THE LIFE AND WEALTH PENDULUM
Disrupt the alignment of the pendulums, and chaos looms.
We are all familiar with the rhythmic swinging of the balls of a pendulum as displayed in Newton’s Cradle where balls are attached by a thin wire to a central point on a frame. Swing one ball, and the centre balls remain static while the outer balls move back and forth. The energy of the swinging ball transfers through the centre balls to the outer ball, sending it flying, while the transferring ball comes to a complete standstill, only to fly in the opposite direction once the other oscillating ball returns to its original position.
Increase the number of swinging balls and the same number of balls fly at the opposite side after contact. Swinging one of the seemingly static centre balls perpendicular to the line of balls unleashes chaos.
The factors influencing our wealth and lives behave like a pendulum in many ways. Both external and internal factors influence our lives. Emotional trauma, physical health, market volatility, capital losses, the fear of insufficient funds for retirement, the loss of a loved one, the news of a terminal illness, divorce, retirement, the list is long.
For life and wealth to exist in harmony, our pendulum must be perfectly in sync. The greater the number of balls that move out of sync, the more challenges we will encounter.
Some readers enjoy the “non-financial” aspects of articles while others have point blankly told me that they do not like the “psychological stuff” that I sometimes write about. While I respect this, we cannot ignore the impact and importance of “the other stuff” on our lives and wealth. Often, clients do not realise what impact the “other stuff” can have on their lives and wealth until reality comes knocking on the door …
After all, it is usually the “other stuff” that sends our emotions into a tizz. As we know by now, financial decisions and most others are primarily driven by emotions. The more we can control our emotional state, the better the outcome will be for our finances and our lives.
Interestingly, when two pendulums collide, even if they are on different trajectories, the resultant reaction and the pattern followed by the respective balls after the collision are repetitive. There is far more in common between financial behaviour and physics than we realise. In financial behaviour, if we persist in making the same mistakes, we cannot expect different outcomes. Repeating mistakes leads to a downward spiral into financial doom until you are financially ruined.
When reading this article, keep balance in mind. Balance and focus will determine your level of wealth and the quality of your life. Focusing on the wrong thing or ignoring it completely may lead to misery.
My pendulums have no particular order of importance, but since most articles in this publication revolve around financial aspects, let’s start with the financial pendulum.
The financial pendulum
When we talk to clients about money and wealth, there are always a few common questions and statements that pop up:
How much money do I need to retire?
What is the average income pensioners draw?
More money means more happiness.
Money can solve all my problems.
Cash is king, I don’t invest in shares.
How much is enough?
Only you can determine how much money you need to retire. The capital required will be directly related to the monthly income you need. One is a function of the other.
Once you have established your monthly income needs, the capital amount and investment strategies can be arranged to ensure you meet those needs. The more conservatively you invest, the more you will need to set aside each month, and the larger sum you will need to guarantee you have sufficient capital to secure future income.
Early conservatism leads to long-term cash flow constraints. Investing becomes somewhat pointless if your investment returns cannot stay ahead of inflation. After-tax cash can only outperform inflation under extreme conditions that usually follow high inflation. Although cash has its place in an overall portfolio, long-term investing in cash does not make sense if the interest is taxable.
Having peace of mind that you are investing wisely by consistently setting aside sufficient amounts in respectable investment products and portfolios will not only bring satisfaction but also serve as the foundation of your financial well-being. The earlier you start, the better.
It is crucial to collaborate with someone or acquire enough knowledge to manage your finances yourself. Ensure that you stay on course to achieve those long-term goals.
How much is enough? You decide. It all depends on the life you wish to lead, how much you are willing to pay for your quality of life, and how much effort you are prepared to invest in genuinely living it. However, be cautious not to let the pursuit of wealth become the dominant factor in your life.
Consider that among the 10 wealthiest people in the world, there have been 13 divorces. This busts the myth that wealth can buy happiness. The race to riches also plays havoc with the time and relationships pendulums, which I will cover later.
I have clients who are retired, drawing R 25 000 per month, and are content with their lives. They spend time hiking, pursuing hobbies and interests, and taking their grandchildren for walks on the beach. They reside locally and understand the limitations of their wealth, accepting it.
On the other hand, I have clients who require an income of more than R 1 million per year and still need to make ad hoc withdrawals from their investments throughout the year. Their lifestyle demands international travel to visit children living abroad and overseas holidays. They enjoy frequent visits to popular restaurants and replace their vehicles every three to four years.
They own holiday homes, which they refuse to rent out, incurring high maintenance costs and levies. But this is their choice. They understand the impact on their capital. Some can afford it, while others cannot.
One of the most crucial calculations to get right is determining how much income is possible from your available capital and, vice versa, how much capital you will require to fund your required future retirement income. If you get this wrong, you will have to readjust your expectations and ruffle your pendulum.
The time and relationships pendulums
Time is the only currency you spend without ever knowing your balance. Use it wisely …
My pendulums work quite often in pairs. This is not necessarily in collaborative pairs but often in conflicting pairs, as in the case of time and relationships.
In the pursuit of wealth and, at times, fame, relationships often become the casualties. We frequently hear executives lament the time spent away from home, missing children’s sports days, awards ceremonies, and significant portions of their children’s schooling. Not being present for anniversaries, parents’ birthdays, and even the funerals of loved ones due to being too busy or abroad on business trips, exerts strain on relationships at various levels.
Unfortunately, the cost of this becomes evident later in life when one realises that expensive gifts and luxuries cannot substitute for personal connections with loved ones. This reality becomes even more pronounced when a child is lost to death. In most cases, parents would be willing to forfeit a substantial portion of their wealth to reclaim even a moment of time with a cherished one, if that were possible.
If you want to retire with the companionship and support of loved ones, don’t neglect them. Why will they want to spend time with you in your old age when you weren’t there for them during their forming years?
I recently read an “other stuff” book in which the author discussed a discussion with a friend. The author asked the friend how often he saw his 75-year-old father. When the friend commented, “About once per year since he lives far away,” the author pointed out and asked if the friend realised that he would probably only see his father ten more times before he died … a rude awakening comment but a realistic one.
Don’t let the time pendulum send your relationship pendulum out of sync … Spend your time wisely. Don’t be the one who stands at the grave of a loved one and, through tears, says, “If only I had spent more time with you”.
The physical and health pendulums
Depending on your individual circumstances, this may involve one or both pendulums, yet there is a strong connection between physical activity and health. Regardless of your age or physical condition, maintaining a healthy lifestyle through proper nutrition and exercise is essential for ensuring successful and positive ageing.
We are all growing older, and we will inevitably face ailments along this journey. After the age of 40, our natural path is that we will lose muscle mass and strength progressively more as we age. Although we cannot prevent this, we can slow down the process, ensuring a more active and participating retirement. We have a choice and can influence how this path is shaped, regardless of our circumstances.
We know that the one future cost that is not only unknown but will also be one of the biggest expenses for most retirees is medical expenses. By taking care of your health and fitness, you will not only cultivate a more positive mindset but also achieve healthier finances due to the lower medical costs associated with following a healthy lifestyle.
The same applies to our mental state and cognitive abilities. Dementia and other cognitive challenges are prevalent among the elderly. In this scenario, not much can be done to reverse or even prevent the inevitable, but we can plan how to manage the situation when a loved one loses their ability to make their own financial and life decisions.
Obtain the support team’s backing (family, home carers, medical support, etc.) and agree on the way forward. Plan, budget, and reach a consensus. Agree on timelines and triggers. It is also important to support and consider the pressure and psychological impact this will have on loved ones. Witnessing a parent or a sibling gradually lose their cognitive ability is challenging, and one must not forget the effect it has on those affected. They may very well also need support.
Change the trajectory of these balls, and the financial and mental/psychological pendulums get disrupted.
Mental/psychological pendulum
Throughout our lives, we encounter various psychological stages, each accompanied by its own challenges and demands. The mental and psychological pendulums swing most actively during the different transitions we experience in life, such as leaving home, which is traumatic for both parent and child (especially when children move abroad), divorce, the death of a loved one, retirement, a diagnosis of a serious illness, or even the loss of a pet.
Different individuals have different triggers, and what may appear trivial to some can be traumatic for others.
This pendulum often leads to procrastination. Not addressing the challenge at hand can create significant disruption for all the other pendulum balls.
When we consult with clients in these situations, we focus on two key points of discussion. Firstly, concentrate on what you can control and try to disregard what you cannot. This sounds much easier than it is, but finding a way to navigate your challenge, whether by resolving it or developing an acceptable alternative, leads to a far more positive outcome than procrastinating and stressing over what cannot be changed.
Secondly, ensure the facts are accurate. We often find that the initial reaction to bad news tends to assume a far worse scenario than what was originally anticipated, but once all the facts are gathered, analysed, and solutions are considered, the reality is frequently not nearly as dire as first thought.
I am always amazed by the endurance and “vasbyt” of many people with serious ailments who often have limited time left. The same applies to amputees and individuals with spinal injuries who suffered life-changing injuries or illnesses. Their positive outlook and mindset are an inspiration. They accept their challenges head-on, and more often than not, they are grateful for the time they have had and for the time they have left. Try using these individuals as a yardstick when things aren’t always going your way.
I often reflect on the performance from America’s Got Talent, where a young girl known as “Nightbirde” performed and shared her story. She received a golden buzzer for her original song It’s Okay. Nightbirde battled terminal cancer, yet her approach and outlook served as a tremendous inspiration. She withdrew from the competition due to her deteriorating condition, but her legacy endures because of her attitude and perspective on life. She passed away shortly after the competition at the age of 31.
During a post-performance interview, she remarked that one cannot wait for life to become easier before deciding to be happy. In other interviews, she stated that her positive outlook stems from her 2% chance of survival and that 2% felt significantly more hopeful than 0%.
If you seek inspiration, I encourage you to Google Nightbirde, listen to her original song, and see her positive attitude in the face of adversity.
I hope you find a way to synchronise your financial and life pendulum towards a fulfilling existence, regardless of what that looks like for you.
Take care and keep your life and finances in balance.
