Sunél's Blog | Feeling secure is not about a number….or is it?

Sunél Veldtman, | 01 March 2024

In a recent Behaviour Gap newsletter, Carl Richards observed that he’s encountered many people who possess more than enough money yet feel insecure, as well as those with almost nothing who feel totally secure. The natural conclusion to this, that a feeling of security cannot be generated by a number, is one I agree with. Yet so many link feeling secure to a number. For some, this number is R10, for others R10 million, for others R100 million, or even R1 billion. Often, as people move up the wealth ladder, the goalposts shift, and the feeling of security remains elusive.

This elusive insecurity is one reason why many delay retirement, the period when they stop receiving a regular income from work and shift to living off their savings. This hesitation can be linked to a fear that they may not have enough to cover all eventualities. The truth is, we can never be 100% sure that we will be financially secure through all possible outcomes. Living on savings always involves risk.

However, feeling insecure can also stem from a failure to understand reasonable risk. It reminds me of a retirement workshop participant who asked me, “Can you know whether you have enough retirement capital?”  The question was loaded with anxiety. I later learnt that the attendee had taken early retirement in their late forties when the stress of corporate politics led to burnout. A few years into this retirement, they were living a lifestyle of extreme frugality, driven by the fear of exhausting their capital.

At a follow-up appointment, we calculated that they had more than sufficient capital to live a reasonably comfortable life throughout retirement. By using conservative assumptions, we showed them that they could relax their tight hold on their money, and enjoy their life just a little more. They were visibly relieved and at each subsequent follow-up meeting looked less anxious about their money. Although they remained disciplined, they were able to use our rational, but conservative, analysis to change the way they felt about their security.

In contrast, I met a couple who had used their ample corporate salary to secure massive debt to build a property portfolio. It was clear that even normal cyclical interest rate increases could derail their plan. One partner already suffered health problems due to the stress of the high bond payments. It was clear they felt highly insecure. Yet they could not be convinced to change the plan because of the lure of big returns and the glamourous locations of their properties. Sadly, it did not end well for them.

The point I make here is that feelings of security can be promoted by sound financial habits and rational analysis. It is difficult to foster feelings of security when you operate in an information vacuum or work with vague numbers. It is nearly impossible to foster feelings of security when you are highly indebted or chase high-stakes investment returns.

We should be concerned about the source of insecurity. If, despite sound analysis and strict financial habits, feelings of insecurity persist, it is likely linked to financial trauma, often from early childhood. Therapeutic intervention and deep work may be necessary to overcome these feelings. If insecurity is the result of poor financial habits, vague information or a lack of rational analysis, more practical interventions can vastly improve how you feel about your money.

Either way, we can do something if we have feelings of insecurity about money. We can either work towards better habits and understanding, or do the emotional work to identify and unpack those feelings; or both. Feeling secure requires work.

I remind you of our annual retirement workshop in Johannesburg. This workshop provides the opportunity to reflect on your feelings, as well as figures, to set you up for a secure retirement.

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Kind regards,