properties, bank accounts, investments and all sorts of other links to the world around us. When we die, we die unaccompanied by people, possessions or our Facebook account.
Let that sink in for a moment. When you die, you leave all of that. What will your death say about your life and what will your family or friends feel as a result of what you leave? You won’t have the chance to explain or make excuses.
In 2019, the Foundation family lost too many people to death. We became acutely aware of the legacy of our friends’ and family’s death.
What will your death speak about? Will it say that you were clinging to your possessions as status symbols, hoarding for comfort or holding on to controlling your affairs even when you were no longer capable of doing so? Will it testify that you lived a chaotic life, leaving messy affairs to sort out or will it say that you lived a mindful life leaving little drama behind?
I know what I want my death to say. I want to leave a testimony that speaks of a mindful, light and elegant life. It’s how I plan to organise my affairs from now on. With death in mind.
My eldest
is learning to drive and I am becoming more conscious of my driving. Driving is
one of those things that you do without consciously thinking about when to look
in the rearview mirror. But I have now become aware of looking in the mirrors
again. Although looking in all your mirrors is essential for safe driving, the
most imperative action is to keep your eye on the road. Without that, driving is
deadly.
Yet, with money, most people manage their
affairs by looking backwards. They are essentially driving their money-vehicle
by looking in the rearview mirror most of the time. When you analyse your
spending, do you look backwards? In other words, do you look at where the money
disappeared to or do you look forward and steer the money to where it needs to
go? Do you make your investment decisions by looking at where you could have had
the best returns last year or even over the past five years?
The data
tells us that’s what most people do. Last year again, investors pulled billions
out from the share market in South Africa and poured it into money markets
presumably based on the poor return share investments showed in the years prior
to that. “Why take the risk in shares, when you can get more in cash,” I hear
them say. This kind of reactive behaviour is what happens all over the world. Worldwide,
people pull out of investments based on poor past returns just when those
investments return to favour and vice-versa. It’s why people who stay the course, or look
forward, get rewarded handsomely over the long-term for the risk they take in
the share market – more than one expects. Last year, the share market in South
Africa delivered about double the return of the money market, just when
investors left the share market in droves.
Looking in the rearview mirror is a bad strategy
in driving and in money. Beware! It’s always a good idea to keep your eyes on
the road.
