Expat Tax: 10 Symptoms You Have Chicken Little Syndrome, 3 Steps for Curing It

Nick Hodges, CPA/PFS, MBA, CFP

We talk with folks everyday who are deeply worried about the future. As we listen, we hear fear on everyone's lips. As each question repeats, the level of fear rises, until the pitch drowns out all reasonable thought and historic memory.

What about America? What about the dollar? What about my freedoms and privacy? What about Social Security? What about my retirement?
     Is the sky really going to fall?

My neighbor says, "Grow your own food and stock up on ammunition."
My barber says, "Gold is the ONLY standard, always has been – invest in Gold."
I hear on the news, "The American dollar is on the verge of collapse."
The political pundits say, "Your standard of living will soon be reduced to that of a third world country. There will be rioting in the streets."
Everyone that seems to care about this country is standing around wringing their hands with worry… No one seems to know what to do.
     Is the sky going to fall soon?

I don't have the nest egg for retirement I thought I would because of stock market declines.
I am upside down in my home mortgage.
I have investments that I don't understand.
I have fears that everything I've worked for will collapse.
I worry that I will suffer additional financial ruin if things worsen.
     Is the sky already falling?

I can't tell what I don't know.
I don't really know what I fear; I just know that I'm afraid.
I can't tell the fiction from the facts.
I don't know who to trust.
     I'm afraid the sky is falling, and I don't know what to do!

If you find your mind circulating these kinds of questions and concerns, you are likely experiencing what we call the Chicken Little Syndrome. Remember that childhood story about Henny Penny, a chicken that was hit in the head by a falling acorn? Because Henny Penny did not understand what happened, she was convinced that the sky was falling and the world was coming to an end. Henny Penny's fear was so real that she convinced others that disaster was imminent. In the end, Foxy Loxy eats Henny Penny because she is too distracted by her fears to recognize the real danger at hand.

FEAR causes smart individuals to make emotional and hasty financial decisions that most often result in permanent damage to their finances.

How do you know you're suffering the Chicken Little Syndrome and making fear-based decisions? Here are some of the KEY symptoms:

1. You sell (or purchase) investments or assets without considering the tax ramifications.
2. You cash out investments when the market is down.
3. You (maybe) buy back in when the market is up.
4. You make financial decisions based on the sales materials.
5. You purchase investments or asset structures that you're not familiar with.
6. You move assets into markets that are not regulated, or are less regulated than U.S. markets.
7. You succumb to sales timing tactics.
8. You buy assets that cost more than the tax benefit you will receive.
9. You trust the news media more than you trust your financial advisor.
10. You repeat worries, concerns, and advice of well-meaning, but uninformed friends and family to others.

Cure Chicken Little Syndrome with education, preparation, and agility.

EDUCATION
Education is really about developing discernment: knowing enough to know the difference between fact and fiction, knowing enough to know where the real dangers lie. Fear-based education filters broad information to emphasize only what reinforces the myths, fears, and scare tactics. Remember that these resources, while providing SOME information, are created to manipulate you, not educate you:

• The nightly news is written to sell advertising to sponsors that want to sell you something.
• Sales materials are created to motivate you to buy a product – their product.
• Salesmen communicate to generate a commission or fee for convincing you they're right.
• Internet resources are distributed to sell you subscriptions or memberships.

Genuine education puts all the information and sound bites into context in a balanced, historical, and comprehensive way. This is not something that you will be able to construct all on your own. What you need instead, is an advisor you can trust that brings these competencies to the table:

• Has experience keeping clients OUT of tax and financial trouble.
• Has professionally survived multiple up/down markets.
• Coaches with balanced, historical, and comprehensive FACTS.
• Educates you on ALL your options and choices.
• Puts YOUR needs and concerns FIRST.
• Points out the dangers AND the opportunities.
• Communicates with you in terms you UNDERSTAND.

PREPARATION
Change is always frightening. Our world is poised on the edge of change. The cure for fear of change is to get actively involved in the process of change. You can do this by preparing your world for change. Proper preparation will help you:

• Understand all the moving parts of your current situation.
• Define what you want for YOUR future.
• Create a flexible plan for the future using proven solutions you understand.

AGILITY
Most people fail to take their education and preparation to this final stage. In fact, many financial advisors fail to define with their clients, these fundamental aspects of their financial decisions. Understanding how and when your financial plan needs to change will provide you with the confidence to face the future.

• Understand which macro-economic changes will negate your current financial plans.
• Know the various exit strategies of each of your financial decisions.
• Create a clear set of economic events that will trigger those exit strategies.

Remember, fear-based decisions made on incomplete (or unbalanced) information produce unexpected results, injecting unnecessary change into an already uncertain world. Hasty decisions made before assessing the consequences, often produce irreversible tax disasters more destructive than your fears about the future. Emotional, knee-jerk decisions may lock you into financial situations over which you have even LESS control than you do now.

Today, take your first step to cure Chicken Little Syndrome, find an objective, knowledgeable tax and financial professional that will work WITH you to discern the facts, prepare a plan, and keep you on track, as you adjust your financial plans in the face of change.

These kinds of conversations are all part of our overall services to our clients at NCH Tax & Wealth Advisors. Please contact our office if you have any questions: (866) 729-6425. We are happy to help provide the direction you need.

Please feel free to pass this along to anyone you think might benefit from this information. We appreciate all referrals.

Your Money Concepts' financial advisor is here to help. We are happy to work with you and your other professional advisors to help insure you the greatest diversity of opportunities in your financial planning. If your advisor can be of any help, please give him or her a call.