Expectation Management

We all have to eat. To eat, we need money. To get money, we need jobs. There are not enough jobs. Once there were not enough people for the work that needed doing, and Governments had to impose hut taxes to force people into the economy. If you tax in cash, you need to be paid in cash to pay your tax. 

If we live hand-to-mouth, then we cannot survive without a source of income. Part of wealth is the capacity to have disruptions, bumps, and gaps in money flowing in. An ability to survive the winter. An ability to plant in the spring. If you treat people as in-the-now productive assets, then their quality of life is chained to the marriage of the supply of work and demand for that work. This filters through to how people build relationships and communities. 

The sad truth is that when you are young, it is about love and purpose. As you get older, it can be about the work that the person does and how they pack the dishwasher. Relationships come loaded with expectations. One of the key drivers of wellbeing is expectation management. The comparison between what you think should be, and what is. It is hard to manage expectations if we are at the limits of our spending.

Ability to Rest

Building an Engine

If you want to still the waves of money anxiety, you need to start with some fact finding. Where are you? For me that has changed in a pretty fundamental way. Quite often big life changes are a catalyst for relooking at your situation. I moved back to South Africa in December. That means thinking in Rands rather than Pounds. I spent the early part of my career getting my money jobs around the world. Building what I call an Engine. You don’t have to be the sole breadwinner. Your money can work too. Especially if you squeeze some space in between your hand and mouth. To create space, you need to have an idea of what you are spending. So for me, now... I have to wait for the dust to settle. As I adjust, the numbers are way bigger (thanks inflation!) than 13 years ago, and some of the basic ways things are done differ from up north. After a few months of paying attention, you can get an idea of the things you can expect. Then you can start to add space for the surprises. Then you can start building (or repairing) your Engine.

Mechanical Repair

 

First Listen

“Numbers to leave Numbers. Form to leave Form.” This is the way Josh Waitzkin describes his practice of embodied learning in chess and martial arts. Not caring about money can mean ignoring it. Which in turn lets it control you. Stilling the waves of money anxiety starts with paying attention to the rhythms. It can start with arbitrary rules and effort in areas you do not value. To get to the stage where you are in control, and move freely, there is awkward, uncomfortable, work to do. Get comfortable with discomfort. Many of our expenses have a pattern. We do not spend the same each month, but look at enough months and there tends to be a regular high and low. A range. There are also fixed expenses. Things we know in advance will come monthly or annually. Then there is the noise, the stuff we cannot control. But can plan for through building flexibility. If you get breathing space between the exhalation (spending) and inhalation (income), you can build a buffer for whatever life throws. Then you can build an Engine so you can gradually free yourself from being an earning machine. Increasing your capacity to say Yes, No, or not right now.

Inhale and Exhale

Stilling the waves of money anxiety starts with understanding where you are. Like meditation, thoughts will continue to come through your head. It is not a fight. You do not do meditation well or badly. There are no rankings or elimination rounds. When a thought comes into your head, it is the point to acknowledge it. Greet it. Politely let it pass. Then go back to your breathing. Financial Security is also about the inhalation (income) and exhalation (spending), and the relationship between the two. You want to breathe in slowly, and with control, and breathe out slowly, and with control. Spending has fixed parts and variable parts. If you keep a record, you can see some patterns. Even the variable parts have regular highs and lows. You can get a sense of the lung capacity needed. There will still be shocks, when spending is way higher than normal. For that, you need a buffer or support. To build that, always starts in the same place, for everyone. Where they are. Where you are. With a breath, and understanding where you are, is. So you can let it pass.

Building Lung Capacity

Building an Innings

I once unsuccessfully tried to explain cricket to a Scottish Music Teaching Colleague who came to watch me play. I didn’t touch the ball while fielding, and she didn’t understand what my role was. I told her not to worry, I was batting third and she would see me play in the next innings (meaning our turn to bat). After a huge opening partnership ended, I walked in, double-stepped, missed the ball, got stumped, and walked back to her to tell her I had no “further” role in the game. She, understandably, still didn’t understand why I mattered. To build an engine, you need to get control of the ins and outs. We have fixed expenses that come off every month/year. We have bumpy, but predictable expenses which vary between a high and low. We have annoying, but predictable maintenance costs that are erratic. Then we have the unpredictable storms we need to build a buffer for, or they knock us back to zero. If you keep going out, it is impossible to build a significant innings.

 

Bavuma became the first black cricketer to make a Test century for South Africa

Reality Check

There are four broad categories of investors in Asset Management Funds. Institutional, High-Net-Worth-Individuals (HNWI), Retail, and those who get left out because the economics are hard. Institutional investors are Pension Funds, Fund-of-Funds, Company Assets, Insurance Companies, Endowments (e.g. Universities), Charities and Governments. Investment Committees make the decision to invest on behalf of others. They pool the assets to reduce the costs. HNWI are rich people. They make their own decisions, or get an adviser. Retail Investors are non-professional but still have enough to invest that the expenses don’t completely swallow the growth. Not having money is expensive. Scale makes things cheaper. One of the hardest problems to crack is making investing accessible. Two companies I follow with interest working on this problem are Franc (www.franc.app) which aims to make investing affordable and social, and Meerkat (www.meerkat.co.za) which focuses on those who are in a hole of debt. Charting a path off debt reliance and providing cover for the clear and present emergencies that can make long term capital building a pleasant unicorn frolicking in another reality.

Schroedinger's Cash

Snapping Hand-to-Mouth income dependence requires stepping away from the edge. This is difficult, because the views are best when we push out as far as we can. Savings and Investment come in very different flavours. Two of them are “there, but not there”. That requires taming your inner toddler. A Buffer is an Emergency Fund of 3-6 months’ worth of expenses. Cash that is in your account, but not for normal spending. It is there for smoothing. When unexpected expenses arise, or income disappears unexpectedly. Any spending requires balancing repair work. An Engine is a source of passive income. Powering a stream of income that lessens the burden on your hands. But you can’t spend the Engine. The Engine is working. Spending your Engine is firing it. You can spend some of what the Engine produces. If you spend less than it produces, it will grow. The third type of Savings & Investment is easier. Saving *for* something. You can visualise the reward. Stepping away from the edge requires developing the ability to value what you can’t see.

There, but not there

Basic Flexibility

One noticeable difference as a Soutie is how get togethers are organised in my UK bubble relative to my SA bubble. Down South… Nice weather? Braai? Everyone magically arrives with meat and drinks. Up North… enter the logistic nightmare of matching up calendars. Add a month to when the event can occur for every additional person invited. Planning too far ahead means full calendars swallow you whole. Inflexibility is contagious. Financial Flexibility is similar. The more fixed, recurring expenses you have, the less you can adapt and adjust to the weather. If you spend too far ahead. More isn’t the core goal of Financial Security. The Foundation should be very aware of the expenses over which you don’t have control. Which are short-term, regular, and insistent. Again, the lack of flexibility to cover the basics when storms hit is contagious. If we don’t all have the basics covered, it becomes difficult to see people.

All Fall Down

Building Buffers creates the ability to press pause. When you are living on the edge, drawing breathe is difficult because there are too many moving parts. Life carries on, and you are forced to carry on with it. Fixed, recurring expenses arise even if you want to “do nothing”. Waking up in the morning has a price tag. “It takes all the running you can do, to keep in the same place” says the Red Queen. In Yoga, Tapas is the practice of austerity. The “warmth, heat, or fire” of doing something difficult or extra. We possibly get holidays wrong. A few weeks a year of “better”. If we took Tapasdays, we could see, and get used to, just how little it is possible to be okay with. To embrace Basic. To discover what “fixed expenses” are truly necessary. To make sure everyone has those basics. Then, in those moments when everything needs to stop for a moment, we won’t all fall down.

A-tishoo! A-tishoo!