Financial Autonomy

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

Episode 64 – Money & happiness - Brian Portnoy - The Geometry of Wealth I am joined by author Brian Portnoy in this episode as we talk about his book on money and happiness called The Geometry of Wealth. In this interview we cover: What is "The Geometry of Wealth" about and what led and triggered him to write it. An elaboration of "Adaptive Simplicity". The 4 C's of the happiness element and how to practically apply it in our life. An explanation of the biggest definition of the book and the 3 symbols - circle, triangle and square. What are the ultimate drivers of success? Discussions on investments, asset allocations, building portfolios and diversification. Brian's advice for investors. The importance of having a financial advisor. Do we really need to retire early? Links mentioned in the show Financial Autonomy Website Brian Portnoy LinkedIn Brian Portnoy Twitter Shaping Wealth Virtus

Episode 63 – Why do investment markets have bubbles? If you've ever seen a graph of any share market, you will know that whilst over the long term it tends to go up, the graph isn't a straight line. Markets will go up, up, up over several years, only to fall back for a year or two, before re-starting their upward climb. Research on United States investors shows that whilst over 20 years to the end of 2017, the S&P500 share market index returned 7.2%, the average investor experienced a return of 5.29% per year. I don't imagine Australian investors would be much different. This under-performance of investors has been observed for many years, so what's going on? And how does it relate to market bubbles? Market bubbles, and their subsequent busts, reflect over-reaction. We bid up prices beyond that which makes sense, and then on the downward slope, we sell when we don't need to, and prices go below what logic would dictate they should be. These extremes have nothing to do with balance sheets and profit and loss statements, and everything to do with human behaviour. In behavioural finance (for which one of the key founders, Richard Thaler, won a Nobel prize in 2017), the term used is herd behaviour. We sometimes also refer to it with the acronym FOMO – Fear Of Missing Out. Market bubbles don't occur because investors are stupid. They happen because we're human. We've learnt through thousands of years of evolution that if a lot of people are running in one direction, it's probably wise to do the same. The luxury of waiting to confirm for ourselves that there is indeed a danger worth fleeing from, may well lead to our death. So when markets keep rising, as we've seen in Australia over the past decade with residential property for instance, or when they fall, like we experienced with global share markets through 2008, our inbuilt, human reflex, is to jump on the band wagon. Another thing that is happening is a concept known as Recency Bias. This is the human trait of disproportionally considering things that have happened recently, and dismissing older information. As an illustration of recency bias in action, if you make an initial foray into some shares, and in the first 6 months they rise 10%, then you're quite likely to put more money in. And if that also rises quite quickly, you start thinking about where you can borrow money from to invest some more. This positive feedback loop is how bubbles emerge. Interestingly the two most famous share market bubbles of the twentieth century, the bubble in American stocks in the 1920s just before the Wall Street Crash of 1929, and the Dot-com bubble of the late 1990s, arose from optimism surrounding the development of new technologies. An amazing range of technological innovations including radio, automobiles, aviation and the deployment of electrical power grids arose during the 1920's. The 1990s was the decade when Internet and e-commerce technologies emerged. The potential long term impact of these new technologies is hard to evaluate, which leaves plenty of room company share prices to climb, even when they are losing money. So why should you care about investment market bubbles? The answer ties in with the Dalbar statistics I mentioned in the introduction. An investor in the US could have earnt 7.2% over 20 years simply holding onto a well-diversified portfolio that reflected the index. Yet the average investor in fact only experienced a return of 5.3% because they followed the madness of the crowd. They bought and sold when they should have just left things alone. The selling is what does the real damage. There is no perfect time to buy, it's only known with the benefit of hindsight. And the cost of waiting on the side lines can be significant. But the selling is something we can be smart about. To start with, don't sell when markets are in a panic. Recognise the herd mentality and step back to consider what is right for you. In 2008, as markets declined, I had clients in their 30's and 40's asking if they should get their superannuation out of shares. I had to point out that they can't touch that money until at least age 60, so short term falls are certainly not a reason to change plans. Indeed for accumulators, markets falls have the silver lining that you are a buyer, and prices are cheap. Also during that period I saw recency bias in action. People would say – "my balance has fallen x% this past year. If it keeps going like this for another 5 years, I won't have enough to retire on". But hang on, we know that the long term average return for growth type portfolio's is around 8%. So why would you extrapolate last year's down year and assume that's what the future holds? Recency bias – applying disproportionate weight to recent returns. Rebalancing portfolios can be a useful tool. That's the process of periodically selling down investments in particular asset classes that have done well, and re-allocating the proceeds to the underperforming sectors. So for instanc

Episode 62 – Putting the puzzle together – 4 essential elements to achieving your big life goals Here at Financial Autonomy, our focus is typically on the money side of how you achieve your goals and gain the choice in life that you deserve. But of course, achieving big goals requires more than just a financial solution. And so in today's post we're going to take a step back and consider things a bit more holistically. Start with Why Executing a plan to achieve a particular goal rarely goes off without any set-backs or things out of left field that you hadn't considered. Adaptation is therefore an essential requirement in achieving success. In start-up land they call it a pivot. The risk when faced with the need to make changes, is knowing which path is the right path, and that's where being clear on your 'Why' is so crucial. Your Why is your magnetic north. It guides you towards progress through the normal twists and turns of life. Let's consider an example. You want to move to self-employment so as to have the flexibility to work around kids school drop offs and getting them to their after school activities. You use your skills as a compliance manager, built up over 10 years of employment, and start your own one person business, providing compliance services for 3 medium sized businesses, mainly from your home office with occasional site visits as needed. You're working around 20 hours per week. You'd like a few more hours, ideally about 30, but all things considered, you're in a good place. One of your clients buys another business and in the process roughly doubles in size. They approach you about working 1 day per week on site at the new business to help with the integration. They would require you to be in the office at 8.30am until 5pm and the office is 30 minutes' drive from home. Now without a clear Why, this opportunity would seem to be a good one. You wanted more hours - well here they are. But because you have a clear Why you can consider whether in fact this opportunity is one you should be taking. It doesn't provide flexibility, and the hours plus the commute don't allow you to do the things with your children that was the whole reason for moving to self-employment in the first place. Knowing your 'Why' makes your decision process an easier one. Set your Goals So you know why it is that you're undertaking the change or challenge, the next step is to set some goals. There's a few crucial elements in this phase. To be useful the goals you set must be specific, not airy fairy and vague. They must be attainable – unrealistic goals lead to disappointment and abandonment. And very importantly you need milestones along the way to give you little boosts of positivity and confirmation that you're making progress. The SMART goals framework is very popular, you've almost certainly heard of it. The toolkit from episode 10 has some good information on how to use this framework to develop your goals, so if you haven't already downloaded that one, you might want to grab it. Develop your plan The next logical step is to develop your plan as to how you will make your goals become reality. Now the content and structure of your plan will depend very much on the goal you're trying to achieve – retiring from paid employment in 10 years will require a very different plan to starting your own business in 12 months' time. But a common element of all successful plans is setting aside the time to make it happen. So let's say your goal is to start a business in a years' time. You develop a plan to acquire the skills you need, get the necessary permits or licences, build your web site, and fund the whole project. Hopefully you set milestones as to when each piece of the puzzle will be completed. Now go and block out time in your diary to actually get it done. Maybe you set aside Sunday morning's, or perhaps it's after dinner on Tuesday and Thursday nights. The important thing is that you have deliberately set aside time to take action on your plan. Planning's great, but you'll never achieve your goals without actually getting the work done. Take action – don't procrastinate You might recall back in episode 17 I devoted the entire post to the evil that is procrastination. Overwhelm is the primary cause, so if this is an issue for you, break your plan down into smaller chunks, and just focus on getting one piece done at a time. Don't be afraid to ask for help. None of us know everything, so if you get stuck whilst taking action on your plan, see if there's someone you know that you could phone or email to help you move forward. Another important element in the take action phase is to persevere. As mentioned at the start, things never go exactly to plan. If you quit at the first, or even the third hurdle, you'll miss out on the benefits that achieving your goal would have delivered. Now persevering is not the same as being oblivious to the outside world. If you launch a Side Hustle and you're just not getting the customer r

Episode 61 – Have your 20's set you up for financial failure? Habits. Human brains love them! Any time we can go on auto-pilot, we jump at it. Author Samuel Johnson observed, "The chains of habit are too weak to be felt until they are too strong to be broken". I also like a quote from Agatha Christie on the subject "Curious things, habits. People themselves never knew they had them". In your financial life, many of your significant habits are formed in your 20's. And often you don't realise it until much later. So today's post highlights some of the habits you might have inadvertently picked up, and suggests some ways that you can create new habits to put you in a stronger financial position into the future. Whilst my 20's are now quite a while back, they're not so distant that I can't recall the enormous transformation that occurred from the beginning of that decade in my life, until I came out at the other end. Uni and work – I studied part-time at night over 6 years and worked during the day. From living at home with the parents, through a few share houses, to buying my first property. And of course the normal relationship ups and downs, including an engagement that never made it to the big day. I also met the lady who is now my wife, and I must have done something right in my 20's, because only a few weeks after turning 30, our first child was born. What is clear when I think about my 20's, and those of my friends, is that they were such an important decade, laying down many of the foundations for our lives. It's a big call perhaps, but I wonder if your 20's aren't perhaps the most important in your life. But that doesn't mean the trajectory that you set for yourself in your 20's is locked in for the remainder of your days. So let's look at some potential bad habits that you may have picked up, and see if we can't get you onto a better path. The number 1 financial problem for Australian's is spending too much, which is most often facilitated by credit cards. Habits are tough to break. If you get used to just slapping everything on the credit card in your 20's, there's a good chance you'll continue with that approach in 30's and 40's. And if you move from your 20's and into your 30's carrying unproductive debt such as credit cards and personal loans, you might never be able to break into the housing market, an important financial foundation for very many of us. But if you find yourself in that position, it's never too late to change. The first step if you've gotten yourself into a spending induced hole is to stop digging! Take the credit card out of your purse or wallet, reduce the limit, and if you've got multiple cards, cancel all bar one. Personal debt such as credit cards are a symptom of spending beyond your means. To solve this problem, you need a budget, and as mentioned in past episodes, with the advent of internet banking, it's never been easier. I've spoken about creating a budget in several previous episodes, so I won't go through it again, but if you're interested in more info on budgeting, check out episode 27 – Attaining financial independence doesn't need to be hard, and episode 16 – Getting your debt under control doesn't need to be difficult. So you've created your budget. When you get paid, you put money to debt reduction, some aside in your bills account, some savings, and what you have left is what's available to live off until the next pay day. Once your debts are gone, more can go to savings, accelerating your journey to Financial Autonomy. The savings piece is important if you're going to break your overspending 20's bad habits. Your initial goal should be to get some money in an emergency account - aim for $5,000 as a starting point. This is what will keep you from running up credit card debt when the car needs urgent repairs, or you find yourself between jobs for a month. Now let's not skip over this bit too quickly, because this is the major habit change that you need to make if you find yourself in financial stress in your 30's or 40's because of bad habits picked up early in life. If you can change from spending more than you earn and accumulating debt, to having a budget and spending less than you earn, with money in an emergency account, funds set aside for bills, and over time some savings, you will have transformed your financial life. With this foundation stone set in place, you can now move forward to invest, perhaps buy a home, and start thinking about your Financial Autonomy goals, like perhaps planning a mini-retirement or making the jump to self-employment. So what else to think about now that you're in your 30's or 40's (or perhaps even still in your 20's and just ahead of the curve!)? Another core financial concept that will make a lot of difference to you over time, is to understand the power of compounding. Compounding is the financial jargon term for earning interest on your interest. Compounding matters a lot, especially for investments that run over a long tim

I interview tax specialist Shaun Farrugia to explore the use of trusts in maximising your wealth.

Often associated with a sense of overwhelm, we look at how you can push through a procrastination barrier.

In this interview with Adam Murray of the hugely popular Subtle Disruptors podcast, hear how a personal crisis lead him to reinvent his life and in the process, gain choice and control.

Episode 60 – Mike Lewis - When to Jump Today in the episode, we interview the author of When To Jump, Mike Lewis. The book is about career change or starting your own business. In this interview we cover: Mike's jump to being a professional sportsman His job and career before he became a sportsman Events that unfolded and didn't go to plan when he left his career Framework: Jump Curves - 4 phases of taking a jump What made him decide to keep going Mike's 2nd jump of writing the book When to Jump and how it unfolded How he strategized and made it happen When he started this idea Learnings from his jumps Details and overview about the book and its contents, including a sample case study Mike's sense of things from the people he talks to The importance of planning in making a career change Mike's plans for the next year or two. Links mentioned in the show When to Jump Podcast When to Jump Instagram When to Jump Facebook When to Jump Twitter Mike Lewis LinkedIn

Episode 59 – The Beauty of the Worst Case Do you remember those Worst Case Scenario Survival Handbooks that were around everywhere about a decade ago? How to land a light aircraft if the pilot has a heart attack, or how to survive a bear attack. I don't know if they extended to surviving a zombie apocalypse, but I wouldn't be surprised if they did. They were good fun reads and made a great Christmas present. In today's episode we're going to explore how planning for the worst case can be liberating. How it can melt the ice that has you trapped in your current state. And the best bit? It's not hard – just two easy steps. Planning for the worst case is a key tool in enabling you to gain the choices in life that you deserve. So let's dive into today's Financial Autonomy episode – The Beauty of the Worst Case. When investing, we know from history that the best investment returns come from growth assets – shares and property. Why then don't investors have all their money, 100%, in shares and property? Why diversify and hold things like bonds? The answer is that whilst we always hope for the best, a wise person plans for the worst. Planning for the worst case is something that's common across government agencies and businesses. The Emergency Services for instance will plan out their response to a large bush fire or flood. A bank might develop a plan to handle a significant global disruption to financial markets. Or a pharmaceutical company might have a plan for dealing with an extortionist tampering with their products. So how can you use this proven process to help you achieve your Financial Autonomy goals? Step 1 is to acknowledge your fears and define them. If your Financial Autonomy dream it to make a career change, like we heard from Tim in episode 55, then perhaps your worst case scenario is that you quit your current job and can't break into the new career that you dream of. That's a totally reasonable fear. And for many of us, that fear is enough to stop us moving forward. It's paralysing. Now one solution to overcoming this paralysis would be to just try and push it out of your mind – the "be positive, it'll never happen to me" approach. Having a positive mindset is certainly important in leading a happy and fulfilling life. But to achieve big changes, we need more. So on a piece of paper, or my preferred method, a white board, write down your worst case. What's your greatest fear in embarking on your Financial Autonomy goal? Perhaps there's more than one. There's some relief in achieving this step alone, in acknowledging your fears. But of course we're only half done. Now that you've defined your worst case, in step 2 we need solutions. So it's brain storming time! If you feel comfortable, perhaps you could invite others in to join you to get some fresh ideas. Imagine what you would do if your worst case actually happened. Write down your solutions. Now this is not your preferred outcome, and it's also not the most likely outcome either. So therefore your response are likely to be things you'd prefer not to have to do. But the point is they are things you could do if you had to. If the career change didn't work out, could you go back to your old career? If the new business you started just wasn't delivering what you needed it to, could you get your old job back? What if you took a year off to travel with your partner, and half way through the trip decided you couldn't stand one another and went your separate ways. Would you fly home, or continue the journey solo? When I made my big jump from employee to self-employed in 2006, I had 8 months of income saved up. That was my runway. If it didn't work out, I had to go and find another job. That was how I dealt with my worst case scenario. And with that in mind, I ensured that before I left I did what I could to strengthen my professional networks, and I made sure I finished up on good terms, so that if I needed a reference or a simple connection in the future, people would answer my call. I also considered where I was at professionally and how employable I'd be. I felt that given my experience at that point, and some of the successes that I'd had, I would be able to secure another employee role if it came to that. Now fortunately it never did come to that. But acknowledging my greatest fear – what if this just doesn't work out – and having a solution to that, was enormously powerful in providing me with the confidence to make the leap. If you take nothing else away from this post, take this – planning for your worst case is enormously empowering. I've found it so useful that I'm implementing it into more and more of what I do. When I develop my yearly business goals, I now also list some worst case scenarios and how I'd deal with them. We'll be introducing an affordable financial modelling solution in the near future so that you can get a robust answer to the "am I crazy to do this?" question. As part of that we typically explore two worst case scenarios –

When I started my career in investment markets almost 20 years ago all the investment options were what we'd now call Active. We didn't call them that at the time, it was just the standard way that money was managed. Passive investment had been around for some time, pushed primarily by John Boggle of Vanguard which first launched a passive index fund in 1975. But it took quite a while for enough data to come in, for investors to begin to appreciate why some hard questions needed to be asked about the focus on Active investment management. In more recent times the trend has swung in favour of the passive approach, and variations of that process, with ETF's (Exchange Traded Funds) driving broad adoption. The increased acceptance and utilisation of passive investment strategies is almost certainly the biggest shift in investment strategy thinking since managed funds kicked off in Australia in 1955. So in today's episode I'll be sharing with you the difference between these two approaches, and how we apply these alternatives when helping our financial planning clients. As mentioned, Vanguard is the best known proponent of passive, or index investing, though interestingly Blackrock is bigger. The idea of passive investment is that instead of trying to do research on different companies and identify winners, you simply buy the whole market. The thinking is that if you do this, you should get the average return of all investors. So let's say you're buying an index fund over the ASX200 – the index of Australia's 200 largest companies. If the ASX200 grew by 5% one year, then that tells you that across all of the investors in that market, half did better and half did worse, and the average came in at 5%. So if you invest in a passive index fund over the ASX200, you will get the average return, 5% in this example, less whatever fees the fund manager charges. Now compare this to the Active manager. Their entire rationale is to beat the market. If the average is 5%, their entire rationale for existence is that by doing all sorts of research and analysis, they can identify insights others have missed, and so deliver superior performance compared to the rest of the market. Now the astute Financial Autonomy audience will immediately identify that given the mathematical foundation of an average is that half of all results will be below, and half will be above, then clearly, not all active fund managers can be successful. Now it is fair to say that not all participants in investment markets are fund managers, there are of course mum and dad investors too, but by far the bulk of trade is conducted by the funds. And so we arrive at the number one challenge when working with active fund managers – what if you choose one that under-performs? But in actual fact, it gets even harder, because not only does the successful active fund manager need to beat the index, but they need to do it after their fees, or at least the difference in their fees versus a passive index alternative. And active fund managers tend to like to pay themselves a lot. So beating the average by say half a percent, won't cut it if the fund charges 1% to manage the money in the first place. So what do the numbers tell us? In data to the end of 2017 (SPIVA Statistics and Reports), when measured over 5 years, only 37% of active funds outperformed the benchmark, and in the US it was even worse with only 16% achieving what they'd set out to do. To put it another way, if you have some money to invest and you're trying to pick an active fund manager in Australia, there's a 63% likelihood that you'll pick the wrong fund and get under-performance. And in fact that number might be generous due to something called survivorship bias – funds that perform really badly close, and so they don't register in the data. Now to be fair, index managers underperform the benchmark too because of their fees. But because they don't need to employ overpaid fund managers, their fees are really low. You can buy an index fund over the Australian share market for a cost of about 0.14%, and over the US market for an incredibly low 0.04%! I thought this quote from Brian Portnoy author of The Geometry of Wealth summed things up well: "Beating the market. That's a silly and fruitless game. It's not tied to your real needs. It's attached to your ego." Tying your investment decisions back to your needs, or goals is really important. You've got a goal, let's say that's to buy 5 acres out of town and grow your own food. To make that a reality you determine a dollar amount that you need to save up to enable the purchase. Now of course you could just chip away putting your savings in a bank account until it builds to the necessary amount, but it's likely to be smarter to invest your savings and let compounding of returns do some of the work for you. A lot of what we do for clients is financial modelling to ascertain how their goals can be met. So for instance we might find that, given your existing f

Episode 57 – 4 Hour Work Week – still relevant today? Originally published in 2007, The 4 Hour Work Week by Tim Ferriss, made some huge waves upon its release. It also laid foundations for its author that continue to this day. Indeed anyone who's ever browsed the iTunes podcast charts will have come across Tim Ferriss, whose self-named show is regularly towards the top. As regular readers and listeners know, the reason Financial Autonomy exists is to explore how we can all gain choice in our lives. Without doubt The 4 Hour Work Week aims to deliver the same, albeit with a quite specific formula for success. Now I have to confess that I didn't pick up the book when it came out. I can't recall exactly when I became aware of it, but it was a bit like a movie everyone was talking about – I kind of felt I knew all the best bits, and with all the hype, I just couldn't find the enthusiasm. 11 years on and with the hype having faded, I thought it was time to right that wrong. The first thing you need to know is that - despite the title, this book really isn't about only working 4 hours per week. In fact nowhere in it does Tim say that's all he does, and indeed I've read interviews with him where he fully acknowledges that he works more hours than that. So don't read this book if that is your sole goal. The sub-title – Escape the 9-5, Live Anywhere, and Join the New Rich, is actually much more what The 4 Hour Work Week is all about. The other thing, which is where I got the wrong impression when it was released, is that it's not all about outsourcing everything to India. Sure, that's an important element, but it's not the whole book I was really pleased to find that The 4 Hour Work Week is a really well written and engaging book. An extremely common frustration I find with many thought-leader type books is that the Big Idea could have been summarised in a 5 page essay, but since you can't make money with a 5 page essay, they've padded it out into a book. That is certainly not the case here - the book is well structured, and the ideas are consistent throughout. I didn't feel like there was any padding. There were elements in the middle where I felt he wasn't talking my language, but I continued anyway and found value in latter chapters. It's probably worth explaining the basic structure of the book. There are 4 key elements, broken up into steps: Definition Elimination Automation Liberation The first, Definition is where he explains his New Rich concept and challenges some common assumptions. Elimination is essentially about productivity – getting more done in less time. Automation explores how you might generate income with minimal personal effort – unquestionably the section I had the most difficulty with. And finally Liberation – mini-retirement, travel, and flexibility – very much in our Financial Autonomy wheelhouse. If you think in terms of a Venn diagram, you know, where there are the two circles that overlap in the middle, and one circle is the things Tim espouses in this book, and the other circle contains the ideas and dreams of the Financial Autonomy community, there is definitely significant overlap. The idea of "wealth" not being defined purely by your balance sheet, but rather with reference to the life you can lead, certainly aligned. Where 4 Hour Work Week didn't resonate for me though was in 2 primary elements: It seemed a recipe for a single person. Success in the approach espoused equalled lots of living abroad, nomadic style. Now I love to travel and am a keen learner, but as someone with kids, first I have an obligation to ensure they get a good education and upbringing. And whilst travel can be an important element of that, professional teachers laying solid foundations are irreplaceable. I also take the view that there's 15-20 years in my life where I get to enjoy their growing up, and hopefully provide a positive influence in their lives. Traveling to Buenos Aires to learn Latin dancing doesn't fit into this picture. My kids want to catch-up with friends, play sport and engage in their other interests. The definition of success in 4 Hour Work Week didn't really seem to allow for that. The other element that jarred for me was that the suggested enabler was building a business that largely runs on auto-pilot with the use of outsourcing staff from India and the likes. If only building a successful business was that easy! I know from the emails that I receive from you guys, that many of you are entrepreneurially inclined. I also know that finding that viable business idea and making it work is really hard. To then overlay on that the ability to outsource its operation, is something that I would think few could pull off successfully. It's possible, no doubt about it, but as a template for others to follow, I'm just not convinced. Indeed the very fact this concept has been around for so long, and yet so few people do it successfully, would seem to prove this point. I also think it fails to recognise

Episode 56 – Are you playing offence or defence? Today in the episode, we talk to Tim Lavrey's career change story from being a bank manager to a preschool teacher. All sports have elements of offensive and defensive play. And whether you play Netball, soccer, cricket or basketball, your team must constantly strike a balance between the two. In pursuing your Financial Autonomy goal, you too must find a balance that will see your goals achieved in an acceptable time frame, whilst also enabling you to sleep at night, and not put you and your family at risk of living on the street. But whilst in sport the distinction between offence and defence if fairly clear, in the financial world, it may be less so. So in today's episode where going to explore your options, so that as you develop your Financial Autonomy strategy, you're considering both offence and defence, and finding a balance that makes sense for you. Offensive moves are typically attacking type moves. They're trying to make something happen in your favour. They're pro-active decisions or tactics that you are employing to make progress towards your goal. Defensive moves are concerned with protecting what you've got, not going backwards or giving up ground. Playing offence is often more glamorous, and for sporting spectators, more spectacular. But any coach will know that a solid defence is essential if your team is to experience sustained success. Your strategy to achieve Financial Autonomy will require both offensive and defensive tactics. You need to take pro-active steps – offence – if your goals are to be met. But that doesn't mean it's wise to ignore the important defensive measures to protect on the downside. Without defence, all that you gain in offence could be given up. Let's start by considering what playing offence might look like in a financial sense. A good starting point would be to have an emergency fund set-up to cover unexpected expenses like the fridge deciding it's had enough, or unplanned medical expenses. For most people, having something like $5,000 stashed away would tick this box. The alternative, that leads all too many people towards financial peril, is that when these type of events crop up, they hit the credit card, with no plan on how this will be quickly cleared. Your next offensive play is to educate yourself on investment and money. Now given you're consuming this post right now, I appreciate I'm preaching to the converted here. You don't need to become an expert, but having a basic understanding of investment options, from term deposits to shares, property and funds, and a sense of the risk in each, will arm you well when developing your strategy. It sounds obvious and is perhaps a bit of a cliché, but a foundational offensive play in a financial autonomy context is to spend less than you earn. This requires management of your cash flow and knowledge of what is affordable. I've come across several instances in recent years where people have signed up to rent a home, without appreciating that once they pay that rent, they simply won't have enough money left to live off. They just don't seem to have done the numbers and realised that the rent is perhaps 50% of their take home pay, a level that would be unsustainable for pretty much anybody. Let's start to stretch the legs a bit now – it's time to start building some wealth. We all need a roof over our head and food to eat. And since the days of living in a cave and hunting for your dinner are well behind us, you're going to need money. You're currently earning money through your skills and knowledge, and whilst your ability to generate income is unquestionably of enormous value, it has its vulnerabilities and limitations – for one you have to get the work done in order to earn the income, but also there is the risk of your skills becoming obsolete or just less valued, you suffer an injury, or simply old age slowing you down to the point where income generation is no longer possible. Owning a home and/or owning income generating assets is essential for you to achieve financial autonomy and gain the sort of life choices that you seek. And the starting point to building wealth is to save. You don't wake up one morning and have $100,000 in your investment portfolio – it starts with that first $100 saved and invested. So play offence with your money and invest. It needn't be huge amounts to being with, but make a start. Improving your income generating skills is also a great offensive play. Deeping or widening your professional knowledge can see your income rise, enabling a higher rate of saving and investment to build wealth. Improved skills also make you more employable, enhancing your overall financial resiliency. So think about what sort of training or experiences you could undertake that would increase your value to an employer, or if self-employed, enable you to increase your hourly rate. And my final financial offensive move is to make an active choice as to how your sup

Episode 50 – Tim's big jump - from bank manager to primary school teacher Today in the episode, we talk to Tim Lavrey's career change story from being a bank manager to a preschool teacher In this interview we cover: Tim's love for football The story of Tim's career change and how he made his move and decision to leave the bank and teach His redundancy and how it contributed to his career change Going through self-doubt during the process Their 6-month period of planning for his career shift, finances, income and budget and their 3-month trial period before the big change How Tim prepared for university and teaching and the struggles he went through Examples of how he created opportunities for himself while studying and after graduation His feelings about his new profession as a teacher His thoughts about the things he'd do differently How good planning, structure, and discipline can help with your financial stability The story of how Tim's wife, Mary Anne, made a big change in her career recently How teamwork contributed to successfully making the changes in their lives Links mentioned in the show Mini Retirement Planning Checklist

Episode 54 – Pay off the mortgage or invest? A shout out here to Christine Calnan who emailed me about this dilemma – whether it is best to put your savings towards extra mortgage repayments, or should you instead be investing? This is one that does come up a lot when I'm working with clients, and it's certainly not a question with a simple one size fits all answer. So let's take a look at the factors you should consider to find the answer that's right for you. Christine observed that whilst the question of whether savings should be put to extra mortgage repayments or investment is something faced by plenty of people, there's not a lot written about it when you do a bit of Googling. And there's a good reason for that – the real answer is "it depends", and no one likes to give, or receive that answer. Arriving at the answer that's right for you is very dependent on 2 key assumptions – what will future home loan interest rates be, and what will the return be on your investment. Boil it down and the question is really, "will I earn more on an investment than I'll pay on the mortgage?" Mortgage rates are at historical lows at the moment, typically around 4.5%. Both the US and Australian share markets have averaged returns of a little under 10% over the long term. Now there is tax to pay on your share investment, and this is one key reason why there is no one size fits all answer – we live in a marginal tax world where different people pay different rates of tax. To further complicate matters, Australian shares throw off franking credits, which offset some and potentially all of your tax liability on these holdings. To lean on the conservative side, let's assume that a third of your investment return goes to the tax man. Your 10% total return becomes 6.6%, still comfortably ahead of the mortgage rate. So on this simple analysis, the preferred strategy would seem to be to priorities investment in shares over additional mortgage repayments. The tricky bit though is considering whether current mortgage interest rates will continue into the future. If you send your savings to an investment, what happens if in 5 years' time mortgage rates rise to 8%? At this sort of level it would be very tough for an investment to provide an after tax return that would exceed this. Then there's the question of share market returns and a topic I've raised before – sequencing risk. It's all very well to say the average share market return is 9 point something percent, but it varies a lot year to year. Will you actually experience the average return? So with the investment option, you have uncertainty as to the result you will get, whereas under the extra mortgage repayments scenario, you have certainty, you have definitely saved the home loan interest rate. The value of that certainty should not be under estimated. Paying off your home loan is effectively a guaranteed outcome. To help address the uncertainty of your investment return, you should ensure that when planning your strategy, you're thinking of a minimum time frame of 5 years, and ideally 10 years plus. The longer you invest for, the more likely it is that your outcome will come in at around the long term average Perhaps it's worth considering whether this mortgage vs invest question need be so binary. Could you do both? At its simplest, if you can save $400 per month you could quite easily put half off that to your mortgage and invest the other half. Hedge your bets. You could spice things up though. Maybe you direct your savings to investments, but then have all the income those investments produce paid off your home loan. Or maybe you even use some equity in your home to buy investments, potentially creating a negative gearing scenario. You're savings go towards servicing this new investment loan, and once again the investment income is used to make extra mortgage repayments. Because you've borrowed to kick things off, your investment portfolio will be bigger, meaning your investment income will be larger, which means more money to pay off your home loan. Another way you could go is to focus initially on paying down the home loan with all of your savings, and then once this is done, using the equity in your home to borrow and buy an investment portfolio. So a sequential, rather than parallel approach. The attraction of this is that you've achieved the certain saving of having paid off your mortgage, and then once you re-borrow to invest, the interest expense will be tax deductable given the investments will produce taxable income. And because you're borrowing against your home, the interest rate will be low compared to the alternatives, which will help make the strategy profitable. The only downside with this approach is the opportunity cost of having no market exposure during the loan repayment phase. It's worth addressing the fact that I've talked here about share market investments and not property investments. There's a couple of reasons for this, but it mainly boils

Episode 53 – Investment Power-Ups I was binge watching a fictional Netflix series last week about a group of 4 guys who had made an app that had become a huge hit, Angry Birds style. Each of the 4 guys had particular skills, and there was a scene where one of the guys was feeling pretty lost. He bemoaned to his friend how such and such was great at art, another coding, and the 3rd guy, the one he was speaking to, was great at game design. But he asked, what was he in the group for? His friend considered this for a moment and said, "you know what you are in the team for? You're the power-ups. When we were just about to run out of money, you went out and found more. When Johnny went off the rails, you brought him back. You hired some key people without whom, none of this success would have happened. And you made us all rich when you found a buyer willing buy our business. So, yeah, you're the power-ups". It was a great scene and it really stuck with me. It also made me think about what the power-ups are in the investment world. What are those things that really accelerate your investment plans? Well, I believe there are 3, and that's what we'll be exploring in today's episode. A great way you can keep up with what's happening here at Financial Autonomy is to sign up to our monthly email update "Gaining Choice". You can do that by clicking on the Updates tab, which, depending on the device your using will be either at the bottom or right hand side of the page. As well as sharing the episodes released in the previous month, I share a Financial Autonomy experience or observation that've I've come across, news about what we've got coming up, and a podcast tip of the month. Importantly, it is only monthly, so we won't be filling your in-box with more content than you could ever consume – as you will hopefully have noticed with these fairly short podcast episodes – quality over quantity is our mantra. Wikipedia describes power-ups as "objects that instantly benefit or add extra abilities to the game character as a game mechanic." If you're old enough to remember Pac-Man, the power-up of eating the power dots in the corners let you chase the ghosts, or in Sonic the Hedgehog, the most common power-up made you go much faster. From Super Mario Bros to modern day Clash of Clans, power-ups are an integral part of most video games. Whilst all of these games can be played without the power-ups, the core objective of the game is either impossible or at least extremely difficult to achieve without using them. And so when thinking about the achievement of your Financial Autonomy goal, whether that be a 6 month mini retirement at age 40, a career change next year, or a move to a regional town, what are the investment equivalents of a power-up, that can bring your goals within reach. I have identified 3 investment power-ups. They are: Regular savings and dollar cost averaging Gearing Dividend reinvestment and compounding Let's take a look at each in some detail. Regular savings and dollar cost averaging If you want to build up wealth to gain the choices in life that you deserve, then you need to save. And there is no better way to save than to commit to a regular savings plan. By this, I mean you have an automated process whereby a certain amount of money is transferred out of your normal living bank account and into investments. There are two reasons why this strategy brings success. For one, it bakes in discipline. The investment just happens. No chance for you to spend the money on some other non-essential item, or use the cash to book a flight to Hawaii. Part of the discipline benefit is also that it ensures you live to your budget – the money just comes straight out of your account, so you can only live off what remains. Savings discipline is far from an easy thing, so don't under-estimate this benefit. The second reason an automated regular savings plan works is because of dollar cost averaging. Now I realise this is a bit of jargon, which is something I usually try to avoid, but in this case it's not a tough concept to get your head around. Dollar cost averaging deals with the fact that there is never a perfect time to invest. It reminds me of something a keen fishing friend of mine once told me – "the best time to go fishing is whenever you can". So rather than picking one moment in time and hoping that it proves to be a great entry point for your investment, you invest regularly, typically monthly. The price that you pay for your investment will vary month to month. Some months you pay a little more, some a little less. But over time what you get is the average price. Sure you don't get the lowest price, but you also don't get the highest either. A great example of how effective this process can be was seen during the 2008 period where share markets declined considerably. Many people who invest discretionarily, put things on hold during that period and sat on their cash. But for those with automated regular savings pla

Episode 52 – Mini-retirements In several previous posts we've looked at strategies to help you achieve early retirement. I've often spoken about the fact that early retirement in our Financial Autonomy context doesn't mean spending all day sitting on the couch watching the Simpsons. Our objective is gaining the flexibility and choice to pursue the things that we're interested in, and not have our life dictated by the need to earn money. An alternate way to gain flexibility and choice is through the concept of mini-retirements. Rather than work, work, work until a particular age, and then give things away totally, the idea of mini-retirements is that during your working life you step away and take meaningful breaks, to refresh, recharge, and explore life and the world. A mini-retirement might be 3 months long or it might be 3 years, but the idea is that you will take this time, and then return back to the income generating world. Often people planning around this approach will target several mini-retirements in their working life. For instance I know of a person whose goal is to take 6 months off every 5 years. I think the concept of mini-retirements aligns really well with Financial Autonomy and the idea of gaining choice. So let's jump into today's episode and explore how you might make mini-retirements a part of your life plan. When researching for this post one of the first pieces that I read was by Ric Kelly – How a mini-retirement brought meaning to my life. Ric certainly didn't mess around. He quit his job and spent the next 5 years, living across 10 different cities studying, researching, writing, and having the time of his life. One particularly interesting observations that Ric made was to not think doors will close because you've had an employment gap. When he was ready to return to work, the first person to offer him a job was his old boss. With that in mind a great suggestion he had was to have some fun, but also set some goals. What will you do during your mini-retirement? What new skills will you learn? If travel is part of your plan, perhaps learning a new language is a piece of the puzzle. Maybe you have a go at an entrepreneurial idea that's been rolling around in your head. Or perhaps you'll master the piano. One of my clients took time out to do a Masters in a topic totally unrelated to the work he had been doing, but in an area he had a passion for. He's got 6 months to go, and the future certainly looks interesting for him. He'll probably go back into project management, which is where he worked before the studies, but will use the cash flow from this work to develop an environmental project that he's formulated as part of his Masters thesis. Tim Ferriss in The 4 Hour Work Week also wrote about the concept of mini-retirements. Tim's definition of a mini-retirement is closer to an unpaid vacation than Ric Kelly's 5 year break, but the objective is the same – refresh, recharge, and grow as a person. One interesting way that Tim and others have brought this to life is through volunteering in a developing country. When I was in Cambodia a few years back I came across several people doing exactly that. I met an Australian who worked in IT, who was volunteering at a school for orphans teaching them all sorts of computer skills, from basic typing and data entry, to graphic design and web site development. It's these sort of skills that will enable Cambodians to participate in the global economy and raise living standards. I also met an American couple who were volunteering with a program to build houses for people. The organisation provided labour and I believe contributed to the cost of materials. What a fantastic leg-up this must provide to the people they help. I've met people who have worked in animal rescue shelters in the Amazon rain forests of Peru, and others who have volunteered at school camps in Ecuador. There are plenty of opportunities that you could explore, and the personal development that you could gain would be just immeasurable. In many of the articles on mini-retirements it appears to be something of a single person's game. Yet mini-retirements for families makes a huge amount of sense. Your kids grow up so fast, and your opportunity to participate in their growth is a specific window in your life. So how would a mini-retirement look for someone with children? Well I guess the first observation is that people, most often women, taking time out of the paid work force to raise children is not something new. But that's a long way from "retirement", so that certainly doesn't count. Increasingly common though is both parents working, and simultaneously parenting and doing all the exciting normal household stuff like cleaning and laundry. With this sort of load, mini-retirements for families are possibly an even greater need than for the kid-free set. A popular mini-retirement for Australian families is the big road trip either around or through this huge country of ours. Whether

Episode 51 – Can you pass the financial literacy test Want to minimise the chance of living off nothing but a meagre age pension in later life? There's a great proverb that I heard many years ago and have never forgotten "a fool and his money are easily separated". So how do you ensure you're not the fool? The solution is to have at least a basic understanding of the financial world. We call this Financial Literacy. That doesn't mean you need to become an expert – you can hire people for that. But you need to know enough to be able to sniff out a bad deal, and to avoid those big missteps. You need to be able to understand the risks you are taking, and gauge whether the likely return adequately compensates for that risk. So, today's post takes on a question and answer format. Let's see how you fare when it comes to financial literacy. Question 1 You log onto your internet banking and your credit card shows an available balance of $7,400 and an account balance of $2,600. Should you make any repayments on this account? The answer is YES. The account balance is the key element here – this is what you owe, and if you don't repay it, you will pay significant interest. Many, many people look at the available balance and think in terms of "well I've got that much still to spend". I very much suspect banks present this figure hoping you will do exactly that. This available balance mentality is what traps a lot of people when it comes to credit cards. Focus on what you owe, and get this down. Question 2 Let's stick with credit cards for a moment longer. Say you have a credit card where you owe $2,000, with an interest rate of 18% and you pay only the minimum repayments each month. Assuming you don't spend any more on that card, how long will it take you to fully pay it off: less than 5 years, between 5 and 10 years, or more than 10 years? The answer is that it will take you over 15 years to pay off your credit card if all that you do is make the minimum repayments each month. You'll pay a fortune in interest too. Just like with the available balance mind tricks, the banks requirement for a minimum repayment is not because they are your friend. They want you paying as much interest as possible for as long as possible. Ideally you would repay your credit card every month in full so that you avoid paying any interest. If you aren't able to do that, then certainly ensure you pay considerably more than the minimum suggested by your bank. And of course if you find credit card debt to be a problem, have your limit reduced to minimise the potential damage. You could have the limit reduced to $1,000 for instance – enough capacity to buy some concert tickets online, or deal with a short term emergency, but not so much room that you could dig yourself into a really deep hole. You could go the whole hog and do without a credit card altogether, though in the modern online world I would certainly find that challenging. Question 3 Your Gross salary last month was $6,000 and your Net salary was $4,500 - how much was paid into your bank account? The answer is $4,500. I find a lot of people get confused between gross and net salary, and I guess they are quite jargon sounding terms. Your gross salary is what you employer pays out. If you're sitting down for a pay review and your boss talks about giving you a pay rise, they'll be talking about your gross salary – how much they pay to have you on the team. But what is more interesting to you is your Net salary – how much actually goes into your bank account. The difference between Gross and Net salary is mainly deductions for tax and superannuation, though you may have other deductions as well, which leads nicely into the next few questions on the most common other form of deduction from your gross income – Salary Sacrifice. Question 4 You catch the train to work in your office job. You have a 3 year old car which you own debt free, and it's meeting your needs. One lunch break you listen to a presentation about how you could salary sacrifice to buy a brand new car. They suggest you will save tax. Should you take up this opportunity? Whilst there will be circumstances where salary sacrificing to buy a car might make sense, this is certainly not one of them. For starters, you don't need another car! When you salary sacrifice to buy a car you are borrowing money to finance the deal, and then paying it back through your normal pay each fortnight. That means you're paying interest on a loan – a cost to you. Also, because they always focus on new cars, the amount tends to be a lot, usually far more than you would spend if you were just going out to buy a car on the weekend. I've seen so many times where people buy a car via salary sacrifice for say $60,000, when if they were just out shopping for a car with their savings, they'd never spend that much. Cars are really bad investments, in fact they're not investments at all. They cost you money to keep, and they decline in value from the moment

Episode 50 – Mini Retirements, 3 day work week, self employment and more - Stuart Barry's Financial Autonomy success Today in the episode, we talk to Stuart Barry about his life story, his love for travel, his published book, his business and how he values his time. In this interview we cover: Stuart's 35-year career journey in the finance industry How he started his current career as a financial planner Countries and places he has worked in Breaks and adventures or "mini-retirements" that Stuart has done The fears he faced about taking mini retirements How he managed to bring himself to take a break and travel The reason why he didn't need much financial preparation during his 1st break The 2nd break he took with his wife and their financial state at that time The experience he had coming back from his first break to finding a new job Advantages of maintaining a good relationship with your employers The things that drew him to owning his own business and why he says building a business isn't for everyone Coping with living in Hobart and the challenges you may encounter with such a change The importance of having a job that suits your skillset and gives meaning to your life Things that surprised him about moving to a regional area How his weekly schedule looks like Valuing part-time work His published book - The Rich Greenie Prioritizing the time we give ourselves Links mentioned in the show The Rich Greenie

Episode 49 – Bike paths, Bitcoin, and Risk Budgets I go for a bike ride most Sundays. Wherever I can, I ride on a bike path. Often there is a road running parallel to the bike path. Very often, cyclists are on the road when they could just as easily be on the bike path. Now I understand why they do this. It's because you can go faster on the road than on the bike path. But the thing for me is, you don't get killed on a bike path. No cars to get under the wheel of. I know it doesn't happen often on the road, but cyclist definitely get hit, and occasionally killed by cars. So why would anyone choose to ride on the road when there is a perfectly good bike track option? I ask because I often see the same thing with investing. People could use a low risk option and achieve their objectives. Yet they chase higher risk options. So that's what we'll be exploring in today's post - high risk and low risk investment options, and when it makes sense to use each. Because I suspect that when investing, some people ride on the road, not realising that there's a perfectly safe bike path only meters away. A good place to start is the concept of a Risk Budget. This is a term used by professional money managers, and can certainly have an application in investment planning for normal people like us too. Institutional investors have a myriad of analysis tools that allow them to optimise their portfolios for their risk budget, but for the rest of us, it's enough to just understand the concept and reflect on whether we're behaving logically in this context. The idea is that a given investor has a certain amount of risk that they're prepared to stomach. Most typically in this context risk is referring to the volatility of potential outcomes. So a low risk investment might say produce returns in the +9% to -3% range, while a higher risk investment might have a range of returns between +15% and -%10. So the higher risk option has a broader range of potential outcomes, and therefore greater uncertainty. Let's say that given your time frame and general temperament you're after an investment in that low risk range. One way to approach your investment planning would be to think in terms of having a certain amount of risk that you're prepared to take on – to spend if you like. Now one extreme way you could spend your risk budget would be to use a small amount of investment money to buy lottery tickets, and leave the remainder as cash in the bank. Most likely the lottery tickets will prove worthless and so you'll lose money there, but your bank deposits will earn a small amount of interest, and so in combination your outcome will be within an acceptable range. Another way you might deploy the same risk budget is to put 30% of your investment amount into international shares, and the remaining 70% in term deposits. Or perhaps you put 20% into a really aggressive investment, perhaps that includes borrowings, and place the other 80% in a bond fund. The point is, there are all sorts of ways that you could structure your portfolio whilst still retaining the same total amount of risk. This is the concept of a risk budget. You have a certain amount of risk to "spend", and as an investor, you want to try and find the most efficient way to spend it – get the most bang for your buck I guess. Generally, a key way investors try to optimise within a given risk budget (even if they've never heard of the concept) is to diversify. So in the examples I gave earlier, none of the potential solutions involved a single investment. Diversification is really important when thinking about risk, because another important consideration when planning an investment portfolio in a risk budget context is that you are trying to find the most efficient use for that level of risk. So if you're prepared to take on a certain level of risk, what you don't want to do is chose an investment option that delivers a lower likely return compared an alternative with the same level of risk. Let's say two investments were presented to you. Their range of returns each year was expected to be between +10% and -5%. But one option had an average expected return of 8%, whilst the other had 6%. Same level of risk for each, but one is likely to produce a higher return on average. Which one are you going to choose? Pretty easy isn't it – you'll go for the one with the higher return. Let's flip it and consider instead two new investments. Both have an expected 5 year return of 8% per annum. Option A however has an expected range of returns year to year far more diverse than option B. So with option A, your yearly return might be +20%, followed by -12%, followed by +14%. Whereas option B is much more steady as she goes – 7% one year, 8.5% the next, etc. So each investment has the same average return over a 5 year period, but option A has a more volatile path to get you there. Again, which investment would you choose? There's probably a few thrill seekers listening who would say option A, but

Episode 48 – the 10 worst things you can do to prepare for retiring early So your financial autonomy goal is to retire early. For some that might mean retiring at age 35 and for others age 58. Often, especially for those looking to retire at the younger end of the spectrum, it will mean ceasing their current role, but still engaging in some income producing activities. So retiring early looks different for each of us. We usually talk about what you should do to achieve your financial autonomy goal, but today I thought I'd flip it and instead look at what you should avoid. Want to ensure your early retirement plans never come to fruition? A good place to start would be to have no handle on your cash flow. Achieving any sort of retirement goal is a dollars and cents equation. If you boil it down, you need to solve how you will have enough money to meet your living costs. Now if you don't know what your living costs are, how can you possibly know whether retirement is possible, how much you need to save, and whether you have enough saved to last the rest of your life? So to ensure failure, don't have a budget, and don't in any way monitor what you spend. Next, since you aren't paying any attention to what you spend, just put it all on the credit card. It's easier now than ever before, just tap and go. Come on, you need those purple Converse runners. And why have last night's left overs for lunch when you could have a burger bigger than your head, with fries on the side? Just keep slapping that credit card down and if the bank that gave it to you starts making life difficult by asking you to actually pay it off, well just go to the next bank and ask for another card – what could go wrong? If only it was as easy to pay off a credit card as it was to build up a credit card debt! The next thing you could do to help ensure your early retirement dream never becomes a reality is to not save. Spend every cent you earn. Saving? Isn't that something my grandparents did? So don't put aside money in a bills account. Don't put money aside for emergencies or a holiday. And certainly don't even think about building up enough money to make any investments. Which leads nicely into number 4 on the list of the worst things you can do to prepare for retiring early – don't invest. Compounding? That's got something to do with chocolate hasn't it? What a foolish idea it would be to have your money actually earn new money without you having to even get out of bed. But let's say you've overcome this mental barrier. The next thing you can do to help torpedo your chances of early retirement success would be to invest too conservatively. Just leave all of your savings in the bank, or maybe you really stretch yourself and take it up a notch with a term deposit. To illustrate just how bad a decision that would be, if you had $20,000 saved and you left it in the bank at call earning 1.5% interest – which is actually a pretty good rate on at call money at the moment – in 20 years that $20,000 would grow to $26,937. If instead you used that $20,000 to purchase a growth investment such as an exchange traded fund or managed fund, and it earned 8% per year, your $20,000 would become $93,219. So your decision to "play it safe", cost you over $66,000. Armed with this knowledge then another good way to lock in early retirement failure is to ignore your superannuation. Now it may be that in your mind super has nothing to do with early retirement because you can't access it until you're old anyway. If you think that way I can only assume you're planning on dying before age 60. Because if your hope is to live long and prosper, then Australia's superannuation system is too generous to ignore. Zero tax on earnings and drawings, plus enormous flexibility as to how much you take out, when you take it out, and how your savings are invested. If you need convincing, click on the image below and download the Early Retirement for Australians – the multi-phase solution white paper that we've produced that maps out how superannuation fits into a viable early retirement plan. An important part of ignoring your super relates back to investing too conservatively. If damaging your long term financial future is your aim, consider your time frame until age 60, and particularly if it's more than 7 or 8 years away, don't put it in the High Growth or Aggressive investment options. Who wants those extra returns anyway? Having said that ignoring your super is a mistake, an alternate approach to sabotaging your financial well-being is to check your account balances every day or two. Even once a month is likely too frequent. This is because investment markets are volatile day to day, something often referred to as "noise", like that static on a radio when it's not quite on the channel. If you're checking your balance too frequently you can get caught up in that noise and make knee jerk decisions that are not in your best interests in the long term. Most often this translates

In this episode, we interview Sean Callanan, a podcasting guru, and owner of Sports Geek. After 15 years of working for IT, Sean started his company, Sports Geek, out of his passion for sports and his expertise for technology in 2009. He eventually started his own podcast in 2014 under the same brand. In this interview we cover: Background on Sports Geek and the podcast The start of Sports Geek The mentality Sean took to make 9 months without income work for him Overcoming the imposter syndrome The case study on Collingwood Football Club doubling their following on Facebook Goal setting and how it has helped him achieve his plans Managing variability in income from being an employee to owning a business and how he managed to make it work especially with a family Handling income when he doesn't hit his monthly targets Inventing different ways and motivation of hitting your goals and targets Looking back, what Sean would have done differently? How adding personnel has helped his business Sports Geek in 5 to 10 years Links mentioned in the show The Miracle Morning - Hal Elrol Sports Geek Linked In - Sports Geek

Whether it's a stall at a local market selling hand knitted beanies for dogs, running an online store via Amazon selling rainbow coloured shoelaces, or designing the occasional band logo on 99 designs, I believe EVERYONE should have a Side Hustle. We're here after all to find ways for you to gain choice in your life – that's what Financial Autonomy is all about. And if it's choice that you want, there are few greater enablers than a Side Hustle. So in today's post, we're going to explore the reasons why I believe everyone should have a Side Hustle in their life. I've come up with 6 reasons why I believe we should all have a Side Hustle. I'm sure there's many more, but hopefully these ones will give you the kick along needed to start something of your own. 1. The learning As I mentioned at the top, a Side Hustle can take all sorts of forms, and the one that's right for you needs to align with your personal interests and skills. But let's take as an example a simple online store. Maybe you sell through Amazon, Ebay, Etsy, or whatever makes sense for you. Hopefully it's successful and you get the financial rewards that you are seeking. But there is so much more to be gained than just the financial benefits. You have to think about marketing. Will you promote on social media, or Google? Will you embark on a paid advertising strategy, or go for organic word of mouth? If it's social media, which platform will you focus on, how will you source the images, and on and on. You'll learn a tonne just working through that. But of course if you're running an online store there's a lot more than just the marketing. Where will you source your product? How will you get it to customers? And how will you determine your price? You've got book-keeping, tax, and all sorts. Now I'm not trying to put you off here – far from it. You'll be starting on a small scale, and because it's not your full time source of income, you can take things at a pace that works for you. But I'm sure you can get a sense of just how many different things you'll learn as a result of your Side Hustle adventure. So how will that help you? Well imagine if you're in a meeting at your day job a few months from now and a manager is bemoaning the fact that targets aren't being met. Perhaps someone throws out an idea of a new approach, which meets with no enthusiasm within the room. But you pipe up and say something like, "I think that's worth giving a shot. I could run a small campaign on Facebook to that target market, allocate $10 a day for 3 weeks, and we could see if there's any interest". Your colleagues all rock back in their set like a bomb just went off in the middle of the room, and you're ranking on the internal totem pole just moved up several places in management's eyes. I could stop just here, because I believe the learning gained from giving a Side Hustle a crack is reason enough that everyone should have a Side Hustle. But I won't stop here. 2. Resilience Resilience is something we consider a lot when developing financial autonomy strategies for our clients. Life isn't always chocolates and roses. Unexpected things happen, and often you wished they didn't. One of the biggest set-backs many of us could face is losing our job. But if you have been working away on a little Side Hustle, perhaps this set-back actually provides an opportunity to see where this little side project can go. Instead of spending 5 hours a week, now you can spend 40 or 50. Maybe the business develops into something to replace your former wages. Or perhaps it gets to a size where it's sellable, as happened with Sharon in episode 41. Maybe, with what you've learned in your side hustle, you can apply for jobs that previously you would have dismissed because you lacked the pre-requisite knowledge or skills. I know of someone who worked in the automotive industry and of course got made redundant. Now his skills from that old job weren't especially useful once he'd left, and for the few jobs that could use those skills, there were hundreds of potential candidates to compete against. But he'd always had an interest in automation, and whilst still working had done a course on security systems and the technical aspects behind these systems. When he left the car industry, it took him no time at all to get the necessary licenses and start working under someone installing sophisticated security systems. Now in this example his Side Hustle hadn't developed into a money making proposition at the time he lost his job, but the mere fact that he was learning new skills meant that his resilience in a time of adversity was enormously enhanced. 3. The compounding effect of some extra cash Albert Einstein apparently said "compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn't, pays it". Let's say you've got a $300,000 mortgage. And with the current repayments that you're making, you're on-track to have it repaid in a little under 19 years. If your Si

Financial Autonomy is all about gaining choice, and very often, attainment of that choice goal results in a career or life change. In past posts we've explored numerous ways that you might be able to get yourself into a position to gain the choices that you deserve. In today's post I thought it might be worthwhile stepping through a brief checklist of the things you'd want to plan for immediately before you take the big step. If making big changes in your life were easy, you'd have already done them. In fact I guess if they were easy, they wouldn't be considered BIG changes. The parts that make these changes difficult, are precisely the reason why some good planning is essential. This is not a post on what your career or life change will be. I'm going to assume here that you've done plenty of introspection and have decided what it is that you want in your future. I'm also assuming you've done all the training, networking etc, and you're now at the point of making your change. So, let's look at some key things that I'd suggest you turn your mind to before making the leap. Define success Often overlooked, but absolutely essential is the need to define what success looks like in your career or life change. Is the aim to get a better work/life balance, increase income, take on a new challenge, or be able to start a family? This might be a bit old school, but for my big goals, I have them written on a piece of paper and bluetac'd to the inside my wardrobe. I don't read them every day, but I certainly notice them enough to keep me from getting waylaid. So take out a piece of paper and write "success =" and then write what your definition of success in this big change project of yours is. Then stick that somewhere prominent for you. This will become your North, your bearing point as you navigate your career or life change. Identify obstacles Significant changes are never simple, and so it is inevitable that you will have to overcome obstacles on your journey to the change you are after. Not all of these obstacles are foreseeable, but plenty are. So why not plan for them? Create a simple 2 column table – one column lists the obstacles that you can foresee, the other, what you might do in response. So for instance let's say your big change is that you're quitting your current job to start a new business. You might have an expectation that it will take 3 months before any revenue starts coming in. But what if it takes 6 months? List this as an obstacle, and then note down a solution – perhaps you redraw on your home loan for instance. Maybe, in thinking this problem through you realise that it would be worth getting an extension on your home loan, so that if this problem arose, you would have funds available. The bank is likely to look much more favourably on you applying for an extension when you're still in your current job, then after you've quit and things in your new business aren't going quite to plan. This process will also have the effect of reducing your stress levels. If you've thought through the most obvious obstacles in your path, and have solutions ready to deploy as needed, your stress levels will go way down. Income Whether you derive happiness from nice clothes and eating out, or living simply and frugally, you can't get around the fact that it costs money to live. Hopefully you will already have in place some form of Income Protection insurance. This cover replaces typically 75% of your normal income if you become unable to work due to illness or injury. It would be well worth your time reviewing your cover before you make your change. As an example a friend and client of mine recently told me that he planned on resigning from his current job, and going in with 2 other guys to start a business. He'd continue doing the same type of work, but now for a business of which he was a part owner. As part of their business plan, none of the 3 were to take any wages for the first year of business operation. Now he had Income Protection in place – I know because I arranged it. But it was a style of policy where the amount payable at claim time is determined by what you were earning immediately prior to you becoming unable to work. So I pointed out to my friend that at least during the initial 1 year period of the new business, his Income Protection cover was worthless. We determined that this coverage was important in the broader context of his financial position, and so prior to him leaving his employer, we were able to get the policy changed to an Agreed Value type, which meant the payout amount was agreed in advance, irrespective of what he was earning at the time of claim. Now most policies aren't Agreed Value, certainly not those within super, but I suspect most people bounce along totally in the dark on this, only to be disappointed when the unexpected happens. So I'd very much encourage you to review your Income Protection insurance, and perhaps all of your personal insurances, well in advance of you ma

What a wonderful era that we live in where holidays and travel are a regular feature in our lives. I don't imagine that through the bulk of human history there was enough surplus of time, food, and resources to allow you to just take time off to explore the world or relax, unless you were super rich. Even as recently as my grandparent's era the only international travel done was to fight in World War 2. So we're in an incredibly privileged time, where a return flight to one of our Asian neighbours costs less than your annual car rego. For the adventurous or curious, opportunities certainly abound. But there's two key ingredients you need to truly satisfy that travel bug within you. One is money and the other is time. And that's where financial autonomy becomes relevant because the choices it enables, can be the solution to both. My hopefully fairly uncontroversial observation is that people who listen to podcasts and read blog posts are those who like to learn - they're hungry for knowledge. And for many people with that trait, a curiosity of the wider world fits hand in glove. Many people that I speak to with ambitions to achieve financial autonomy have a goal of regular overseas travel. So what's needed to make that happen? Well the first is the flexibility to be able to take the time to travel. If you're an employee you'll have your normal 4 weeks leave entitlement, but is that enough, especially if you're in a role where at least 1 week of that is gobbled up with compulsory Christmas shutdowns? The second requirement is of course money. Sure, there are parts of the world where you can travel quite cheaply. But you still need to get there, and cheap living doesn't mean costless living – you still need money for food and shelter no matter where you are. So what could you do to realise your travel bug dreams, and how could a financial autonomy mindset help you succeed? Well, here's a few ideas for you. Rent out your place while traveling Of course anyone with the slightest travel bug inclination will have considered using AirBnB to solve their accommodation needs when on the road. But have you thought of flipping the equation and using AirBnB (or one of their many competitors), to rent out your house while traveling? The income generated through renting your place out could cover many a night on foreign shores. Could a Side Hustle help? Regular readers and listeners will know that very rarely can I get through a post without mentioning Side Hustles. So how could they help you achieve your travel goals? Well, for one you could direct all earnings from your side hustle to your holiday account, so your normal day gig can continue to be devoted to things like paying off the mortgage or saving a deposit for a home. Your side hustle could perhaps also provide you with the flexibility needed to travel. Imagine if you built up a drop-shipping internet business that generated $2,000 per month in income for you for instance. You could run that business whilst travelling, and while $2,000 a month would barely get a roof over your head in the capital cities of Australia, in much of the world it would be enough to live a frugal but totally satisfying and fun life. If you haven't already done so, download my 50 Side Hustle Opportunities for Australians pdf to find a Side Hustle with your name on it. Credit card points Now I know credit cards are playing with fire, but we're grown-ups here so I'm going to make the assumption that readers and listeners of Financial Autonomy are smart enough to manage a credit card without winding up bankrupt. Maximising, or perhaps gaming credit card points schemes seems to be big in the US, but I'm sure it's possible in Australia too. Depending on whether your goal is domestic or international travel, find a credit card that provides Qantas points for instance, and then put all of your spending through that card. Just ensure you clear the debt each month, as the savings generated through using the points would be nowhere near enough to cover the interest the credit card company will charge if you run up a debt. Always remember, the bank giving you this card is not your friend. Delay your retirement Now I'm using the word retirement here in a broad context. Your pursuit of financial autonomy might mean you aim to retire at age 45, so please don't think I'm talking about working into your 80's or something unless that's something that you really want to do. But let's say it is an age 45 goal. Maybe to satisfy the travel bug gnawing away at you, you push that back a few years and do some travel in your 30's and 40's. I read an interesting article recently from someone who had retired early, and he noted that his need for holidays reduced once he retired. When he was working he was stressed and under pressure. So some travel was an important and well looked forward to release valve. But once he'd escaped that corporate pressure, the need evaporated. So maybe it's worth considering whether yo

As a kid, family holidays meant board and card games. Canasta was very popular, as was Monopoly, Cluedo, Squatter, and various other games. As an adult my love of games has continued and fortunately I've been able to convince my home tribe to join me (and usually crush me). Of the various games that we play, Settlers of Catan has to be my favourite, and I know I'm not alone. So today's episode, is a bit of a nerdy self-indulgence, but I hope you'll enjoy it. For those fellow Settlers of Catan lovers, hopefully these musings help bring your early retirement dreams closer to reality, and for those who've never had the pleasure of a great game of Catan, I hope this inspires you to put the word out amongst a few friends, and give it a go. One of the hottest trends circulating around the globe at present is board and card games in cafes and bars. Perhaps we've started to reach a tipping point with social media and screen time, where the appeal of getting out of the house, not a screen in sight, holds enormous appeal. The opportunity to talk and have fun with actual people in the same room as you satisfies a deeply entrenched need for connectedness. The game in a café also solves another potential social obstacle – what to do if we run out of things to talk about. I'm not in the dating phase of my life, but if I were, I think I'd go with a game in a café pretty early as a really low-stress ice breaker. You'd certainly get to know someone a whole lot better than sitting next to them at a movie. Settlers of Catan, the German game released in 1995 has undoubtedly been an essential element of this rise in board game popularity. Some refer to Settlers of Catan as the modern day Monopoly, though whilst I enjoyed many hours playing Monopoly as a child, now that I've experienced Catan, Monopoly just wouldn't get a look in. Reid Hoffman, LinkedIn's founder, Microsoft board member, and a board-game aficionado, says that Settlers of Catan is "the board game of entrepreneurship". So how does Settlers of Catan help with your early retirement aspirations? I believe many of the game elements have parallels in the planning and investment process. Let's start with Settlements. To have success in Catan, you need a) to have settlements in good locations, and b) to have as many settlements (and cities) as possible. The order of those two factors is not by accident. Broadly speaking, the more settlements you have the better, but as with investing, quality matters. For the uninitiated, Settlers of Catan requires players to gain resources in order to build or buy things. You gain resources either through the placement of your Settlements, or through trade. In some cases claiming a particular port that links to a resource you are well endowed with provides you with a solid path to victory. So when thinking about planning your Early Retirement, before you make any investments, think about what your broader goal is, and as with the placement of your settlements, remember that quality, especially early on, is more important than quantity. Another really important aspect of building wealth to enable early retirement is recognition of the importance of compounding returns. All of us, when we start investing, start small. And sometimes it can feel like progress is glacial because the incremental gains month to month are perhaps only in the single or low double digits. But reinvest those earnings, and you start to get earnings on those initial earnings, and like a snowball rolling down a hill, as time progresses your investments get larger and larger. The magic of compounding! It's important therefore to not be put off by the early slow progress. We see the parallel of this in Settlers of Catan. Early on we have only two settlements, and so the accumulation of resources can be a little slow. But as the game progresses, we eventually build extra settlements, and ultimately cities, and so we gain from the benefits of compounding – with each turn in the latter part of the game, we tend to get more and more resources. You can't win at Catan without trading, and that means you can't win in isolation. If you are to realise your early retirement goal, you similarly need to involve others. The most obvious is your significant other if that is the circumstance you are in. It is extremely common, when I sit down with a couple for an initial meeting, to find that they've never discussed their long term plans with one another. One might be thinking that she'd like to retire as early as possible, whilst her partner might be worried about being bored, or losing the social interaction of being in the workplace, and want to work as long as possible. Stepping outside your immediate household circumstance, a relationship with a trusted advisor is very likely to be wise. We can't all be excellent at everything, so consider where your knowledge and interest gaps are, and find people who can plug those holes for you. When investing, we often talk of the need to di

On the off-chance that you're one of the few people who read the information sent out by their superannuation fund, you might have noticed that in recent years they've added an Ethical Investment option. Now the exact labelling of that option will vary – it might be called Socially Responsible, Sustainable, or just Responsible, all of which are interchangeable terms for ethical investment options. So given these options are popping up like mushrooms in a wet cow paddock, what do they mean, what's happening under the hood that makes then different to other investment options, and bottom line – should you care? Each year the Responsible Investment Association of Australasia (RIAA) produces a Benchmark Report which tracks the adoption of ethical investment options, and their performance. In their most recent report (2017) they found that funds adopting a "core" responsible investment approach outperformed their peers over the longer term, both in the Australian share and International share space. That superior performance doesn't happen every year, but the RIAA data has found fairly consistently over the years that when measured over the medium to long term, an adoption of an ethical investment approach has delivered improved returns for investors. And so it is for this reason primarily that ethical investment options, once an extremely niche offering that was expensive and little understood, has broken into the mainstream. In fact RIAA found that 44% of all of Australia's assets under management are now being invested through some form of responsible investment strategy. Now there's two interesting paths to wander down at this point. The first is what does it mean to invest "responsibly", and the second is, why is the adoption of this approach leading to improved returns. What does Ethical Investment mean? As you might guess from the number of inter-changeable terms used to describe this investment process, there is no single definition of what makes an investment an Ethical one. This is hardly surprising, since ethics is something formed by an individual, and whilst in society there is likely to be much commonality on what is "ethical", there will also be considerable room for disagreement. In a broad sense, ethical investment means considering "ESG" factors when contemplating an investment. ESG stands for Environmental, Social, and Governance. So in considering these factors, fund managers or investors are thinking about a business in a broader context than just the profit and loss statement and balance sheet. The adoption of the consideration of ESG factors by professional investors has been where the bulk of the growth in this space has occurred. But of course, just because you've considered these factors, doesn't necessarily mean that you won't still decide to invest in a coal mine or a weapons manufacturer. The next tier up is what RIAA defines as "Core" responsible investment funds. They define this subset as: "Core responsible investment approaches apply at least one of the following primary strategies: negative, positive or norms-based screening; sustainability themed investing; impact investing, community finance; or corporate engagement." I'd suggest that if you're someone who finds the idea of ethical investment interesting, then this definition and the fund managers that fall within it, are what you are seeking. So let's unpack that definition a little because there's plenty of jargon in there. Negative screening means that the fund might have certain industries that they undertake never to invest in. The most common are fossil fuel mining, tobacco, and weapons manufacture. Here's an example from one of the more stringent local listed funds: (Companies invested in) can't be materially associated with a range of activities that could be deemed inconsistent with responsible or ethical investing. These activities include, among others, the production or financing of fossil fuels, gambling, junk food, tobacco, pornography, armaments, alcohol and animal cruelty. So if you chose to invest your money with that fund manager, you can have confidence that your investment will never have holdings in those sectors. Many ethical funds stop at that negative screen point. Some go on to apply positive screens as well though, so they look especially favourably for example, on companies that develop medical solutions to improve people's lives, or are creating solutions to improve the environment. Other funds don't use screens at all, but instead have an overarching investment philosophy around investing for the long term and considering sustainability as a primary factor when evaluating a business. There have been some global share funds that have adopted this approach that have generated outstanding returns for their investors in recent years. You might also be interested in a short piece I wrote some time back "What do Ethical fund managers do?". Given the different "flavours" of ethical investment, there is a

Today I am joined by Sharon Gourlay from Digital Nomad Wannabe about how to gain financial independence through Blogging. Sharon Gourlay is passionate about working online and helping others to follow in her footsteps. She left Australia with her young family at the end of 2014 determined to grow an online business. She succeeded and now supports her family of 5 to live their dream lifestyle. In this interview we cover: Her blogging journey from a hobby to a full time blogging business How she was able to sell her travel blog, even with her name on it Whether it is still viable to have an online business now or is it too crowded The difference between a hobby blog and having a financially successful blog How to get started with a blogging strategy Traffic generation strategies she now focuses on to build successful niche and authority sites How affiliate marketing works Key skills when starting out to be a commercially successful blogger The importance of treating your blog like a business The small investment you need to make when starting your blog The biggest commitment to building a profitable blog is time The number 1 tip when starting out The importance of clear goals so you know what to chase Understand your traffic and what key metrics you need to measure The importance of rankings and SEO for building a successful blog Knowing the engagement of your readers and understanding what behaviours they do on your side What programs she uses to track your blog engagement and activities of her readers What would she do differently if starting out again and her changing definition of success How she balances her family and work life The non monetary benefits of what blogging can do for you Links mentioned in the show Digital Nomad Wannabe DNW Facebook group!

Are you tired of the insecurity that comes from constant corporate restructures and the politics of a large work place? Way back in episode 11, I explored the Security Illusion. This looked at the idea that most of us are brainwashed into believing that financial security comes from working for a large corporate, or perhaps even a government body. In reality, these organisations are constantly the subject of restructures and redundancies. They are pyramids, with fewer and fewer roles the closer you get to the top, so people need to be constantly shed to make room for those below to progress. So this post is for those who have reached the point of thinking about life beyond the corporate world, and what they see in their future is some form of self-employment. I'm particularly excited to explore this topic, because this is a path that I've walked, and I know it's been the experience of many in the Financial Autonomy community too. So as I mentioned, transitioning from the corporate world to self-employment has been part of my life experience. I worked for one of Australia's largest banks for 16 years. I've got plenty to be thankful for during that time. I learnt a heck of a lot, worked in several different areas to gain a diversity of skills, and got a start in financial planning. In hindsight I perhaps wish I'd tried to accelerate my path a bit, but that was really about my own lack of maturity rather than a fault of my employer. As a foundation stone for my working life, I have no regrets about my time spent in the corporate world. But I did reach a point back in 2006 where I'd found the thing I was passionate about – Financial Planning - I had another 20+ years of working life ahead of me, and I just couldn't see my life plan aligning with that of my employer – I knew at some point I'd get shifted, or downsized, or worse, made a team leader, the ultimate kiss of death. My story is far from unique, with perhaps the only wrinkle being that my banking career had lead me to a budding profession that I could continue with in the outside world. Plan So how could you successfully transition from the corporate world to self-employment? I'd suggest the first step is to develop a plan. Start with a 1 page business plan, of which there are plenty of templates available for free on the web. Whatever you will do next, if you've chosen the self-employment route it's highly unlikely you'll be managing a team of 100's. So if you can't explain your business plan on a single page, you've gone wrong somewhere. Another step, which I didn't do when I planned my transition, but I really wish I had, is to draw a diagram of your business model. Just on a piece of paper or a white board, show the various sources where your customers will come from, and how they will go through your funnel to become revenue generating. Here's an example for my financial planning business: Just as with the 1 page business plan, your business model should also be 1 page and answer the core question, how will your business make money? Cash flow The next port of call is to think through how you will manage cash flow. Cash flow in your post corporate world life will be very different. No more approving the invoice and sending it to accounts for payment. Cash flow is king. From personal experience I advocate developing a Survival Strategy and a Capital Strategy. The Survival Strategy addresses how you will survive financially whilst you get this business off the ground. The Capital Strategy then considers your new enterprise – how will you fund the start-up costs, marketing etc. For a deeper dive on this, take a look at How to be financially ready to start a business. It will also be helpful to you in making this transition a success, if you're in a good financial position – that is you live within your means and you have minimal debt. Also, whatever your business plan, assume things will go wrong. If you forecast initial cash flow coming in at month 3, have a plan for if first cash flow doesn't arrive until month 6. Most business plans don't survive their initial interaction with the real world, so always adopt the mantra – Hope for the best but plan for the worst. Can you test? Assuming you're not leaving corporate unexpectedly as a result of a redundancy, as part of your planning for this transition think about whether there are ways that you can test your idea with minimum risk. Let's say for example that your plan for the next phase in your life is to start up a florist in your local area. Could you run a stall at a local market to learn what types of flowers people like to buy, who are the most reliable suppliers, and even just if you like dealing with flowers. The main thing you want to try and test is whether people will part with real money to purchase your product or service. You'll have no shortage of friends and family giving encouraging words, but it's not until total strangers put their hand in their pocket that you know you have something

Regular listeners and readers know by now that Financial Autonomy is about gaining choice. Maybe that choice is retiring early (eg. the FIRE goal that's popular in the US), but it could just as easily be the choice to work in a different career, start your own business, work fewer hours or days, or the choice to take a job closer to home, even though that means taking a paying cut. So whatever your Financial Autonomy goals is, what are the common strategy options that you could use to make progress from where you are today, to where you want to be in the future? I should mention at the outset that there's no need to take mental or physical notes, you can grab that checklist by clicking on the image below. If you are to gain choice in life, a prerequisite is that you not be under financial stress. The more easily you can meet your and your families living costs, the more options you have. 1 Pay down debt A good strategy option to start with is to pay down debt, and avoid most new debt. Start with your most expensive debt – perhaps a credit card or a personal loan, and focus your energy on getting this cleared. Then move onto the next. If you have a home loan, this is not likely to be something you can have paid off in a year or two. But if you have paid off your other debts, it does make a lot of sense to then focus on reducing this debt as quickly as you are able to. This will result in you building up equity in your home, which then gives you several options that will help in pursuing your Financial Autonomy goal. For instance let's say you want to re-train in a new career and need to go back to school for a year. If you're well ahead on your mortgage repayments, you may be able to reduce repayments to the minimum for 12 months, or go interest only, to reduce your ongoing expenses. You may even have re-draw capacity that you could live off if need be. Or what about if your Financial Autonomy goal is to start your own business? Through a focus on paying down your home loan, and building up equity in your home, you have financing options to get your new business off the ground. 2 Can you reduce your housing costs? In most households, putting a roof over your head is the largest expense. Whether you are renting or paying off a mortgage, it's not uncommon for 30% of income to go towards housing, and I've had people come into the office who spend over 50% of their income just on having somewhere to live. Given the size of this expense, even minor savings here are likely to be more impactful than many other savings measures that are more in the "penny pinching" realm. With an awareness that housing is a major expense item, can you think of any way to bring this cost down? When I bought my first home, a small 2 bedroom flat, I rented out the spare room. That rent was really helpful for me in being able to make the budget work, and it came with the bonus of having someone around to talk to. I heard of someone just recently who was able to buy a fairly low cost house that was in need of some love. He spent a few months fixing it up, then moved into the smallest room and rented out the other 2 rooms. The rent he received from his two housemates was almost enough to cover his mortgage repayments, and so the cost of putting a roof over his head with close to zero. Plus he could share the utility bills with his housemates, further reducing his expenses. If you're renting, could you move to a lower cost option? Could you share with others? 3 Could you reduce your transport costs? If housing is the biggest expense, transport costs often come in at number 2 or 3. The last car I bought was a year old and still had 4 years of warranty left on it. In comparison to buying the same car new, I saved a third, about $10,000, of the new car price. So as a starting point I'd suggest you never buy a brand new car. Most of your transport expense is getting to and from work. Is there any ability to negotiate with your employer to work from home some times? I know that won't work for a nurse and many other professions, but there are some roles where that is possible. Could you change to a role closer to home? Or if you're renting or about to buy, is it possible to live closer to work? Maybe you could get close enough to walk or ride your bike to work and do away with a car altogether. For the annual cost of registration, insurance, fuel, maintenance, and depreciation, you could afford to pay for plenty of Uber trips. 4 Save and invest – generate passive income The first three strategy options are I guess the foundations for you gaining Financial Autonomy. Now let's assume you've done all that you can on those fronts, what next? It's time to build some passive income. Passive income is income to flows to you without you having to get out of bed. There are 3 typical sources – interest on your bank deposits, dividends from your shares, and rental income from an investment property. Now it'd be great to have a bit of all 3, but I'd suggest

Whether you're planning for a traditional retirement at age 60+, or working towards an early retirement goal, thoughts of "will my money run out?" will no doubt have crossed your mind. There is a lot written about safe withdrawal rates. This refers to the rate you can afford to draw down on your savings, so that there's no risk of your savings being depleted during your life time. The most common rule of thumb guide here is 4%, and that's certainly a useful starting point. The answer for you though will depend on how you invest your savings, and also at what age you retire. So for instance if you retire at 75, you could probably draw at 8% per year and face no real prospect of your money running out before you do. Whereas someone hoping to retire at 45 would need to be much more conservative with the draw down rate. Similarly, if your preference is to invest very conservatively, mostly in cash and term deposits for instance, then your safe drawdown rate might need to be 2% for instance. But today's post isn't about safe draw down rates. Instead, when thinking about the "will my money run out" question, a key determinant is a concept called Sequencing Risk. It's a jargon sounding term I know, but understand this, and manage for it, and the chances of your money running out in retirement will be dramatically reduced. In my role as a financial planner, clients often want me to find them the best return each year. But actually a far more important role for me to play is to manage their asset allocation so as to minimise the chance that their money runs out during their lifetime. A key way we do this is to plan for sequencing risk. So what is sequencing risk? Well, it refers to the importance of the order in which your returns occur – the sequence. So let's say you typically invest in a Growth type asset allocation – so you've a good weighting towards shares and property, but still keep something like 20% of your savings in cash and bonds to smooth out volatility a little. With this asset allocation it might be reasonable to assume the average return over 30 years will be 8% per year. Armed with this assumed return, you can then project forward what your savings will grow to, and when thinking about how much you can afford to draw down each year in retirement, you could work back and say for instance "well if I earn 8% and draw 5% each year, that leaves 3% to combat inflation – I'll be sweet". The problem with this is that in almost no individual year will you actually earn 8%. Year 1 the return could be 11%, 2%, or even -6%. Year 2 the same and so forth. So the average return number may well be correct, but that doesn't mean that in the first 3 years of your retirement you don't earn 1% or 12%. And it turns out, those returns in the early years matter a lot! A good quote from commentator Michael Kitces sums the issue up well, "It's not enough for returns to average out in the long run, if the portfolio could be completely depleted before the good returns finally show up." Another way to think of this is that an asset can only be sold once. If you are forced to sell a share at $10 because you needed the cash, the fact that 2 years down the track it rises to $20 is not at all helpful. Interestingly, further analysis by Kitces found that a sharp drop, followed by a fairly rapid recovery, was actually less damaging than a protracted period of below average returns. It's worth highlighting here too that overspending in those early years is essentially the same as having a protracted period of below average returns. It dramatically increases the chances that your money will run out. So what's the plan? Want to minimise the chance that your money will run out in your retirement? Here's what you should do: Use conservative assumptions when running projections. So if you've structured your portfolio so it should average an 8% return over the long run, perhaps run your projections assuming 6%. If you build in a bit of fat here, then if returns are poor early, it only eats into that fat, and doesn't torpedo your entire plans. Reduce the level of risk in your portfolio in the 2-3 years leading up to retirement, and keep that risk fairly low for the first 3-5 years of retirement. So this might mean, instead of being invested 80% in shares and property and 20% in cash and bonds, you drop that down to 50/50 3 years out from retirement. And leave it that way for at least the first 3 years of retirement. In this way your savings will be less exposed to any large drops in investment markets, reducing the likelihood of a negative or even just poor return. Now of course there's a cost here in that a 50/50 asset allocation will on average earn less than an 80/20 allocation. So this gets back to my earlier observation that sometimes, trying to get the highest return every year should not be priority number 1. The objective is to generate income for you for the rest of your life. Whilst maximising returns is important, an understandi

Today we have two interviews for the price-of-1 with sisters Tracey and Joanne from Sistermixin. Their online business is about educating everyone (especially their own families) on exactly what they are eating, what is in your food and some of the harmful effects this can have on your health. And they have become sought after thought-leaders in living an additive-free lifestyle. In this interview we cover: Why they started The Whole Circle podcast and how they now repurpose the content into their blog posts The impact over 100 podcasts episodes has had on their business and how it has positioned them as thought leaders in the additive-free industry How Sistermixin got started and its growth journey to now employing three family members as well as additional staff in their warehouse and offshore. The different income streams generated from their online business The importance of reinvesting any profits and revenue you have when starting out How they have built their business up without any capital investment or business loans What they are most proud of with their business success The hard work and self-belief needed when they first started out How they have successfully been able to work together as sisters/family members The point when you need a business coach and what you need to look for in the right coach for your business The importance of paying and rewarding yourself when starting out Tips for those thinking of starting an online business around their passion Why you shouldn't wait until its perfect as it never will be Being comfortable with the uncomfortable to move forward The importance of being yourself and to stop comparing yourself to others The future for Sistermixin including a major rebrand to Addictive Free Lifestyle Overcoming the struggling of losing their entire website without a backup in place Links mentioned in the show https://www.sistermixin.com The Whole Circle podcast Instagram Facebook

The goal for many in the Financial Autonomy community is to retire early. Early retirement means different things to different people, but as I always talk about, Financial Autonomy is about gaining choice. So whether you're early retirement consists of lying on the beach in Fiji at age 40, or traveling around Australia with your caravan when you're 55 and picking up odd jobs as they crop up, this post is for you. I haven't gone into a tonne of detail on any of these 6 ideas, because to my mind, a hack means a short cut, and so that's what I'm delivering here today. 1. Work out your expenses Start by determining what you spend now. The banks are coming up with good tools to help you in this area. There's also a good tool at the MoneySmart web site. Once you've figured that out, create a second version with what you would expect that to become once you retire. Will you travel more? Will you go down to one car in the household. Perhaps the kids will be off your hands and so food costs will decline. Maybe you're planning on a tree change which will see your mortgage wiped out. The point is, when they wanted to put a man on the moon, they didn't just shot rockets up randomly and see what landed where. They had a clear goal and then they worked towards that. For you, your equivalent of the moon landing is being able to meet your expenses for the life that you want to lead. Unless you quantify what that number is, how can you possibly take steps that will deliver success? For a more detailed look at this topic, check out episode 31 – What's your number. 2. Figure out a debt plan Sure, it may not be essential to be debt free when you retire, but in my mind, if you still have debt, then you can't afford to retire yet. So the next early retirement hack is to figure out how you will be debt free by the time you pull the plug on your current day to day way of paying the bills? That could be as simple as working to a schedule of paying money off each month until the debt is cleared. That's the most typical way debt is paid after all. If you've got high interest debt, such as credit card debt that you're not clearing regularly, then perhaps your debt plan is to refinance that into a lower interest loan and then pay that off as quickly as possible. Or perhaps your debt plan is a bit bolder. Maybe it is to sell the inner city home and buy something out of town for a fraction of the cost, with the difference between the 2 prices providing funds for debt clearance and maybe also income in retirement. A tree or sea change may not even be necessary, perhaps you simply downsize. If you're in a large family home, there's likely a time in your life, when the kids are off on their own journeys, that a smaller home or unit might be better suited to your needs. So there's all sorts of ways you can be debt free at your early retirement – figure out your plan. 3. Invest aggressively In bringing your early retirement aspiration to life, it's highly likely that you will build up some investments that will provide passive income when you enter your early retirement phase. Now you could build up these investments in your bank account but you will have to do all of the heavy lifting through contributions. A better option is to invest in growth assets such as shares and property to gain the benefits of higher compounding returns. Now of course these assets have volatility and risk, as discussed in episode 35 Investing - how to get started, but that can be managed through appropriate time frames and asset allocation mixes. As I explored way back in episode 7, if you wanted to build up savings of $500,000 and could afford to save $2,000 per month, you could deposit your savings in a bank account and it would take about 21 years to reach your goal. If instead you invested it in such a way that it earnt 7% each year, your goal would instead be reached in 14 years. In short, you can retire earlier if you invest aggressively, by which I mean holding a mix of growth assets, not only investing in cash. 4. Don't ignore your super I know it's tempting, when thinking about early retirement, to dismiss superannuation as something only people on the traditional work path need worry about. You want to retire EARLY, and Australia's superannuation system isn't built for that. But that thinking is wrong headed. Regardless of what age you retire, you need to generate income to meet your expenses throughout your life. The less tax you pay on that income, the more money that is available to meet your expenses. Australia's superannuation system provides a way for you to generate tax free income after age 60. Your early retirement plan needs to contemplate how your income needs will be meet after age 60, and I'd suggest you'd need your head read if you didn't consider superannuation as at least part of this solution. If you haven't already downloaded it, grab our Early Retirement for Australians – the multi phase solution PDF where we have glide path diagrams i

Research from the Australian Stock Exchange found that in 2014, 36% of adult Australians owned investments listed on the share market. Combined results from RP Data and Census data found 7.9% of the Australian population own an investment property. Now there would be some cross-over here with people holding both shares and investment property, but we can safely conclude that at least 55% of the adult Australian population holds no investments outside of their superannuation. Click here to download the toolkit Back in episode 27 we explored what was required to achieve financial independence. In a nut shell, determining what your living costs are for the lifestyle that you want, and then finding a way to generate that sum of money each year is the solution. So let's say you've done your numbers, and you know that for you to achieve financial independence, to gain the choice that is the goal of Financial Autonomy, you require X dollars per year. How do you then go about generating that? Now of course regular listeners and readers will know of my passion for the Side Hustle as an important element in anyone's financial independence aspiration, and so that may well provide part and perhaps all of the solution. Gig economy type freelancing work could also contribute. Or it could just be as simple as a regular employed role that you enjoy. Another common way to meet income needs for those seeking financial independence is to build up income producing investments. That might be property that throws off rent to the owner, or it might be shares that generate dividends. Your investment income might meet some, or perhaps even all of your expense needs. Whilst the desired destination of achieving financial autonomy is not to be able to spend day upon day sitting on the couch in your underpants, if your expense needs are meet through investment income, this is at least an option for you from time to time. I'm a pretty driven person, but even I like the odd afternoon, remote control in hand and Netflix to burn. So in today's post, we're going to explore how you might get started on your investment journey. It's easier than you think! Let's start with the shares vs property question. It's a bit like asking whether you're a dog or a cat person, most people pick a camp and will explain to anyone who will listen that their chosen camp is the right one. The truth is shares and property both work as a way to build wealth and generate income to enable you to achieve financial independence. Each have pro's and con's. But I need to nail my sail to the mast here at the outset and say I'm a shares guy. With my wife, we own both shares and a property other than our home (we have a cat and a dog too, so we're obviously serial fence sitters). But my preference investment wise is shares, and I'd suggest that if you're looking at getting started in investing, shares is where you should be looking too. The great things about owning investment property is that you can borrow fairly easily, and that means returns are magnified via the power of gearing. Many people also like to invest in property because it's a physical asset, something they can see and touch, and that gives them comfort. But as anyone who's owned or even simply lived in a property knows, properties wear out. They need maintenance. We own a small office in our super fund, and whilst commercial property is less involved that residential, even so we have to deal with body corporate issues, ongoing expenses like council rates and insurance, and tenants. Just yesterday I had the tenant tell me that there was an annoying vibration type sound coming through the roof, and so could I please get the air conditioner unit that sits up there serviced because maybe that's the cause. With shares, you never have these issues. Buy them, tell the registry where you want your dividends to go, and they require no further input from you. Now I know that when I suggest that shares are a good investment option I always get someone email me and say that I didn't talk about the huge risk associated with investing in shares. "What about the GFC" they say, "my neighbour lost everything". So let's tackle the shares are hugely risky myth head on. As an investor, you want some risk. No risk means no investment return. Risk and return are opposite sides of the same coin. What you need to decide is what level of risk you are comfortable with. If you are only comfortable taking on the risk of not keeping pace with inflation, then cash in the bank is the investment for you. If you want to earn more like 5%, then you need to take on only a small amount of investments that have any volatility associated with them, but in the current interest rate climate at least, you do need to take on some risk. If you seek a 20% return, then you're going to need to take on a whole heap of risk, probably including borrowing to leverage your outcome. So risk is not bad, but understanding the level of risk and what you are c

Today we chat with Co-founder and consultant with Tara Lucke from View Legal about the importance of Estate planning. Though it is not something we like to talk about, it is so important for protecting your assets and loved ones, no matter what stage of life you are at. In this interview we cover: Making sure your hard earned money goes to the right place with a good estate plan What happens to your money if you don't have an estate plan Why you need consider having a Power of Attorney no matter what your age Why you may have more assets than you think How to avoid lawyers taking advantage of your estate The two important factors to consider in your estate planning once you have children Case studies of poor estate planning situations The problem of the "I love you" wills Why you need to consider Testamentary Trusts as part of your estate planning for asset protection and tax benefits The different roles of the Power of Attorney Conversations you need to have with family members Considerations for estate planning for Small Business owners Links mentioned in the show Tara - LinkedIn Tara - Instagram

We all know that property prices in Australia have gone stupid in recent years. One significant consequence of that has been that first home buyers have found it increasingly difficult to enter the property market. Banks like to see at least a 10% deposit, and in the ideal world you'd have a 20% deposit to avoid mortgage insurance costs. But when a first home can often cost north of half a million dollars, saving a deposit of that size can be really challenging, especially if you have rent to pay, and perhaps a HECS-HELP debt that sucks away a portion of your income. Fortunately there has been recognition of this problem by both sides of politics, and the solution that has been legislated in recent months is the First Home Super Saver Scheme. So what is it, and should the First Home Super Saver Scheme be on your radar as a strategy to enter the housing market? In short, should you care about this new initiative? Click here to get the toolkit It's always good to start at the beginning, so before we dive in, let's just consider the objective of the First Home Super Saver Scheme. Home ownership is considered a good thing for the nation. Now as regular listeners and readers will recall, in episode 19 I looked at whether people who simply can't enter the property market are financially doomed, and the conclusion that we found is certainly not. However for those that do wish to own their own home, and that is most of us, the rationale is sound. Owning the roof over your head gives you long term financial security. Sure, you'll have a mortgage to repay for many years, but one day this will be paid off, and so in your later years, you'll have your housing needs covered for relatively little ongoing expense. This makes retirement that much more affordable, and also provides you with the security of knowing you can remain in your community without disruption. Building equity in your home may also enable you to finance things like starting a business, and provide funds for Aged Care needs towards the end of your life if needed. Home ownership also tends to align with a sense of equality. I enjoy reading about the period around the French Revolution, in the late 1700's. In that era (and it was much the same throughout Europe and England), the wealthy few owned everything, and the vast majority eked out a living as best they could. In that type of society, the average person had little control over their life, and got blown about by the whims of the wealthy elite, with their wars and ridiculous extravagances. Australians have always resisted a society like this. The concept of a fair go is ingrained in us. And whilst in recent years it feels like perhaps we've headed a bit more towards the wealth of the nation become concentrated in fewer hands, the ability to access home ownership for all Australians is a really important foundation stone of our society. So the First Home Super Saver Scheme exists to help ensure that entry into the housing market remains possible. So how does it work? Now I need to give a jargon alert here. I always try very hard to not use financial jargon when I write pieces for Financial Autonomy. But because the First Home Super Saver Scheme feeds into the superannuation system, and because Australia's superannuation system is almost a language all of its own, I won't be able to avoid having some jargon in this post. I'll do my best to explain things in what I hope are easily understood terms, but if anything is unclear, don't hesitate to drop me an email to clarify. Click here to get the toolkit The First Home Super Saver Scheme enables you to make extra contributions into your superannuation account, and then withdraw them, plus the earnings, for the purposes of a first home deposit. It's rational because you are likely to save on tax, and typically the earnings on savings in a super fund will be better than what you would generate with a bank deposit. From 1 July 2018 it is possible to apply to withdraw voluntary contributions made to super after 1 July 2017 for a first home deposit. Voluntary contributions includes both pre-tax (salary sacrifice) and after tax contributions. Your normal superannuation contributions made by your employer are not relevant here – they remain preserved until your retirement. The First Home Super Saver Scheme only applies to extra contributions that you make. The primary benefit exists for pre-tax contributions, so for the remainder of this post, I'm going to focus on these. Now the jargon term here is "concessional contributions". They are concessional because these type of contributions receive special discounted tax rates. For most people, concessional contributions occur via salary sacrificing to super. That is, you arrange with your employer to have an amount taken out of your wage before tax is calculated, and that money is sent to your super fund, on top of the normal employer contribution that they would be making. Now if you're self-employed, it's even easi

Networking marketing has changed since the days of Tupperware and Amway. Today I am joined by Lloyd Ross who talks through how our online behaviours and advances in technology have revolutionised the world of network marketing, making it an easier side hustle than ever before. In this episode we cover: What network marketing is and why you need to consider this as a viable side hustle How social media has evolved the industry The skills and attributes to be a successful network marketer The ease of getting started with just a few hundred dollars How to fit in a Hour of Power for your side hustle while working full time The evolution of network marketing due to changes in shopping habits, technology and online networking How to find a product and company that aligns with you and your values Links mentioned in this Episode Lloyd on Facebook Lloyd on Linkedin Lloyd on Instagram

The goal when working towards Financial Autonomy is to gain choice. Choice in how you support yourself and perhaps your family financially, be that the type of work you do, the hours you spend doing that work, or whether you earn that income as an employee, or as a self-employed person. In developing an actionable plan to get you from where you are now, to your Financial Autonomy position, there are several foundational elements that you need to decide upon. Perhaps the most fundamental of these is how much income do you need to generate to support your lifestyle? What is your number? In today's episode, we'll be exploring how you might go about determining what your number is. And with this nailed down, consider what's next in your Financial Autonomy planning. So you've recognised that the standard working life treadmill is not for you and you've decided to gain choice via a Financial Autonomy strategy. You've probably got some ides as to how you could earn income once in Financial Autonomy, and perhaps some thoughts as to what steps you might take to get their – things like extra education or career development (check out episode 29 – the 5 most impactful ways to invest in yourself). But to set time frames and make genuine progress, you will need to quantify your Financial Autonomy goal, and that means determining how much income you will need to make this a reality. A good starting point is to determine how much you spend now. If you're someone with a detailed budget, that's fantastic. But having worked with people on these goals for over 17 years now, my observation is that such people are as common as a sports person who retires at their peak – it happens occasionally, but it's a long way from the norm. So if you're like the majority and can't easily answer the question of how much you currently spend, one quick method I use a lot is just to work backwards. Start with your gross yearly income. Subtract the tax. Then subtract any savings that you made over the past year – this may include extra repayments to your home loan if that's the space that you're in. Whatever's left must be what you spent. Now it will come as no surprise to you that the lower your spending, the easier it is for you to achieve Financial Autonomy. Much of your expenses depend on your lifestyle, so you have plenty of levers that you can pull here. Choices need to be made. Speaking for myself, I don't want to live like a monk. I enjoy travel and want to be able to afford that. I also want to ensure my kids can participate in all sorts of sports and activities that interest them, and provide them with a good education. So setting a spending goal of say $30,000 per year, isn't where I want to be. That doesn't deliver the life that I and my family want. Sure Financial Autonomy might be far more easily obtainable, but that's a level of sacrifice that I'm not prepared to make. But on the flip side, if you need $150,000 or $200,000 per year to live your life, then depending on your occupation, Financial Autonomy is likely to be some way off. Now maybe that's okay – that's your goal and we are all unique. But for many people, if the desire for Financial Autonomy is strong, they will consider how they might be able to reduce their expenditure, so that they can gain the choices that they seek sooner. How might you get your expenses down? The cost to put a roof over your head is likely to be a significant element of your expenses. So maybe a key milestone in you achieving your Financial Autonomy goal is paying off your mortgage. If that's not realistic in the time frame that you seek, perhaps you need to move to a cheaper area. I've worked with people who have moved out of town, often down along the coast somewhere. They've traded a large city mortgage to either become debt free with a lovely home, or if they still need a mortgage, it's at least far smaller and more easily managed. There are investment strategies that can be used to help pay down your mortgage too. It may be possible to use equity in your home to establish an investment portfolio, and then use the income from that portfolio, plus perhaps capital gains, to accelerate clearance of your home loan. We've used this strategy for several clients with great effect. Beyond having a close look at your housing costs, the most common other way that people rein in their expenditure is to get a better handle on where their money is going. Many of the bank apps now offer some good tracking tools to help you in this regard. We'll also be rolling out a cash flow and budgeting solution within the next couple of months too which brings all your financial matters into a single app or web site – bank accounts, super, mortgage, cars, investments etc. For those of you that have used Xero or MYOB recently, our new package operates in a very similar way for personal finances – it gets data feeds and then categorises your items, so you can quickly see how much you're spending on groceries, or eating o

In this episode, I talk to Joanna Maxwell all about career change. Joanna has worked in a wide variety of jobs throughout her career and she helps a lot of other people change careers as well. She's now taken all that experience and recently gained a position with the Australian Human Rights Commission in the Age Discrimination Team. Joanna is the author of the book Rethink Your Career in your 40s, 50s & 60s. In this episode we cover: Why Joanna has had a such a varied career How her love of travel impacted career choices and led to her interest in career change The challenges of identity with career change How men & women deal with their sense of identity How Joanna took her interests and satisfy those through her career choices Planning financially when running your own business Finding strategies to create a working life that is sustainable How the book came about and what's included Joanna's tips to make career choices work Links mentioned in this Episode Joanna Maxwell's Website Joanna on Linkedin Rethink Your Career in your 40s, 50s & 60s

Right now you're listening to this podcast, or reading the blog article. Why? You're curious, and have a thirst for knowledge. You want to learn new things. You want to improve yourself. We usually think of investment as being a financial thing. But investing in yourself - your skills, knowledge, and health, can be just as important and impactful. And just like a financial investment, diversification pays. Download the cheat sheet here In past Financial Autonomy episodes we've looked at investing in the share market, buying or starting a business, getting debt under control, and various other topics that tend to have dollars and cents as a core element. And whilst the money side of things is unquestionably important in you attaining Financial Autonomy, there are other essential ingredients required for you to achieve success. Motivation, health, happiness, self-awareness, creativity. There is a lot on the net about self-improvement and investing in yourself – I've spent hours reading it to research for this article. So what I'm going to share with you today is the 5 ideas I've been able to identify that will have the greatest impact in you reaching your Financial Autonomy goals. 1. The starting point must be your health. It's no good achieving Financial Autonomy at age 50 say, only to drop dead 6 months later. There's 2 elements to investing in your health – activity and food. On the activity front, the important thing is to start. If you're currently doing very little physical activity, start by taking regular walks. Build up the distance over time. Perhaps you could extend that to jogging. There are podcasts available based on the couch to 5k approach that I know people have found useful. If you already have some level of fitness, think about setting yourself a new challenge. Last summer I set myself the challenge of completing a triathlon. Swimming has never been my thing, so I had to put quite a bit of time into training for that component of the event. The funny thing was, when the tri season ended and I focused back on running, I found my running had improved, even though I hadn't given it much focus over the summer. When thinking about the activity component of health, just remember the "R" in the SMART goals acronym – realistic. The surest way to side-step success in this area is to set some crazy high goal, that you quickly become discouraged by, and you defeat yourself before you make any progress. Start small. The second component to investing in your health is food. As important as activity and exercise is, if you head down to KFC for a post work-out feast, you're probably not going to maximise the health benefits of your exercise. I'm not a nutritionist, so I can't give you any particular guidance on what you should and shouldn't be eating, but just reflect on your eating habits and consider whether this is an area worthy of investing some of your time to research and improve. 2. Get your creative juices flowing! For many of us, creativity seems to die when we leave primary school. But it doesn't have to. Indeed as technology like self-driving vehicles and AI eliminate many of the traditional jobs in our economy, the ability to think creatively takes on far more value and importance. Pick up some blank paper and a grey lead pencil and have a go at drawing that tree in your back yard. Is there a musical instrument floating around the house that you could teach yourself to play. If there isn't a YouTube video showing you how, I'll eat my shoe. How about expanding your cooking repertoire? There's no shortage of cooking shows to give you ideas. Many years ago my wife and I made a new year's pledge to cook something we'd never cooked before, once a week. We subscribed to one of the monthly cooking magazines, and so that was the main source of inspiration each week. There were 2 or 3 weeks during the year where we didn't achieve our goal, mainly due to the very reasonable excuse of our first child being born. But there were several other weeks where we tried 2 new recipes, so over the course of the year we felt we'd ticked the goal well and truly off. And it's paid long term dividends. Once you learn basic cooking skills, and what goes with what, you gain the ability to ad-lib. Substitute what you have in the cupboard for what the recipe is asking for. Cooking skills can also help with your health goals, and be good for the household budget. How about learning a new language? There are great podcasts around. I'm currently having a go (pretty unsuccessfully so far) at Coffee Break French, interestingly enough taught by two Scottish people. Perhaps writing is your thing. Short stories, a novel, or poetry. Worst case, no one reads it but you. Make a start, have a go. Only good things can flow. 3. Expand your knowledge in an area you are already good at. Professionally we operate in a competitive world. I make my living providing financial planning advice. But there are many financial planners in the wor

With Amazon now in Australia, we talk to John Candivish from FBA Frontiers on how to make a side hustle by becoming an Amazon seller. Before starting his Amazon Europe journey, John had zero experience with running an online business. After university, he joined the corporate world in London but rapidly realized that it was not for him. After launching his first Amazon brand in 2014, John was soon able to quit his job to travel the world and network with other successful Amazon sellers from around the globe. Today, he's generating 6 figures of revenue per month from over a dozen products in Europe. John's experience led him to develop a specific, step-by-step system to find success with every product launched. John developed FBA Frontiers because so many sellers he met had great businesses on Amazon.com, but had completely dismissed Europe. He's since made it his mission to help sellers overcome the barriers to entry in the EU and find success by bringing their products into Europe. In this episode we cover: What is Fulfillment by Amazon (FBS)? The territories in which Amazon operate and how the fees are calculated Getting started as an Amazon seller The low risk business model as an Amazon Seller How to find the right products The profit margin you need to The importance of having an ad spend on Amazon when launching How Amazon ranks products The lifecycle of the product The benefits of doing a niche product What you need to for branding when getting you The minimum quantities you need to get started Things to consider when FBA starts in Australia and the first mover advantage locals have What the future holds for Amazon Links mentioned in this Episode FBA Frontiers Course Jungle Scout

In the interview I did with Adam Murray in episode 20, he spoke about how he reduced his expenses in a significant way when he worked through his employment transition and gap year. And you might recall, he found living on less made him more happy, not less. Another key element in your financial independence plan is to have a financial buffer, an emergency fund, to get you through the unexpected. Perhaps you already have this, but if not, you want to build this up. Everyone's needs are different, but you're likely to need $2,000 to $10,000 in there to make you secure. This assumes you've got appropriate insurances in place. Once you have that emergency fund in place, savings can go towards investment. We're not going to get into potential investment strategies in this episode, but the key point here is that the goal is to build up some investments, so that in future they can generate passive income for you, to help cover your expenses. It might be rental property, shares, or if you're real risk averse, term deposits. But the key is that whether it's rent, dividends, or interest, they will all throw off income for you to use, without you having to lift a finger. Envisage that you determine that you need $40,000 per year to cover expenses. If you could build up an investment that was capable of throwing off half that each year, then you only need to work in some form of paid employment to earn the other half - $20,000. You might be able to do that working a few days per week, or doing jobs in the gig economy. The key is, you've gained choice. You've gained financial autonomy at that point. Expenses are one thing but income is the other side of the ledger. Your income earning capacity is crucial to achieving financial independence. In the previous example, where you needed to earn $20,000 to achieve your goal, if you are a well-qualified GP, you could probably earn that working once a fortnight. Whereas if you are in a low skilled job, you may need to work 3 days per week to get the same result. So nurture your professional skills and invest in yourself. This will help you enormously in attaining financial independence. Whilst thinking about income, is there anything else that you could do to boost your income? Push hard for a raise. A side hustle perhaps. Or chasing a job at a competitor that might pay more. We've spoken about side hustles quite a bit in previous episodes (21 and 22 especially). This could potentially be a great path towards financial independence. You are generating income doing something you're passionate about. And you can put in as much time and effort as works for you. What other things might form part of your plan to reach financial independence? Avoiding credit card and other non-productive debt is likely to be wise. I'm not someone who believes credit cards are always evil. For those who can manage them, the consumer protection and rewards benefits they offer can be really valuable. But if you don't pay them off each month, the interest you will pay will very quickly outweigh any of the other benefits. So think about whether your credit card is working for you, or whether you need a change of approach on that front. Similarly, loans for holidays, furniture, and the like are likely to be costly, and drive you away from reaching financial independence. If you have these already, then an early focus of your plan might be to clear these debts. How else could you trim your expenses to make your financial independence goal more attainable? Usually it's about simplifying your life. Maybe changing some habits. Could you become a better cook so you eat out less? Would a housemate be a possibility? On a larger scale, could you downsize or make a tree change? Perhaps this would reduce your rent or mortgage. If you've got an inner city home with a mortgage, perhaps a move out of town might leave you with a debt free home even, which would make the achievement of financial independence for you that much more reachable. Episode 6 – Nish's success story had an example along these lines. It feels a bit harsh to say, but do you need new friends? If you surround yourself with people who spend money like it's water, it's going to be very tough to rein in your own spending and gain the flexibility and independence that you are trying to achieve. The type of car you feel the need to own is often a function of the social network that you're in. Our friendships and social networks are of course a foundation of our happiness, so I don't raise this lightly. But it is certainly worth reflecting on whether you have certain friendships that are detrimental to you achieving your goals and dreams. Well, I hope that's given you a kicking off point on your goal to attaining financial independence. Determine your why, consciously own the goal and commit to it, and develop a plan to get you there over time. Of course if you want help in developing your plan to achieve financial independence - that's what I do every da

Following on from Episode 23 on Multi-Phase solutions for Retirement we are joined today by Shaun Farrugia from Optimised Accounting & Finance to talk all things Trusts. Check out our free download Multi-Phase solution for Early Retirement In this episode we cover: The dummies guide to what exactly a Trust is How it can work as a funnel and the tax flexibility that it allows The two types of people that generally use Trust structures What are franking credits Three case studies of how Shaun clients are using Trust for tax flexibility Case Studies as mentioned in this episode Scenario 1: Couple approaching retirement / early retirement. (Dramatically reduce tax) Distribute investment / business income to a 'bucket company' Allows for tax to be paid at the company tax rate - accrues as franking credits Funds pile up and are invested within the company Upon 'retirement' dividends can be streamed out with franking credits attached Draw down $13,000 each financial year to remain below the tax free threshold with a tax refund of $5,572 - effectively a zero tax rate Draw down $26,000 each financial year and receive a refund of around $6,800 back - 11% tax rate. Scenario 2: Young Couple - DINKS / Side Business (flexibility) Couple both working full time on incomes > $90,000 Have a side business and investments Currently there isn't much of a tax benefit however couple is looking at having kids in the medium term Wife will take a year off work, and then in the 2nd year the husband will take a year working part-time Trust allows the couple to distribute the income from the side business and investments to whichever member of the couple has the lowest income at the time. Scenario 3: High Income Earner with a property Client is on the highest tax bracket Purchased a rental property at the coast Client is looking for a tax-break whilst being able to achieve capital growth Wife is entrepreneurial and keen to run an AirBNB Client is time poor and not interested in having a bar of it Property is leased at proper market level rates to a family trust setup by the wife Client receives rent as normal Wife runs business Kicker is adult son in Uni - profit from the Air BNB is effectively tax free. Links mentioned in this Episode Optimised Accounting & Finance Multi-Phase solution for Early Retirement

Way back in 1996 I bought my first home. It was a two bedroom flat in a very ugly brown brick building, probably built in the 70's with nothing done since. It wasn't flash but it was within my budget and in a good location close to town – Kew for the Melbournites. I paid $107,000. Now I know that for those looking to buy their first home, $107,000 is probably pretty sickening right now, but 20 odd years ago that was the going rate. 4 years later and I'd meet my now wife, and it was time to move from a flat to a house. We were starting to think about having a family. So I sold the flat for $189,000. Now those straight numbers - $107,000 purchase price, $189,000 sale price, look pretty good right? And they were. It equates to 15% per year growth. I wish I could say that I got that return due to a whole lot of research and planning, but the truth is it was pure luck. I bought when I could afford to buy, and I sold when I needed to sell. But that 15% does not tell the true picture, and that's what I want to explore in today's episode. My actual return was just over 68% per annum. Yep you heard that right – 68%! Gearing. Borrowing to invest. It's about magnifying outcomes. Gears are used in engines and other mechanical devices so that one small turn over here can lead to a really big or fast turn somewhere else. This magnification of outcomes may be the key to you reaching your financial autonomy goals in the time frame you want. It's an accelerant. But as with all accelerants, gearing also has risks. It's a tool you can definitely use to gain the choice you desire. But it's one to use as part of a well thought out strategy, with the potential downsides considered and mitigated against where possible. Property investment is the most common area where we see gearing, but it can just as easily be done with shares, exchange traded funds, or managed funds. Given the interest costs associated with borrowing, gearing only makes sense into investments that are likely to grow, and where the expected return after tax is greater than the interest cost. So for instance it wouldn't make sense to gear into a term deposit investment – the return on the term deposit would be less than the interest expense. So let's get back to my 68% per annum return. I'd be disappointed if you weren't a bit sceptical. The Financial Autonomy community is a savvy bunch and you know the old saying, if it sounds too good to be true, it probably is. But stick with me, in this instance it really did happen. When I bought my first home, I put down a 10% deposit. So that meant I put in $10,700 and the bank funded the rest. Of course there was some stamp duty but it wasn't a lot at that price point, and I had a friend help me with the conveyancing so that cost me next to nothing. Over the 4 years that I owned it, for much of the time I had a flat mate in the spare room, and her rent helped with the loan repayments. I didn't really make much of a dent on the loan during that 4 years, but it went down a little, and I had a roof over my head. So I sold for $189,000. The first thing to happen was that the associated loan needed to be repaid. With that done I had around $93,000 in my bank account. Now of course I had to pay a real estate agent for the sale, and some legal costs. I can't recall exactly how much they were, but being conservative, let's say I was left with $87,000. I bought my flat for $107,000, and sold it 4 years latter for $189,000, a gain of about 15% per year. But the real story here, the one relevant to me, is that I put down almost $11,000 of my savings, and 4 years later, that had become $87,000 – my savings had multiplied by a factor of 8! Now as I said at the start, whilst I'd love to say that I got this amazing return because I was some sort of property investment genius, the truth is it was pure luck. But you make your own luck. I wasn't to know the property value was going to increase that much, but by saving a deposit, finding something in my budget (even though it was a long way from my dream home), and making a start, I enabled that luck to happen. And the power of gearing significantly magnified my outcome. So how could you use gearing to magnify your investment outcomes and get to your Financial Autonomy goals quicker? A popular strategy that we use with clients a lot is regular gearing. You might put $1,000 per month into an investment, and we arrange a lender to lend a matching $1,000 so that each month you are buying $2,000. Your investment exposure is therefore doubled, and by doing this monthly, you are averaging out your entry price – dollar cost averaging is the jargon, which serves to reduce risk. There are also products that will allow you to buy a parcel of shares or funds, and put down a deposit in the same way you would buy a property. You then make monthly repayments on the loan in the usual way. This enables you to have a potentially large exposure to the market right from day 1. There are also some offerings t