Financial Autonomy

What are the secrets to a fun and interesting working life? Nepal, teaching, and pursuing your passion. That's what we discuss this week with Jim Smith who shares how he's been able to achieve this much-desired outcome. These days Jim's focus is on building a tourism business that helps Australian's and especially students, experience life in Nepal, whilst also helping the local Nepalese people through paying fair wages for work done - such as guiding, and supporting several orphanages. "And at that point in time, it was more a question about what you like doing and what you want to do with your life more than what's going to pay you the most money" – Jim Smith Jim's website is www.Focustours.net SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY How many thousands of dollars do you have parked on the street or in the garage losing money every day? It's a question I've been focused on for our household recently. My wife and I each have a car, plus there is a 12 seater minibus for my wife's tourism business that we could use for a personal trip in a pinch. I reckon we've got about $70,000 of vehicles sitting on the street, slowly degrading, and all the while costing us money in servicing, petrol, tyres, insurance, and registration. Surely there's a financially smarter way of getting around! I want to share the research I've done on a few alternatives to owning a vehicle and a little about my journey with car ownership.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY We speak Vanessa Wiltshire, a Gen-X/Y 'tree changer', living in Heathcote, Victoria. Three years ago, she and her husband made the leap from suburban Melbourne to Heathcote in rural Victoria. In our chat Vanessa explains: - How to know if a "tree change" is right for you. - Escaping a career that makes you unhappy and into something that makes you smile (and pays the bills) - The top things to look out for (that most tree changers won't tell you) - Knowing where the GOOD jobs are and how to find them (tapping hidden job market). Check out Vanessa's website: www.sparkrural.com.au

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Welcome back to another episode in our financial history series. We started with Tulip Mania and the madness of crowds. Then we reviewed the Great Depression and how the lessons learnt continue to have impacts today. One thread of the Great Depression story was the Gold Standard, which we explored in episode 109. An understanding of the Gold Standard is vital to anyone attempting to think through the potential global impacts of Crypto currencies. This week we look at another moment in financial history – the hyperinflation experienced in Germany during, and especially after, the First World War. It was this experience that made countries so reticent to drop the Gold Standard during the Great Depression. We're also going to explore why nations today could be planting the seeds for a repeat of this financial disaster.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Peter Stanhope, co-founder of Gig Super shares some of the challenges faced by self-employed people in our financial system. If you are self-employed, or planning on making a move to self-employment – this one's for you.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Welcome back to the third episode in our financial history series. Last episode we looked at the Great Depression and why it still matters today. Before that we visited Amsterdam in the 1630's to learn about Tulip Mania. Today we're going to be exploring the Gold Standard, something that cropped up during the Great Depression piece. Indeed the Gold Standard is often pointed to as one of the key causes of the Great Depression, and certainly contributed to its depth and duration. Like the previous episodes, we'll be giving you the essential facts and narrative around this important historical period, but what I hope you'll especially get value from is the exploration of how the concept of the Gold Standard is being re-imagined today in the Crypto Currency world. So hold onto your 1920's hats, and let's dive into – The Gold Standard – What was it and what does it have to do Crypto currencies?

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Today we're continuing to explore significant moments in financial history. In particular I'm aiming to arm you with a basic understanding of what the event was all about, and then importantly, why it's of relevance today. Last week we looked at Tulip Mania in the Netherlands in the 1600's. Today we skip forward several centuries to the Great Depression of the late 1920's and 1930's. The Great Depression remains the longest and most serve economic collapse in modern history. There is some variation across countries, but it is generally considered to have lasted 10 years, from 1929 to 1939, though for many countries directly impacted by World War2, their struggles were further prolonged.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY You know how sometimes in the media or perhaps in a social setting, a self-declared expert will make reference to some historical event that they know full well most of us know little about, but they say it in such a way as to imply you'd be an imbecile if you weren't aware of this world altering event. This is the first in a series of episodes in which we're going to explore some of these often quoted financial events – the Great Depression, Hyperinflation in Germany, and this week's episode – Tulip Mania. I'll be keeping things short and sharp, as usual, but armed with the knowledge you've absorbed through these episodes, next time someone attempts to assert intellectual superiority, you can get right back in their face – "yes, I did know that", you can say, "but actually the real tragedy was the way…". Put them right back in their place. From the early 1600's to the 1720's, the Netherlands was the wealthiest country in the world. This was largely the result of a fair judicial system which meant that merchants from other parts of Europe, who were regularly imposed upon by their Kings to fund egotistical wars, (with imprisonment the outcome of non-compliance), where attracted to Amsterdam as a place where they could focus on what they did best - making money - relatively unimpeded.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY It's so easy to just float along. If it ain't broke don't fix it is not just a good approach to raising toddlers, it can be a whole of life game plan. But there will come a day when you're sick of going sideways. When rinse and repeat just won't cut it anymore. Whether it be career progress, building wealth, or physical health and fitness, one day you'll wake up and decide it's time for a change - time to move forward. Today's episode provides a simple 5 step road map for how to achieve progress in making the change that you seek. For an audio blog whose focus is all about gaining choice, I'm not sure how we made it to 106 episodes without exploring this already. Better late than never I guess.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Not your usual Financial Autonomy podcast. I was recently invited to co-host the Wheel of Sport podcast when they were working on the theme of Money in Sport. I had a ton of fun with this one – I hope you enjoy it too.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY In this week's episode I speak with author Annie Raser-Rowland about her book The Art of Frugal Hedonism. Annie shares her tips on living a life of maximum happiness and fulfilment, whilst side-stepping some of the limiting societal expectations that we all face. Annie certainly embodies our theme of Gaining Choice, and I'm sure there are ideas here that you can draw plenty from. Link: https://www.frugalhedonism.com/

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY The great Australian dream of owning a home once drove a fairly predictable housing pattern - Aussies would rent for a little while, save for a deposit then dive into home ownership at the first opportunity. Housing status spoke volumes. Homeowners were successful while renters were either young or couldn't get it together financially. How times have changed. Rising house prices and a need for lifestyle flexibility now have many questioning if they want a huge mortgage or if they're simply better off as tenants. Let's take a look at how you might decide if renting or buying is the right option for you.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Online freelancing platforms can help you obtain freelancing work, or hire people to do tasks where you either lack the expertise or the time. In this interview, Sarah Tang from Freelancer.com shares the inside tips on how to get the most out of these hugely powerful tools.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY With technology changing our world so rapidly, the chances of us entering the paid workforce in one role, and that role then seeing us through until retirement 40+ years latter would seem quite remote. And even if this were possible, is it what you would really want? In this post we're going to explore some key steps you could take to execute a successful career change.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY EPISODE 100!!!! Thanks for joining us for another Financial Autonomy episode. We've got a bit of a change in the normal routine today, because today is Episode 100 and I don't want to pass through that milestone without doing something a little bit special. I've asked our Gaining Choice subscribers for their top Financial Autonomy questions. I've picked out five and in today's episode I'll take you through the answers. Let's jump into episode 100.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Throughout most of human history, the only time you retired was when you died. Retirement as we now experience it is a reasonably recent phenomenon. It's an invention of the 20th century and it's worthwhile questioning whether it will continue through the 21st century, at least in the format we currently think of. When the retirement age of 65 was set, back in the early 1900's, it was assumed you only had 2 or 3 more years left until you were in the grave. But as we live longer and longer, will the current version of retirement continue to be feasible for the bulk of the population? Perhaps more importantly, will it be desirable?

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY In this episode, we explore how the fantastic journey of Kim from being an employee to a self business starter The experiences and knowledge Kim shares in this episode: How he turned a small side business into his full-time gig. Planning and Preparedness is important in transitioning from employee to self-employed Seeking mentorship for guidance and feedback to fast track your way to success. Sales is the lifeblood of any business.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Writer David Rae, in a great article in Forbes magazine, identified the disconnect between the early retirement through extreme frugality crowd, and the mainstream of society who want to enjoy life without financial constraints. He identified 8 levels of financial freedom. A ladder that we progress along to gain more and more choice and freedom. Given this aligns so well with our Financial Autonomy mission, I thought they were worthy of exploration.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY The starting point must be clarity around your goals. Most importantly, your goals determine your investment time frame. They also dictate whether your investment should have as a priority growth, or income. If your goal is having the option to retire in 15 years time, then you can invest in assets that experience high levels of volatility. You could also hold assets that are fairly illiquid – that is, not quickly sellable. Some examples. On the volatility side, as I write this piece, the Asian Share index is the best performer over the past 5 years. It is however also more volatile than the developed markets such as the US and Australia. If you wanted maximum returns 5 years ago, you got the best result through buying the Asian share index. But you only enjoyed those gains if you stuck to your investment and rode out the significant ups and downs. Now with a 15 year time frame, you can do that. If your time frame was 3 years though, an investment in the Asian share index was likely to lead to a disappointing investment outcome.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Freelancing offers flexibility. It's a way to fit in the necessity of generating an income, with the other things you want to achieve in life. Recently I heard someone reflect on the standard 9 to 5 working day. It came about in the industrial era to align with day light hours. The factories had little or poor lighting, and so they needed the workers to be there during the hours when the natural light streaming in through the windows was at its best. Given the wonders of electricity mean that most of us are no longer tied to having to work when the sun shines, why persist with this ridged allocation of our daily hours?

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY When it comes to gaining choice, there's few more powerful enablers than increased skills. Financial Autonomy is about gaining control and choice over your life – not enduring a working life that is unfulfilling. It's about getting the most out of the one precious life that we are allotted. In this post, we're going to look how an investment in your education, could help you gain that choice and control. What brings each of us happiness differs, but what is consistent is that in the modern world, money is a necessity. And whilst in the long term it may be possible to generate the money you need from accumulated wealth – for example dividends and rent from tenants – for most of our adult lives, the money equation will be solved through us doing something that someone else values, and getting paid for it.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY For many people, thinking about superannuation is the go-to cure for insomnia. This isn't all bad, in that so long as your superannuation foundations are set-up right, it is something that needs to be left alone to grow – too much fiddling around can be extremely costly. But ignoring your superannuation savings completely is a mistake. Your superannuation savings are likely to be either your largest or second largest financial assets, depending on house price movements. So let's take a quick run through the things that are important to know about your super, to ensure this important asset is set to deliver you the best financial outcome possible.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Have you ever surfed the internet and seen something like "don't pay thousands of dollars to a dentist to fix that sore tooth, download my free ebook – do it yourself dentistry, for everything that you need to know"? Or how about "people who tell you you need a qualified electrician to hook up your solar panels are just trying to steal your money. Take my 3 part mini course and do it yourself. I haven't burnt down my house, and neither will you!" Hopefully not, though on the internet, perhaps I'm being optimistic.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY In this episode, we explore how you can convert the knowledge you already possess into dollars in your pocket. The experiences and knowledge Ronan shares in this episode: How mastermind group works Taking advantage of your Return of Intellect How to unleash your own Return of Intellect Turning your experiences into profit.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY As we've explored in past episodes, a Side Hustle can be the key that unlocks Financial Autonomy for you. That little side business that brings in some extra cash, turbo charges your learning, and has the potential to enable a total career reinvention. An extra $10k earned through your Side Hustle and paid off your mortgage each year, could see you debt free years earlier than previously thought possible. But how to get started, and I guess how to get started in a way that maximises your likelihood of success? Well, I've scoured the internet for various business plan templates, and thought about models I've used in the past. My experience is that a 40 page business plan is of no value to anyone, and is definitely not a good use of your Side Hustle creation time. A useful business plan should be on a single page. I've created a template specifically for Side Hustles, which I'll be stepping you through in today's post.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY A key change in the working environment that has enabled greater choice, has been the explosion of the freelance economy and the rise of the solopreneur. But for all the positives that this change brings, primarily around flexibility, there is at least one potential downside – loneliness. So in this post, we're going to explore this issue and consider some ideas you might like to implement to combat the loneliness demon and ensure your freelancing, delivers a holistic, fulfilled life.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY A discussion on property is well overdue here at Financial Autonomy. So I've roped in Buyers Advocate Emily Wallace to share with us her expert tips and advice for buying a property in Australia. She's lived in 23 properties in 25 years. Property investment is well and truly in her blood. The experiences and knowledge Emily shares in this episode: -How she became a buyers advocate (and what a buyers advocate does). -Advice on how to purchase your first property. -The sometimes hidden costs of buying a property. -Potential mistakes of people make when buying a property - and how to avoid them.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY According to Forbes magazine "the world has changed dramatically in the past several decades with more and more of a company's value attached not to factories, machines, or hard assets but rather the companies' ideas, processes, and designs – their intellectual property." Intellectual property (IP) can take a range of forms – writing, music, design, inventions, or software are all examples. The digitisation of the world has meant that the ability to convert these IP assets into money has exploded. In this weeks episode, we explore how you could use intellectual property assets to achieve financial independence.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY My parents, like many of their peers, bought a caravan shortly after retiring. Each winter they escape a cold Melbourne, and head north, to explore the vastness of our nation and enjoy the agreeable climate on offer. They're onto their second caravan now, and whilst their preference has evolved to staying in the one spot for an extended period rather than travel around, the winter escape remains a permanent fixture in their yearly calendar. This type of retirement, frequently referred to as the Grey Nomad lifestyle, is something of the default for Australians. Our superannuation and age pension system point us towards an income producing life that ends around 65 years of age, give or take a few years, followed by hopefully 20+ years of leisure. And whilst this model brings happiness to many people, here at Financial Autonomy, our mission is to share with you potential alternatives. Surely there's a way to live a full and interesting life now, not put things like travel and exploration off until our best years are behind us. I can't think of a single component of our complex lives where there is but one path. Certainly there might be one path that is the most popular, the most trodden. And it will be well lit to make those approaching it feel like they'd be crazy to do anything else. But there are always alternatives. Always.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Debt is like the leg irons worn by convicts – it holds you back from gaining choice in life, from achieving Financial Autonomy. Yet if we aspire to own a home, then in all likelihood we're going to need to take out a very significant loan – a home loan. So given the conflict between: Our goal here at Financial Autonomy is to help you gain choice in life, and The majority of you will at some point take on a home loan, which potentially limits your choices in life it makes sense to spend some time exploring how you can get this debt off your back as soon as possible. In this post we'll run through the key strategies you can use to get that mortgage done and dusted.

It's a scenario many of us face - experiencing professional success in the corporate world, yet finding it's not making you happy in broader life. In this episode, Fraser Cameron shares his journey. How he left the corporate environment and founded a coaching business helping others achieve their potential. Oh, and along the way he moved his family from New Zealand to Southern France. The experiences and knowledge Fraser shares in this episode: -Why he needed to escape corporate life, and his journey to self-employment and taking control of his life. -Superpowers that will unlock your potential for opportunities. -How Fraser's change has improved his relationships with his kids and his wife. SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Job security isn't what it once was. The trend toward contracting, outsourcing and the gig economy, combined with technological automation and increasingly, artificial intelligence, means the need for us to be emotionally and financially resilient has never been higher. Emotional resiliency isn't something I'm qualified to speak on, but financial resiliency – financial independence - is of course what we're all about here at Financial Autonomy. We're going to look at what financial independence looks like in the modern economy, and consider whether there are any local peculiarities that make financial independence in Australia unique.

A centrepiece of workforce change over the past 20-30 years has been the rise of the independent contractor – the freelancer. It's no coincidence that this rise has occurred in parallel to the global expansion and adoption of the internet. The internet has enabled people to work together, and find one another, whether they are in the same city, or the other side of the world. Creatives such as graphic designers have long been the poster child of this workforce revolution, but scratch the surface and you'll find an increasing variety of roles being performed within a freelancing framework - from consultant engineers, to article writing, video production and social media marketing. So could freelancing be your ticket to Financial Autonomy? Let's find out. SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Joanna Penn's journey is a fascinating one. From consultant to business owner, to writer and entrepreneur, she's certainly packed plenty into her life. Today she runs a multi six-figure company with multiple streams of income. This one episode you definitely won't want to miss. The experiences and knowledge Joanna shares in this episode: Her evolution from day job to being self-employed. Recognition of her financial vulnerability when she got laid off from work and all her income streams disappeared. How she took a side-hustle approach to develop her business. The current landscape for self-publishing authors. Links mentioned in the show The Creative Penn Podcast Twitter: Joanna Penn J.F.Penn (fiction) www.thecreativepenn.com/blueprint

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY If retirement is a decade or more away, it's tempting to look at your parents and perhaps grandparents in retirement and figure, well, they seem to be getting along fine, I'll just have what they're having. But there's two key factors that have underpinned your parents retirement, that will look vastly different in your retirement – the Age Pension, and a huge increase in wealth due to rising property prices.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY In the last post - How to start an Investment Portfolio - we looked at the steps and mechanics involved in creating your first investment portfolio. So we covered - setting your Objectives, determining how much Risk you will take on, your investment Time Frame, and Opening a share trading account. This week we'll progress from this set-up phase, to explore how you then build an investment portfolio. We talk quite a lot about investments here at Financial Autonomy. That's because our goal is to enable you to have choice in what it is that you do with your life, and if you have an investment pool that generates income, then some and potentially all of your living costs can be meet without you needing to trade your time for money. The freedom this provides is what can then enable you to spend your time writing your novel, learning a language, building a boat, or whatever it is that is your Financial Autonomy goal.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY This is the first of a two-part series. In this post we will explore what are the actual steps and mechanics involved in starting an investment portfolio? In the next post, I'll explore how you should go about building your portfolio. I've been building investment portfolios for clients for 20 odd years now. What I'm going to share with you are the actual steps we use to deliver successful outcomes for our clients.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY We are joined today by Shaun Farrugia from Optimised Accounting and Finance to talk about the essential things you need when you move to self-employment. In this episode we cover the challenges and knowledge Shaun shares about being self-employed: Getting the clarity of knowing why you need to move to self-employment. Keeping the proper financial record and the challenges encountered with record keeping. The capital and survival strategies whilst building your new business. Tax and accounting tips. Putting aside enough money for tax. Understanding your own break-even point.

SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY One of the best ways to gain choice in life is to become self-employed, and a great way to bring that aspiration to life is by trying your hand at a Side Hustle. For the uninitiated, a Side Hustle is a business that you create as a second income to your primary source of making a living. It can be used to pay off some debt or build an investment, but it can also be a way to test out a business idea that could perhaps become your full time gig in the future. But there's a problem. How do we find the time? In today's post I'm going to share with you 8 ideas I've found that might help you side step this obstacle.

Episode 75 – When investing, focus on what really matters SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY I remember reading once the advice of someone who had achieved success in their field. Their key observation was, "in life, you will occasionally be faced with times where you have to make a choice. One path will be easy, and the other harder. I've been successful because whenever I faced those choices, I chose the harder path". Now I think there is great wisdom in these words in the broad journey of your life, but when it comes to investment success, they are plain stupid. When investing, we want the simplest, most likely to succeed option that there is. And that means focusing on what really matters. SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY

Episode 74 – How to get your partner engaged in your Financial Autonomy goal SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY A significant reason many people don't achieve Financial Autonomy is because they get pigeonholed into a certain life. They define themselves in certain ways, and often this flows from the role they've developed in their marriage or significant relationship. Some people worry about how their partner will react if they want to choose a fork in the road and pursue significant change. Yet I've found that when couples unite on a Financial Autonomy goal, it can really strengthen their relationship – they have a shared goal, something they can work on and achieve together. So today I wanted to offer some suggestions as to how you might bring your significant other on board the Financial Autonomy train. So you have a Financial Autonomy dream, but you're hesitant to raise it with your partner. Perhaps they'll think it's stupid, or just want to shut down the idea altogether. Maybe you're worried that they won't understand why you're dissatisfied with the way things are now. We know that happiness comes from making progress on goals. It stands to reason then that goals set and worked on as a couple provide the opportunity for happiness as a couple. Psychologist Dr Barton Goldsmith goes so far as to say "goals are a relationship necessity". The first thing to recognise then is that whilst you might have some apprehension, there are some great potential gains to be enjoyed through sharing your Financial Autonomy dreams. You might remember the discussion I had with Tim back in episode 55, where he made the jump from bank manager to primary school teacher. There's no way Tim could have made the move without the involvement and support of his wife Maryanne, and without doubt that required Tim to share his thoughts, dreams and aspirations. The outcome of having done so however is that he's now in a career he loves, and Maryanne has gone on to make a career change herself, becoming a police officer. How then to start the conversation? I found some great advice from Kathy Caprino, a career advisor for women. She advised that you need to "find brave" - commit fiercely to being open, honest and compassionate. To saying the hard stuff, without allowing yourself to turn off or shut down, or become emotionally reactive. I like that find brave idea, because deep down that really is what's needed – put it out there. Bottling up your thoughts, perhaps your discontentment, is certainly not the path to happiness. For me, there are two scenario's that work for these type of conversations - in the car on a long drive, or out on a walk. You're away from the distractions of televisions and kids wanting your attention. You can have unhurried and uninterrupted conversations. Perhaps in this conversation you can paint a picture of what success looks like. For example if your goal is to cut back to 3 days per week paid employment, you can talk about the extra family time that will allow, or the reduction in stress levels in the household. If your partner does have concerns, acknowledge them, and then try and find solutions together. There may be value in getting some financial modelling done so you can really see how things will look in a money sense if you pursue this goal. I met a great couple recently who were about to have their first child. They wanted to know if it would be possible for the husband to quit his current job and become a tennis coach. He didn't need it to be straight away, but wanted it to happen somewhere in the next 10 years. We were able to perform the financial modelling for them, and provide a couple of ways he could achieve the choice that he sought. This was a great way for the two of them to really understand what was possible, and also what the costs were – in this case working longer before retirement. I've had people tell me that getting their partner to listen to a Financial Autonomy podcast episode whilst they're in the car has been really helpful in starting the conversation, which of course I'm super pleased about. Once you and your partner have found common ground on the choices in life that you want, write those goals down and put them somewhere where you can both see them. And finally, celebrate the wins. Identify some milestones on your journey to Financial Autonomy, and as you cross them off, pat one another on the back and acknowledge the shared journey that you're both on. We that's it for this week, I hope you got some value out of my thoughts. SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY

Episode 73 - The pay yourself first strategy Have trouble building up a nest egg? Struggling to build up enough cash to start investing? Hate the idea of a detailed budget? If you answered yes to any of these questions, then the Pay Yourself First strategy could be for you. The idea of Pay Yourself First is not new – Google tells me the term was first used all the way back in the 1920's by an American publisher. But it's even easier to apply today thanks to the advent of internet banking. Let's get straight to it. The idea with Pay Yourself First is that you set aside money in a separate bank account on the day you get paid, and then live off what's left. The opposite would be to save whatever is left in your bank account at the end of each fortnight. It's essentially the precursor to the bucket strategy, which is where you have separate bank accounts for bills, savings etc. Pay Yourself First then is a form of budgeting, potentially without the need to do the detailed work on how much you spend on coffee or shoes. You're effectively hiding money from yourself. Where this strategy has become really useable is through the use of automated transfers via internet banking. Automating the transfers to your seperate bank accounts is enormously powerful because it takes away any will-power issues. So let's work through the strategy in practice. You have your normal bank account that your pay goes into, and that your living costs come out of. Let's say you get paid fortnightly on a Thursday. You would set up your internet banking to automatically transfer a set amount out of your bank account every second Thursday, to correspond with your pay day, and put it into a separate bank account. Ideally, I'd suggest two bank accounts, one for bills and one for savings. So for instance you might have $500 go automatically across to your bills account, and $200 go across to your savings account. Whatever is left in your account is what you have to live off until next pay day. If you get to the last day and your bank balance is 5 cents, then it's Vegemite sandwiches for you. Of course you can fine tune the amounts transferred so that you get a situation where you do have enough money to live off, and the bills account is getting enough money thrown in to actually cover the bills you need to pay. But this is where the beauty of modern day internet banking comes in – it's easy to adjust your automatic transfers. I can't emphasise enough how important automation is to the success of this strategy. The central element of this strategy is that your savings happen first, then you spend. You're purposefully putting your future well-being and security ahead of your immediate consumption. This is what the original instigator meant – you're paying yourself, by putting money aside for savings, before paying everyone else for your food, clothing etc. Australia's superannuation system is a form of Pay Yourself First if you think about it. Money comes out of your pay without you having to do anything, and is set aside for your eventual retirement. Another useful aspect of the Pay Yourself First strategy is that it can be a way to avoid lifestyle inflation as your income grows. It's tempting as you progress the career ladder to feel that your increased importance demands a matching BMW, or spending $15 per day on lunch instead of bringing in leftovers from home. Instead, you could simply increase your automatic transfers, so that your new increased income flows to savings and ultimately investment. This accelerates your progress in gaining choice in life, which is of course what we're all about here at Financial Autonomy. Another practical way that you could apply Pay Yourself First is for households with two incomes – either a couple or someone with a side hustle. Perhaps you could live off one income, and have all of the second income go to savings and investment. Pay Yourself First is forcing some frugality on what you spend. But that frugality need not be extreme – what you set your automatic transfers to is of course entirely at your discretion. It certainly provides a practical framework in which to manage your money and ensure that you are building your financial resources. Well that's it for this week. If you're not already receiving our monthly email update Gaining Choice, be sure to visit financialautonomy.com.au and register for that – there's a link at the bottom of every page. That will keep you informed of all the goings on in the Financial Autonomy world in one single monthly email.

Episode 72 - Net Worth – how and why Remember back in your school days where every few weeks you'd have a test, then at the end of the year there would be an exam. I have kids in high school now and I can tell you the framework hasn't changed. So why all this measurement? It's all about assessing progress. If you get a test result back and it's 8/20, you know you've got to pull your finger out before the year-end exam rolls around. In the absence of that test result you may have floated along thinking you had that topic well covered. And the exam serves to confirm that you've learnt enough of the material to progress on to the next stage of learning. Without that assessment of progress, students could move up to concepts of higher complexity, without the foundational knowledge required for it to make sense. The take away here is that if you want to improve on something you first need to know your starting position, then you measure at regular intervals to monitor progress. The feedback this monitoring provides is essential to enable you to know where to focus, and course correct as needed. In a personal finance context, the way you do this by determining your Net Worth. So in this episode we're going to look at how you get that done, and then how you can use this measurement to propel you towards Financial Autonomy and the choices in life that you deserve. Let's start with the how. It's really pretty easy. Step 1 – list all of your assets, with their dollar values next to them. So your car, money in the bank, retirement savings, home etc. I wouldn't bother going down to things like furniture and jewellery, which are pretty hard to value and possibly unsellable anyhow. Now add up the value of all of your assets. Step 2 – do the same thing for all of your debts – credit cards, mortgage, car loan, etc. Once again, add up the total. Step 3 – Subtract the total debt number from your total asset number. The result is your Net Worth. Net Worth calculation example: ASSETS Home $825,000 Car $13,000 Superannuation $135,000 Money in bank $6,800 Shares $14,000 TOTAL ASSETS $993,800 DEBTS Mortgage $640,000 Credit card $2,300 TOTAL DEBTS $642,300 NET WORTH (ASSETS - DEBTS) $351,500 The first thing to establish is that your Net Worth number is a positive one. This means you have more assets than debts. If you do come up with a negative number, then your goal becomes crystal clear – get that negative down, and move to a positive net worth position. This will mean getting debt paid down. A negative net worth means you've borrowed to spend, but that spending hasn't produced any assets. So the money has gone on clothes or travel for instance. For most people, you will get a positive Net Worth number. So what's next? Well in isolation, it's just an interesting number. But where the Net Worth calculation becomes useful, is in how it changes over time. There is no particular ideal number (so long as it's positive). Happiness comes from achieving your particular goals and the financial requirements of your goals are unique. (Just a slight aside, understanding the Net Worth you need to achieve your goals is determined through financial modelling. This is something we do for most of our clients, so if you need help with this bit, visit the Work with Paul page to find out more.) So recalculate your Net Worth number at regular intervals – at least once a year, and then compare it to your previous results. You will be able to see in one clear and concise number the progress you've made in building your financial resources. Monitoring this progress in your Net Worth can have several benefits. I think the most important is providing you with feedback that you are making progress. Building wealth is a slog and it takes time. Often your main focus is paying down debt, which doesn't come with a lot of fireworks type celebrations. But if you calculate your Net Worth number every 3 months, and can see it rising steadily, you're getting the positive feedback, which will help you stick with your plan. Monitoring progress will also allow for course corrections. Some people have home loan facilities where they put all of their living costs on a credit card, and all their wage goes onto their mortgage. Then once a month, the credit card is paid off via a deduction from the mortgage. Now the people that sell these packages can show how it delivers a great result over time through savings on interest on the home loan. But I've seen plenty of people who actually end up making no progress in building wealth, because there's no brakes on their spending, the credit card just magically gets repaid, but what they miss is that their home loan doesn't go down like it should. Sometimes it even goes up. Now if you monitored your Net Worth every 3 or 6 months, you'd fairly quickly recognise that this scheme isn't working for you. However most people don't notice for years because they only get a home loan statement 6 monthly at best, and quite possibly don't

Episode 71 – From fashion to true crime with Anna Priestland Anna Priestland joins us in this episode and tells us her story about how she achieved choice and flexibility in her career while building a young family. She shares how she has made these career choices work in her life. The experiences and knowledge Anna shares in this episode: An interesting walkthrough of her working life starting from a university. Working in the fashion industry for years in Australia and London. Experimenting in freelancing which gave her control of her life and time. How she built her career in writing. Her concerns about leaving her steady job and moving to a freelancing job. Tips from Anna on easing your way into your chosen career. Where does Anna see her future going? Links mentioned in the show Anna Priestland LinkedIn The Twist - ABC The Case Files

Episode 70 – Financial Anxiety - is it holding you back? I've spoken in past episodes about the potential for overwhelm to lead to procrastination. Procrastination is evil because it results in no progress. You're stuck in the cement. But there's another element to the no-progress problem, and that is financial anxiety or financial stress. If you've never worried about money in your life, I'd say you are a very rare human being. For most of us, most of the time, money worries are a transient thing that we get through, and then move on to planning our next holiday or getting the kids to basketball practice. But having worked with many, many people over the years, I've come to recognise that often, the reason we don't make progress on the big, really important life and financial goals, is because of financial anxiety. So in today's episode, we're going to explore what are the most common causes of this financial stress, and some strategies you might be able to use to reduce or perhaps even remove this worry, letting you make clear and confident decisions to move forward on your financial autonomy path. There are 3 main types of financial anxiety that I come across on a regular basis: Inherited Debt Longevity Inherited financial anxiety is the most common and debilitating. It is experienced by those who have grown up in households where their parents regularly argued and fought about money. Money therefore becomes this stressful topic, and so the thought of sitting down and doing any sort of planning is about as attractive as volunteering to have a root canal done by a first year trainee dentist. Those suffering inherited financial anxiety tend to follow one of two patterns. Either they put their head in the sand. They don't open their superannuation statements, don't budget, and certainly don't discuss financial matters with their loved ones. Alternatively they go to the other extreme, and micro analyse everything, to the point of complete paralysis. They're convinced that whatever decision they make, it will be the wrong one. The next type of financial anxiety that I see is that caused by debt. In 99 out of 100 cases of debt induced financial anxiety, credit cards will be a central element. And there is never just one. Often there'll be a car loan and perhaps a mortgage, but credits cards certainly seem to be the gateway drug to debt related financial stress. The final form of financial anxiety that I see I've somewhat imperfectly termed longevity. This manifests itself in being stressed about the normal ups and downs of investment markets – actually not so much the ups, but definitely the downs. For people suffering this form of financial stress, they worry so much about market volatility, that they either buy and sell at the completely wrong time – selling when markets are down and buying when they are up – or they hold all their savings in cash or similar, and in so doing actually damage their long term financial well-being. (See Episode 48 – The 10 worst things you can do to prepare for retiring early). So what can you do to prevent Financial Anxiety from holding you back? The first thing to do is have a separate bank account for your bills and regular expenses, and have an automatic transfer from your everyday account every time you get paid, to top it up. Go through your bank statements for the last 3 months and tally up all of your regular expenses – electricity, phone, insurance, etc. Whatever number you get, multiply it by 4 to get your approximate annual spend, and then divide that number by how many times you get paid in a year, so if you get paid fortnightly, divide it by 26. Whatever that number comes in at, round it up to the nearest $50, and set up your regular transfer. Ideally, you'd put an initial one or two thousand into this bills account to act as a bit of a float for the natural lumpiness of your bills. With this system up and running, you will know that whenever a bill comes in, you have the money sitting there waiting to pay it. This means, a) no more stress, and b) no need to hit the credit card. The next thing is to clear your unproductive debts. Determine which debt is the most expensive and focus all your attention on getting rid of it. Again, use automatic transfers as much as possible to avoid the risk of weakened willpower. Once that especially horrible credit card is paid off, you can move onto the next one. And whilst it won't happen overnight, eventually you'll get all these debts paid off and then the money you had been using to clear these could instead be put into savings, putting you on the path to financial autonomy. Another useful way to alleviate financial anxiety is to have some projections done, so that you have a good sense what the long-term outlook is. You'll find that your super fund website will have a projection tool so you can get an estimate of where your retirement savings will end, and site like the government's Money Smart has some good calculators for th

Episode 69 – Money can't buy happiness ... or can it? In his thought provoking book The Geometry of Wealth, author Brian Portnoy observes "Does money buy happiness? The answer to that question can be summarised as Yes, Not really, It depends". Intuitively none of us like ambiguous answers like this, but here, it successfully illustrates the complexity inherent in the question. After all, what is happiness? There are plenty of sayings we get brain-washed with, that actually don't stand up to scrutiny. "What doesn't kill you makes you stronger". Really? If I lose a limb or suffer a stroke, I doubt I'm stronger. Or how about "slow and steady wins the race". Doesn't sound like a recipe for success that Usain Bolt applied. Likewise, we all know the saying money can't buy happiness. But I'm quite sure that if you're on the pittance known as Newstart, some extra money would almost certainly add some happiness to your life. If we really believe money can't buy happiness, why do so many people buy lottery tickets? Indeed recently I observed a queue to buy a ticket in a lottery that had jackpotted to $100million. That lottery regularly has prizes of $20million. Your chances of picking the correct numbers are exactly the same, yet somehow, people who weren't sufficiently motivated to buy a ticket for a potential $20million, were stampeding the counter for an extra $80million. Money can definitely alleviate poverty. It can put a roof over your head, food on the table, warmth, clothing, and medical support. Once our basic needs are meet, money's impact on our happiness is progressively less impactful. If you're a CEO on $1million, a 5% pay rise isn't going to move the happiness dial for you enormously. Yet for someone on $45,000, to get that same additional $50,000 per year would almost certainly have a big impact. Their housing options would change, their ability to support children would be enhanced, they could afford better medical care, etc. We find happiness in many things. Connection with our community, making progress towards and achieving goals, learning new things, enjoying exhilarating experiences, and watching others grow. So how can we use money to help achieve these outcomes? I believe the power of money as it pertains to achieving happiness is in gaining choice. By paying off your mortgage, you gain the choice of working part time, or having a longer holiday. By putting money aside for your children's future, you gain the choice of where they might go to school, or which extra circular activities they might undertake. By having savings rather than debt you reduce stress in relationships, often an enormous contributor to unhappiness. Money won't make you happy in isolation. As an illustration, we often see successful artists who earn huge amounts of money succumb to drug addiction. Money in this case is perhaps the enabler of self destructive behaviour. Which is why a focus on using money to gain choice is where I believe the potential exists for happiness to flourish. What else do we know about using money to give us happiness? A paper from US academics titled "If money doesn't make you happy then you probably aren't spending it right1" offers some useful tips. They observed "money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don't". They found we tended to be pretty bad at predicting how happy a certain action or thing will make us. We consistently mis-predict what will make us happy, how happy we will be, and how long the feeling of happiness will last. The authors identified 8 principles that could help us all make money decisions with a better chance of producing happiness. Principle 1 – Buy experiences instead of things. Two reasons were found to explain why experiences tend to produce greater happiness than things – the first is that we adapt to things quickly. We buy a new lounge suite and initially it makes us happy as we walk into the room and admire it, but pretty quickly it's just somewhere to sit while we watch Netflix. This is known as adaption. The second reason why experiences win is that often experiences are shared with other people, and other people are a key element of happiness. Principle 2 – Help others instead of yourself We humans are the most social creatures on our planet. Numerous studies have shown that improving our connection with others improves our happiness. In a money context this might mean supporting a charity or community group. Principle 3 – Buy many small pleasures instead of few big ones In principle 1, we observed the problem of adaptation. One way to counter this problem is to spend your money on frequent small pleasures, which are different every time. This constant change can produce sustained delight, producing more happiness than one big purchase, followed by nothing. Principle 4 – Buy less insurance The authors here specifically referred to extended warranties a

Episode 68 – Financial Fundamentals – the 6 essential foundation stones for financial success SUBSCRIBE TO OUR WEEKLY EMAIL "GAINING CHOICE" TO KEEP UP WITH ALL THINGS FINANCIAL AUTONOMY Today's episode flows from a meeting I had last week with one of you guys, a member of the Financial Autonomy community. For reasons of privacy, of course I won't use her real name, so let's call her Jenny. It was a first time meeting, and in it Jenny observed that she felt she just didn't have the financial fundamentals right. As an example, Jenny pointed to having her employer continue to take out extra tax for a HECS debt, even though this debt had actually been repaid. Jenny did this so that she would get a large tax return, which she could then put to something meaningful. Essentially this was a savings strategy, but she realised it wasn't the most efficient or profitable way to go – lending your money to the government for no interest is not ideal. So it got me thinking about what are the key financial fundamentals that really set you up for success? I came up with 6, but I'd love to hear your thoughts – let me know on either our Facebook page or via email from the financialautonomy.com.au website. 1. Cash for emergencies The number one source of financial pain I see is credit card debt. Now credit card debt can build up for a number of reasons – the search for happiness through a little retail therapy is common. But often it tips from manageable to a problem when a big unexpected expense comes in – the car breaking down, the fridge dying, or a big bill. Without having some cash up the sleeve, the credit card becomes the only solution, and the downward spiral begins. So the starting point in our financial fundamentals has to be having some cash saved to act as a cushion when life throws you the inevitable curve ball. Now if you have a mortgage, those savings could be in redraw or your offset account - it doesn't need necessarily to be hived off in its own little bank account. But just having some cash available is essential. How much? Well, of course, it depends on your circumstances. A family with 4 kids would need a larger stash of emergency cash than a single person. But as a starting point, think of getting $5,000 put aside. This will cover most things, like a new fridge, excess on insurance, car repairs, or a flight at short notice to see a sick relative. 2. Know what you spend I'm well aware that budgeting is not a topic of fun and joy. But when you talk about financial fundamentals, having a handle on what you spend just has to be included. Most people in the Financial Autonomy community are in their 30's and 40's, but at times I get people in who are about to retire, usually referred by other clients. In developing a retirement plan, one of the first question I have is, how much income do you need each year to fund the retirement you want? I get a lot of blank stares. So then I ask, okay, how much are you spending now? More shrugs of the shoulder, looking at the partner, them looking blankly back – they simply don't know. Having had these sorts of discussions for about 19 years now, I can tell you that only about 5% of people actually have a detailed budget. Far more though have a less detailed plan that might look something like: We pay $2,000 a month to the mortgage ($500 more than the minimum) We put $1,000 a month into an account we use to pay bills We put $500 each month into a savings account that we use for things like holidays And we spend the rest on normal living They haven't broken it down into how much they spend on coffee or electricity but through trial and error, they've found what works. This sort of money plan is totally fine, so if the idea of a detailed budget is about as hard to swallow as wasabi on a hotdog, put together a plan along this line. The important thing is to have a plan – know where your money is going. This is absolutely fundamental to financial success. 3. Protect Another unsexy one, but having insurance in place is another basic financial fundamental. Why? Because unwanted things do happen from time to time, and we don't know when or quite what they'll be. That's tough to plan for financially. Insurance premiums, however, can easily be planned for, and then all that uncertainty is someone else's problem. So if you're a home owner you should have insurance in case the house burns down, rare though that is. Most people should have Income Protection insurance, since it's your ability to earn an income that is the enabler of most of the other things in your life, from putting a roof over your head to food on the table, to clothes, gifts and holidays. Health insurance, car insurance, life insurance – everyone's needs differ, but you should certainly give some thought to where financial disaster could hit you, and explore how you can pass that risk onto someone else via buying some insurance. 4. Eliminate debt Now I should clarify here that not all debt is bad debt. Debt used to b

Episode 67 – Trent Taylor and the 3 33 333 plan - work 3 days per week, 33 weeks per year, and earn $333k In this episode, we learn from Trent's interesting story from being a pilot to building his business to gain choice and improve his family life. In this interview we cover: His journey and transition from being a commercial pilot to changing his lifestyle by acquiring a franchise and then building his own business to give importance to being the father he wanted to be. Tips from Trent on how to handle your own business. The story of how he brought back a 3-day work week to his life and traveled around Australia with his family using his business model, and how he is teaching this to business owners. Common mistakes people make in their businesses. The process of the Clarity Plan and uncovering your "Why?". Is being self-employed or running a business for everyone? Links mentioned in the show Teach It Forward Trent Taylor LinkedIn

Episode 66 – The reality of negative returns - knowledge is power Investment markets don't always go up. In fact they go down on a pretty regular basis. Is that a shock to you? I suspect not. Yet virtually none of the commentary on investing talks about negative returns – markets going down. But when I speak with clients, especially new clients, usually somewhere in their top 3 issues is not wanting to lose money – hardly surprising! So in today's post, let's bust open this taboo subject and talk openly about the reality of negative returns. So you're about to start investing. Your driver is the goal of growing your savings – building wealth, and with that comes the choices in life that is our central theme here at Financial Autonomy. But you would be unusual if you didn't worry about losing your money. Mountains of behavioural finance research tells us that we humans fell loses much more powerfully than we enjoy equivalent gains. So let's look at the realities. If you invest in a portfolio that is either 100% Australian shares, or 100% International shares, the data indicates you will experience a loss roughly 1 on every 4 years. Now most people actually invest in a mix of assets – shares, both local and international, some property, and usually some conservative assets like cash and bonds. For a typical Growth type investor, where the bulk of their assets are in shares and property, the likelihood of a negative return becomes around 1 in every 5 years. A more conservative Balanced investor would be looking at closer to a negative return 1 in every 7 years. Just a side note here – when I talk about a Balanced portfolio, I mean roughly 50% in growth assets like shares and property, and 50% in defensive assets like cash and bonds. You will find that some super funds offer a Balanced option, but when you look at the asset allocation it is far more heavily weighted to the growth assets – often it looks like a 70/30 split, which is more like a Growth allocation. I just wanted to highlight that because it's a real problem in the investment industry – mislabelling of products. Don't assume that the Balanced option in your super fund has the 1 in 7 chance of a negative year. Take a look at how they invest your savings, and if it's weighted towards the growth assets, recognise that your chance of a negative year is likely to be closer to 1 in 5. Now most in the Financial Autonomy community are in the building wealth phase and retirement is not imminent, so I'm going to work from here on the assumption you're going to invest in a Growth type mix of assets, and that means you should see a negative return about 1 in every 5 years. Of course if you find that uncomfortable, you can invest more conservatively, and reduce that frequency. You might also want to take the risk level down a notch or two if your time frame is shorter – say 3 or 4 years. But here's the key takeaway for you today – for Growth investors, 4 out of every 5 years, the value of their investments will go up. And that is a totally fine outcome. What you want is a good outcome over the medium to long term. Short-term ups and downs don't matter, so long as you have structured things so you're not forced to sell at a bad time. To illustrate this, consider two investors. One can't tolerate any years where there's a loss. So the solution for them is to invest in cash. Now they find an online savings account that pays pretty good interest, so let's say they earn 2%. The other investor, whilst not a gambler, can tolerate a few ups and downs. So they invest in a typical Growth mix. Now I've grabbed the data for the past 10 years – the year ending December 2008 to the year ending December 2017. Now the Growth mix sure enough had 2 years that were negative, 2008 and 2011. As investment experiences go, and investor that kicked off at the start of 2008 had about the worst start imaginable, with markets diving and so a return that year of negative 20% - a big fall in year 1 is the worst result you can get. But even with this absolutely horrible start, the growth investor still did better than the Cash investor. After 10 years in fact, and based on an initial $50,000 investment, the Growth investor would be over $20,000 better off than the cash investor. They've been paid $20,000 as compensation for putting up with occasional negative returns. And that's a hugely important concept for you to grasp. Provided your portfolio is appropriately diversified, you get paid to take on risk. The reason the Cash investor only gets 2% is because their only risk is the bank going broke – fortunately very improbable in Australia. The Growth investor, by being prepared to tolerate the ups and downs of markets, comes out significantly ahead. Now there will be some listening who will think "well, if my investments are going to experience negative return roughly one in every 5 years, I'll try and pick the bad year, and pull out my investments. Then when things look better, I'll go bac

Episode 65 – The challenges of investing for children With the cost of housing continuing to climb, in addition to the rising cost of tertiary education, many parents and grandparents are worried about what the future holds for the young people in their lives. Last week Michael contacted me. He has a young daughter and was thinking of starting an investment for her, where he'd perhaps tip in $25 per week, so that when she was a young adult, there'd be a pool of money to get her off and running. He'd seen a lot written about ETF's so he figured that must be the way to go. But his initial enquiries weren't bearing much fruit and so he reached out to me, to establish whether there was something he was missing. Why is it so hard to start investments for children. The first barrier Michael found was that he couldn't actually establish an investment in his daughter's name. I confirmed that there's two reasons for this. One is because, to establish an investment, whether that be buying shares through a broker, or into a managed fund, you are engaging in the world of contract law, and contracts can't be enforced on minors. Now it may be possible in some instances to transfer investments across to children whilst under age 18 after purchase, but that then brings us to the second reason why investments in your child's names is problematic – Minor's tax. This is a penalty tax regime designed to prevent wealthy parents from hiding assets in their children's name to avoid tax. Kids can earn investment income of $416 per year without a problem so basic bank interest is not an issue, but once they go over this threshold, they are taxed at an amazing 66 cents in the dollar! This drops to a not much better 45% when their income exceeds about $1,300. So ownership wise, when investing for children, the investment will likely need to be in an adult's name – usually one of the parents (could even be in both names). And the adult owner will need to include the investment income, and hopefully capital gains, on their tax return. Given this, it would be sensible to have the investment in the name of the parent likely to have the lowest income, since this will result in the lowest tax payable. Most investments will allow you to put a designation on the account which is like a tag, so you might have "Jane's investment". These designations have no legal or tax impact, but they help in identifying investments. If these tax consequences are a significant barrier, most likely because both parents earn incomes of over $80,000, then another solution to investing for children is to use Insurance Bonds, or a derivation of them, Child Advancement policies. Insurance bonds are a little like super funds, but without the restrictions of access to your money. Insurance bonds pay tax within the bond (at 30%), so you don't need to include them in your personal tax return. If you hold them for 10 years or more, then when you withdraw the funds – to for instance gift to your daughter so she can buy her first home - there is no further tax to be paid. This is quite different to a regular investment in one of the parents' names, where upon sale, Capital Gains tax will be payable (assuming there has been growth of course). The investment options are quite wide within insurance bonds, so just like within super, you can choose the Growth or Balanced options, or individual asset classes like Australian shares or International Bonds. If you are saving specifically for education purposes, Child Advancement policies, which are a version of an Insurance bond, can be very helpful. These enable you to claim back the 30% tax paid within the bond where you can demonstrate that withdrawals are being made to fund education expenses. You do this by providing the receipts when you withdraw the funds. Acceptable expenses are quite broad – school uniforms, books, fees, music lessons, and plenty more. And the expenses can relate to all levels of education, including tertiary education. Products vary quite a bit in this space, so just be sure to have a good read of the product brochure so you understand exactly what you are getting. Whichever ownership structure you decide is right for your child's investment, one final note is that whilst ETF's have many great applications, regular savings plans are not one of them. In Michael's case he wanted to add to his investment on a regular basis. To do this with an ETF, you have to buy the shares in the ETF through a broker, and that means every time you want to add to the investment, you have to pay brokerage. That's likely to be around $20 per trade, which will really add up if you want to add, say, each month. You're likely to be better off using a managed fund (or an insurance bond as per above), as these will typically have regular investment plans where you can instruct the fund to deduct a specific amount from your bank account each month and add it to your investment. I've not seen a fund charge a fee to do this. The ong