It's been a tough year… there have been some tough learnings

Let's not do this year again

This year, 2020 has been a year where the confidence of many people has been tested.

In Australia it started in January 2020 with;

• unseasonably extreme bushfires that burnt over 46 million acres (or 186,000 square kilometers) with devastating effects on life; and then
• major flooding over Queensland and NSW that saw a year's worth of rain delivered in just a few days, with devastating effects; and then
• the global coronavirus pandemic; (first declared a Public Health Emergency of International Concern in January 2020, and then a Pandemic in March 2020).

As we close out 2020, it's fair to say, ‘it's been a tough year’.

Read in this article

Living through a bad year - however you describe one

This year, 2020 we've spoken with hundreds of people and we asked them all the same question,

‘What's been tested the most this year in your life?’

Surprisingly this is what they didn't say.

They told us,

• it wasn’t the drain on their emergency fund, emergency fund,
• it wasn't deciding whether to take a home loan repayment holiday to keep their personal liquidity up
• it wasn't deciding how to manage the risk of reduced rental income because of COVID-19 affected tenants;
• it wasn't about deciding to increase their life insurance,
• it wasn't updating their super beneficiary nominations, and it wasn't 
• even getting their Power of Attorney documents sorted for themselves and their elderly parents.

Amazingly it wasn't even about the stress of home schooling children (although that was in the top 3).

Overwhelmingly the most common answer to our question, 'What part of your life has been tested the most in 2020?' was

'Our Confidence'

How do you understand the word 'Confidence'?

Confidence is the feeling or belief that you can have faith in or rely on someone or something, and our belief in our ability to figure things out.

This year people have had to face the unavoidable reality of living in an unpredictable world and question, whether they have the personal and practical skills needed to survive and find a way through.

Confidence is the key to being connected to our future - so we need to know how to look after our confidence.

If you're not convinced, try answering the four questions below when you’ve just had a grueling week, are facing a stressful financial event or don’t feel quite on the same page financially with your partner.

1. What's your future going to be like?
2. What are you prepared to do to get there?
3. What's the general strategy you're following to get there?
4. What is the general direction you need to be moving toward to get there?

That sense of ‘having to pause and think carefully about it first, before you can answer these questions, is you recognising that as our intensity of confidence changes, it also changes our sense of control and connection with our future.

Simply put: stuff regularly gets in the way of our feeling Confident

Your future is more a 'flexible general direction' than a sure and certain target

In an uncertain world where plans never quite work out exactly how we, well … well-planned, a flexible approach is our best defense.

• This means understanding that setbacks and challenges might push us all off-course at times; but we can still find our way through and over time continue back in the general direction we need to be going.

So how do you make sure you're continually heading towards (or course-correcting to) your future and your true north?

In large part, it's about how you treat your confidence.

Three ways to protect your confidence this coming year

1. Be deliberate about recognising and celebrating how far you and your family have come already this year.

Celebrate the small wins and achievements.

In the busyness of life and business (and soccer practice and after school ballet classes) we often forget to ‘celebrate the small wins’ and routinely acknowledge the progress we’re making this year, compared to last year.

Don't forget how far you’ve come already (and all the obstacles you've overcome)

Make a new family habit to celebrate the small wins and acknowledge you’ve kept your family safe and made it this far.

When you have a clearer appreciation of what you've overcome to date, and you're still working, moving and helping family and friends, (and you didn't go to the dark side even when cynical people wanted to pull you there), you increase the pulling power of a better future for you, to get you through the next challenge.

Give yourself the credit for how far you've come as a foundational element for better confidence.

2. Don't lose sight of the bigger future

When we lose confidence, we’re actually losing sight of the future.

Part of confidence is, we see ourselves in the future, in a good way.

When we detach from the future, our performance goes down as does our resilience. Having a plan in place about how to keep our family safe, attaches us to a better future.

• Having a savings goal in place (with the direct debit in play) attached us to a future.
• Having a plan for our friends and family attaches us to the future.
• Having a backup plan, just in case, for our family and business, attaches us to the future.
• Having a plan for our debt (to reduce it) attaches us to our future.

A plan without some consistent movement towards it, is just a wish; that becomes a frustration

3. Look for the small steps you can take now

Remember momentum develops confidence.

Taking the small steps (my assistant calls it ‘tweaking the small steps’) every day to move us forward in a good way, develops our confidence.

Small steps include things like;

• updating your super beneficiaries,
• rounding up your home loan repayment to the next $500 dollars to get ahead,
• tripling your credit card repayments every ‘even month’ (to remind you to pay down high interact debts faster),
• getting your life insurance connected to your Will,
• saving for your child's education
• Learning about your own Moneyisms
• Getting better at talking with your parents about money and not being a jerk about it

All these small steps, continue to move us forward to a better future.

Four traps to avoid as we all start 2021

If we understand that confidence is a key to success, it makes sense we need to learn how to protect what we cannot afford loose.

Here are four insights to help you better protect your confidence and your 2021.

1. Learn how to be slower to catastrophise.

Catastrophising is a way someone begins to believe that something is far worse than it actually is.

What initially may have started off as a relatively benign stressor event, seems to develop a life of its own and ‘runs away with itself.’

It can feel like an entire day, week (or life) is ruined by one small event that feels like a domino collapsing onto everything else,(like having to chase the family dog who snatched the strand of snags off the BBQ and by the time you catch him they’re half eaten, you’ve slipped over twice and skinned your knees, and well my mates will never want to eat off that BBQ again and, and, and … yes that was my weekend).

• Some things just are; and don't deserve the reverence of being promoted to the status of 'Omen Announcing your Impending Doom' (or public banishment from all future BBQs)

If you don't catch this runaway thought process and see it for what it is, you can quickly connect all negative events into one super-event and anticipate the ruin of all that is good and wholesome in the world.

Learn how to be slower to catastrophise, and if you can, just stop it

2. Learn how to pause and say, ‘I don't have enough information yet’.

Let's face it; there’s a lot of stuff happening in the world you can get emotional over.

Add to that, the real money matters are a deeply emotional issue, and you’ve got a cocktail for calamity - especially if you don't have a system of knowing how to talk yourself off the proverbial edge when you go there.

Once you get emotional about a decision, you're no longer making rational decisions

The risk of jumping in too soon (or too under-resourced, or under-aware) means you can set yourself up for an opinion that is difficult to change later, even when you need to change it.

• And when it comes to pushy sales people, Ponzi schemes, money scam transfers to a new love interest in Nigeria (that Nigerian Prince won't let up) or new and exciting ways to mis-use your self-managed super fund by emotionally rushing into a unique investment opportunity, it's probably worth pumping the brakes over.
• For our clients who have had to patiently listen to my soapbox rants, ‘hasten slowly’ is a warning I hope they remember most.

So, when you have a new idea, new love interest or something more complicated, great; learn, watch, take advice from someone outside your bubble, review, and hasten slowly.

You can also check out the government's SmartMoney Scamwatch.

3. Learn how to recognise loss aversion.

Nobody likes to find out they’ve lost money. (I’m at risk of a mild stroke when I find I forgot to pay off the credit card last month and ended up giving my hard earned money away in the form of credit card interest!)

Humans are not good at feeling good about losing stuff - especially money and a sense of personal control over our environment.

Some people will spend a dollar to make sure they don't lose a cent - and therein is another mindset that can attack our confidence

So people who feel particularly overwhelmed by events around them they cannot affect can seek to create a feeling of artificial control by dogged adherence to what can look like strange ideas and beliefs.

• Whether the earth is actually flat is not the real issue - feeling like an outsider and feeling like one doesn’t naturally belong or contribute to a bigger community, is made more bearable by joining the Flat Earth Society (a group of people who ‘feel the earth is flat’ so it must be) and then seek to convince the world that it’s, well ... flat.
• We see this defensive trait of needing to create a sense of control, also in people who have spent a fortune in a casual and sporadic DIY investment approach ‘stock picking’. Rather than facing the fact they're losing unusual amounts of money with their chaotic approach to investing when faced with a failing investment, they continue to let their emotions rule their investment decisions. The end result is they often end up trying to 'time the market', 'get a feel for the future' or decide they ‘can’t get out now because I’ll lose so much money.’ (yes the last one is strange but a recognised human behavior).

Not only are you hurt financially but also mentally and, emotionally: your confidence can also take a hit. Emotional investors end up losing massive amounts of money (and confidence) in unusual and sadly often preventable ways if only they were to recognise their crippling need to be seen as ‘right all the time’.

Unless you have a predetermined set of rules for how to invest your money in turbulent times and how you manage your emotions, an investment loss could do more damage to your confidence than the actual loss of money.

Pro Tip: This same emotional vulnerability is part of the selection criteria illegal Ponzi Scheme promoters use to find ‘the next overnight Millionaire in the making’. You can learn more about the warning signs at the government's Smart Money ScamWatch.

4. Share your learnings with others so they don't make similar mistakes (and you reduce your risk of repeating them).

Everything we know we’ve had to learn.

When people hide their mistakes, other people don't learn from them (whether that's our children or our close friends) and we’re at greater risk of repeating them ourselves.

• Admitting we’ve got it wrong, that we got swept up in emotions or we were following a crowd is hard to do.
• Not being honest and open with yourself, can inadvertently create a bubble (or echo chamber if you like) that exists to only reinforce our opinion, insulate us from different viewpoints, and further isolate us from a chance of learning something new and helpful.

For many people carried along by this now social media amplified phenomenon, their energy seems to go into protecting and justifying their initial response, rather than stopping and updating their learning and admitting they have a new reason to change their opinion.

This basic mindset is as applicable to investment promises of Super funds advertising as it is to political and religious observances.

Pro Tip: Be prepared to share your learnings with others so they don't make similar mistakes and you don't repeat them.

End of year suggestion

Facing 2021 after facing fires, floods and a global pandemic

Why not work on being more kind to others, more patient with your family and friends, and perhaps not taking yourself so seriously; remember to attach more value to learned experiences and celebrate the small steps that move us all towards better; whatever that looks like for you.

So here’s to moving towards a brighter future.

After all, we’ve made it this far, and we know how to learn new stuff, and we see the value in being connected to the right people.

2021 - You’ve got this.

Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses.  He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn.  Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.