Financial Autonomy

In our first interview episode on the Financial Autonomy Podcast with talk with Felicity Loughrey. She shares her career transition journey from journalism to advertising that spanned across two continents. In this interview we cover: How this Australian freelance journalist ended up working in New York Why she finds Americans are good to work with How she handled the transition away from the dying industry of journalism into writing advertising copy The interesting journey of getting better at her craft but getting paid less for the work The subculture of freelance creatives in the US The importance of consistency pitching for work to maintain constant cash flow Overcoming the hurdle of getting paid for your work as a creative The need to be constantly learning when entering a new industry Her time at VaynerMedia and what it is like working for digital thought leader Gary Vaynerchuk The role a Digital Creative Running an autonomously team in a HR focused digital agency Hiring from outside your industry to create a dynamic team The difference between the use of social media between the Australia and the US Advice for those currently working in declining industries Understanding your core skills and how you can adapt them into a new career and industry Links mentioned in the podcast Head Ovary Heels podcast Confessions of an Advertising Man VaynerMedia Gary Vaynerchuk

How hard is it to get started? I'm sure we've all had things that either need to be done, or that we'd like to do, but we put them off – shift them to the bottom of the pile or check out our Facebook feed instead. Procrastination is evil, and it afflicts us all at some point or another. When it comes to Financial Autonomy dreams, I think procrastination is quite possibly the number 1 impediment to you moving forward. So with this in mind, I've done some research on strategies to overcome procrastination woes, and today I'm going to share with you the key things I've learnt. When it comes to achieving something great, something worthwhile, taking the first step is often the hardest part. Perhaps it's not knowing where to begin. Or a sense of overwhelm – the goal feels like this huge inflatable ball – impossible to get your arms around and difficult to know where to grab it. Procrastination does not equal lazy. It's likely driven more by fear of uncertainty or failure, or anxiety, which is often closely associated with overwhelm. But if you're to make progress on your Financial Autonomy goals, then making a start is essential I've seen quotes and interviews from incredibly successful authors Stephen King and Jodi Piccoult, who both have routines that require them to just sit down and write. It can always be edited latter, but waiting for the inspiration lightning bolt to strike is not the way achieve anything - just make a start! A common strategy deployed to overcome procrastination is to break down the thing – the goal, task or whatever - into smaller tasks, and then work through these small tasks one at a time. I find Trello really helpful for this so you might like to check that out – it's free for individual users. Create one column titled "Things to do" and create cards in there for all the components you can think of that need to be done to reach your goal. Then you create two other columns, one titled "Doing", and the other "Done". Work on one card at a time from the "things to do column, and progressively move them across into the "Done" column. It really helps clarify your thinking and overcome the sense of overwhelm, and also self reinforces as your see the "Done" column start to fill up – you feel like you're making progress. Tip 1 to overcoming procrastination – break the goal down into smaller components and deal with one of them at a time. Making a start is hard, but let's say you've taken action on the first tip and broken your goals into small actionable pieces. Another thing you might want to include is a time frame. When will you get these done? I personally wouldn't set time frames for each small item you've identified, because before you start working on them, it's tough to judge how long it will take – inevitably some tasks will take on the fraction of the time you would have guessed, whilst others are like an old woollen jumper your grandma made you – what starts of a as a single lose thread ends up going on and on the more you pull on it. So don't set time frames at the individual task level would be my advice, but I think there is value in setting yourself times frames to achieve broader milestones. Let's say your goal is to start up a side line business online. Something to generate some extra income, and potentially even develop into your primary source of income one day if it really took off. So you break that down into lots of different things that you need to do – register a business name, buy the website address, get a logo designed, etc. It might be helpful to set yourself a deadline that by the 1st of March, I'll have my idea to a point where I can start showing people and getting realistic feedback. A deadline like that provides flexibility around the individual components, but helps you stay the course, and push on when the energy levels flag a bit. I should add here too that what you don't want to do is set unrealistic deadlines. They will just create disappointment and frustration and potentially make you give up on your goal. Tip 2 – is set realistic time frames to get things done. Who hasn't sat at the dinner table as a kids and seem something on the plate that made you want to run and hide – brussel sprouts, parsnip, fish – we've all got something. And what did our wise elder folk advise? Eat the things you don't like first – don't leave it to last. The same can definitely apply here to you overcoming your procrastination. What is the ugliest bit that needs to get done if you are to make progress on your Financial Autonomy goals? Can you tackle that first? I've certainly had instances, and I'd imagine you have too, where there's some task you've been dreading, and so you've taken every opportunity to put it off. But the day comes where it just has to get done. So I grudgingly get started, and after 10 minutes realise, this isn't nearly as ugly as I thought it would be. And with that ugly bit out the way, it's downhill from here. You've got momentum now. Tip 3 – can you

How good would life be if you were debt free? No mortgage payments, or car loans. No credit cards. Imagine the weight off your shoulders. The financial freedom you would gain. The financial autonomy. Of course many people, probably most people, achieve debt free status over their working life. This episode is not for those who have already achieved this milestone. This episode is for those of you on the journey. For whom debt obligations comprise a significant portion of your regular income. We're going to look at some strategies you might be able to use to get to debt free status quicker. And that acceleration in clearing your debt brings you closer to whatever your financial autonomy goal is. For the purposes of this article, I'm going to assume you, the listener or reader has debt, and debt you'd love to see the back of. Given the title of this post, I'd imagine self-selection should deliver us this outcome. In the modern era, establishing yourself financially without taking on debt is near impossible. The only way I could imagine this happening is either if you were fortunate to be born into a wealthy family who bought you a home, or else you never owned anything, perhaps rented your whole life. Most people I meet will have a mortgage, or if not a mortgage, then at least a loan for a car, with the hope or intention of having a mortgage one day. Very often there are credit cards as well. Sometimes there are debts for whitegoods or a holiday. Debt is not evil. Borrowing to buy your house is likely to have been a smart investment. Over time the home's value rises and you hopefully reduce your debt, so that you build up equity in your home. One day you will pay off the debt entirely and will have a roof over your head without having to find mortgage or rent payments each month – incredibly liberating. Debt to fund consumption on the other hand is not so wise, but who hasn't done it? Financed the brand new car when a 2 or 3 year old vehicle would have been significantly cheaper and still done the job. Or come back from holidays with a credit card bill you couldn't pole vault over. I've been there and I'm assuming you have too. So how can we get these debts under control and fast forward your journey towards financial autonomy? Let's say you decided you needed to lose a few kilo's. What's the first thing you would do? Would you jump on the bathroom scales and weigh yourself? That would seem to be a sensible first step. You need to know your starting point to understand the task ahead – do you need to lose 5 kilograms or 20? You also want to measure progress. You want to know if the actions that you are taking, say increasing your exercise, is paying dividends. So in planning to get your debt under control the first step is to establish where you are now. I'll put in the tool-kit for this episode a table you can fill in to help make sure you don't miss anything. In putting this together, you'll get an accurate picture of how much income you need to generate each month to cover your debt repayments, the different interest rates on each loan, and your total loan balance. It's also helpful when putting together your list of debts, to establish whether they're tax deductable or not. Later, we want to decide which debt to focus on clearing first. Typically you'd focus on the debt with the highest interest rate, but if it were tax deductable, that could alter the thinking, so it's useful to know the tax status of each debt. If you have any debt that is tax deductable, you'll probably already know about it, but to clarify, tax deductable debt arises when the thing you bought with the money you borrowed, generates taxable income. The most common example is an investment property. You borrow to buy the property, and the property then brings in rent. The rent is taxable, and the interest on the debt associated with buying the property is tax deductable. Tax deductable debt could just as easily be for buying shares, a business, and in some cases a vehicle where you use it to generate income. Something that comes up from time to time when ascertaining whether a debt is tax deductable, is which asset the debt is secured against, versus the thing you bought with the money from that debt. The debt on your home is not tax deductable – your home doesn't generate any income. But what if you buy another home, and keep your old place as a rental. You will borrow against you previous home and use the money to buy the new home. Now people will often assume that given the debt is against the property that is now a rental, it would be tax deductable, but that is wrong. Tax deductibility has nothing to do with what asset is used as security. Tax deductibility is determined by how the money that you borrowed was used. In this case the money was used buy your new home, something that won't generate any taxable income, and so the interest on that debt is not tax deductable. If you've got any uncertainty as to whether a debt is tax deduct

If you catch a snippet of the radio in the morning on your way to work, you're likely to hear what happened to the Dow Jones overnight. If you read your news online or watch the news on TV it's likely you'll hear about the All Ords or maybe the ASX200. You might even come across acronyms like the NASDAQ and the FTSE. Probably, you know this is something to do with share markets. If you turn your mind to it a bit more, you probably know that the share market is where people buy and sell shares in companies like Telstra or BHP. Maybe you have in mind that the share market is risky and people lose their money sometimes. Well, if this is about the extent of your share market knowledge, you're not alone, and this episode's for you. I think it's fair to assume that you have an interest in achieving financial independence. That is what we're all about here. In working towards that goal, building wealth is likely to be an important feature. With wealth you can generate investment income with which you can then live on. Or perhaps you can use that wealth to buy a business, or invest in starting a new business if that's where your Financial Autonomy goal points you. Or perhaps Financial Autonomy for you means remaining as an employee in a business with a team of people that you enjoy being around, but with the financial resources to resign if ever management changed or something else happened that meant you no longer enjoyed coming in each day. The goal of this audio blog is to provide you with choice in life, and that sort of goal is a common one I see with many of my clients. Being in a position to say no. It's very empowering, and very liberating. One avenue towards financial independence is to build wealth via investment in the share market. I should make it clear here that what I'm talking about is investing, not trading. If you've listened to the common investment mistakes series you will recall I covered off on the dangers of trying to be a share market trader. In short, it's an almost guaranteed way to get poorer. So we're talking about investing. Buying shares that you intend to hold for at least a year, and profiting from both the dividend income, and growth in the value or price of the share over time. There are different ways you can gain exposure to the share market. Your super fund likely has at least some exposure right now. Later I'll look at a couple of options for your non-superannuation money, but let's start by explaining a few of the terms and elements you will come across when you take an interest in investing the share market. There a multiple markets We refer to the share market like it's one thing, but that's not true. All developed countries have their own share market, and some such as the US have multiple markets. There are 60 major stock markets around the world. There's a good infographic on world share markets here. Technology is gradually bringing these markets together in a practical sense for investors, but for the moment at least, as an Australian, if you want to buy shares in Apple let's say, it's not easy. Why? Because Apple isn't listed on the Australian share market, and it's not straight forward for an Australian investor to invest in the US share market (where Apple is listed) directly. Our local market is called the ASX. The Australian Stock Exchange. Should be ASE really shouldn't it, but presumably someone felt the X looked trendier. On the ASX you'll find lots of companies you're familiar with – the banks, the big miners, Woolworths, Telstra, etc. Of course there's also plenty there you've never heard of too. About 2,000 companies all up I believe. In the United States the main market is the New York Stock Exchange. This is the largest share market in the world. On the NYSE you'll find companies like Johnson & Johnson, Exxon Mobil, AT&T, VISA, and Pfizer. The second largest share market in the world is also in the US – the Nasdaq. This market tends to be more technology focused, so Apple, Amazon and Microsoft are listed here. There's also the London Stock Exchange and on and on it goes – typically one per country. You're buying a piece of a company The next thing to recognise is that when you buy a share, you are buying a small piece of a company. Let's say you buy a share in JB HiFi. You are now a part owner of that business. If that business performs well, you will get a share of the profits. If it grows and becomes worth more, the value of what you own will also rise. Of course if things go badly – maybe Amazon enters Australia and JB HiFi loses a whole lot of customers, then the business might decline, and so the value of your little piece of the company will do the same. As a part owner you have the right to attend the company's annual meeting and vote on issues like who should sit on the board of the company. I sometimes have clients tell me that they prefer property investment to share market investment because they can touch a property. It's a physical thing. They

Today's episode is the 3rd and final look at the most common financial mistakes I come across when advising clients. Thanks for your comments and feedback on the previous 2 posts, it seems that many of you have battled with some of these issues yourselves, and there were a few other mistakes that you've managed to make that, whilst being proud of them is perhaps not quite right, they are certainly something good for a laugh well after the fact. I've got 5 more for you today, so let's dive in and help you avoid the most common financial mistakes. In episode 9 we looked at Jenny's story, where her husband suffered pancreatic cancer and was without any personal insurance. They had looked into obtaining personal insurance, and indeed Jenny had done so, but he took the "I'm tough as nails, it'll never happen to me" attitude, to the detriment of their family. So the next common financial mistake I see is people not having appropriate personal insurance. There are 4 types of personal insurance, and I've got explanations for what they each do in the Toolkit for this episode, so be sure to go to the financial autonomy web site and download that. But in summary, the 4 types of insurance available are Life insurance, Total & Permanent Disability, Income Protection, and Trauma. Now if money was no object you would ideally have a package that includes all 4 of these. But for most people, there is a need to balance the ideal with the realities of their budget. The crucial thing though is to review your needs, and make a conscious decision as to what cover you will hold. Personal insurance is very customisable, so there is usually a solution available that can manage your risk, whilst also fitting within your budget. Too often, people get some default life cover within their super fund, and give no thought to whether it is actually fit for purpose. And they just never even look into Income Protection and Trauma cover. Personal insurance is applicable to us all during our working lives, but especially if you have a mortgage and children, it's just so crucial that you sit down with someone and put together a package that makes sense for you and your family. Remember, as we saw in Jenny's case, the implications of you not having insurance are far broader than just you. Another common financial mistake that I see is not having goals. In episode 10 – is your ladder against the wrong wall? , we looked at the popular SMART goals acronym as a process to flesh out your goals. Once again, I've included detail on this process in the free downloadable toolkit. Sir Edmund Hillary, the great Kiwi, didn't get to the top of Everest with Tenzing Norgay by just going out for a stroll and happening to find himself at the summit. He set himself a goal, and then went about planning how he would achieve it. I really like this quote from him: You don't have to be a fantastic hero to do certain things -- to compete. You can be just an ordinary chap, sufficiently motivated to reach challenging goals. You don't have to be a hero to reach your Financial Autonomy dreams either. You just need to set your goals, develop a plan that will get you there, and then get started. If you're a home owner, you likely have equity in that home. This represents the portion of the asset that is yours, once the mortgage is cleared. So for instance if your home was worth $1 million, and you had a mortgage on it of $600,000, then your equity is $400,000. If the house was sold, and the debt paid off, you'd have $400,000 in your pocket in very simple terms. Over time, as you pay-off your mortgage, and as hopefully the value of your property rises, your level of equity rises. In a balance sheet sense, you are becoming wealthier. The end game is to eventually pay off your home loan entirely, and own your home outright. That way, later in life when you no longer have any wages coming in, you know you'll always have a roof over your head, and you have an asset there that could potentially be sold, to get you into a retirement village or in some other way look after you in your final years. A common mistake I often come across is people viewing this equity as their personal piggy bank. Banks make this easy with things like re-draw and Lines of Credit, because there business is charging you interest on debt, and so they don't really want you to pay your home off. This is where regular monitoring of progress towards achieving your goals is important. Is your debt going down from one year to the next? All too often I sit down with clients and we find that despite having made home loan repayments all year, their loan balance is about the same as it was when we last reviewed things 12 months ago. The culprit will usually be the family holiday or the new car. Now housing your savings in or against your mortgage may well be a very sensible strategy, but be really wary of taking back out not just what you've saved, but also the repayments that were intended to bring that debt down.

Welcome back. In the last episode we explored common investment mistakes people make. It's not really essential that you listen to Part 1 before giving this one a listen, but if you haven't listened to that one yet, perhaps make that the next episode you grab. Today we're going to explore common cash flow mistakes that I see people make. I mentioned in the first episode that when I was first planning this post, I jotted down 12 ideas – financial mistakes I'd seen regularly over my 18 years as a financial planner. Last episode we covered the three that I grouped together as investment related – procrastination, being too conservative, and trying to be a share trader. In this episode I'm going to start with three more, that all have cash flow as a common theme. Hopefully you've listened to a few Financial Autonomy episodes by now, and if so you'll know that a common pre-cursor to making progress on your Financial Autonomy goal is having a good handle on your household's cash flow. How much comes in, and how much goes back out. In the Toolkit for the episode I'll make sure that our Budget Tool is included. I know the "B" word strikes fear into many, which is why I typically focus on cash flow instead. The thing is, getting on top of your Cash Flow is much easier now than it used to be. That's courtesy of internet banking. Our Budget Planner template has Expenditure first and income second, but if you want to get some quick progress, fill in the income figures as they're the easiest to get. You want the after tax number here – how much actually goes into your bank. Now go back to the top and work through your expenses, referring to your bank statements in your internet banking to get the numbers. Focus on the bills first because they are easily identifiable. For things like your phone bill, they're pretty stable month to month, so you should be able to just check a couple of months' worth and then get a good estimate of what they will cost you over the year. Bills like Electricity and Gas can vary quite a bit between summer and winter, so you might need to go back and get the whole years figures for these ones. Once you've filled in the clearly defined expenses, then go back and perhaps focus in on 2 months' worth of figures and tally up what you spend on food, clothes, and the like. Things that you will always spend money on, but for which it varies a bit, and drips out over the course of a month. I would print out the 2 months worth of bank statements and tick items off as I allocate them to a group such as food. Perhaps you could use a few different coloured highlighters – one for food, one for entertainment, etc. The end game is that once you've completed this exercise, everything you've spent money on in the past 2 months has been put into a category in your budget. So now you total up your expenses, compare that to your income, and hopefully you like the answer. If the answer is that you should be saving $x per year, reflect on whether that has been your actual experience over the past year. If not, why not? One key element of the exercise, probably the most important, is for you to see what you spend your money on, and whether that's really bringing you the greatest happiness. Is the way you are currently running your finances bringing you closer to your Financial Autonomy goal? In know that money and finances can be a point of stress in some relationships too. Perhaps going through this exercise together might help you both have a deeper conversation about where you are currently going, and whether that is taking you to the destination you both want to arrive at. So not having an understanding of your cash flow is common financial mistake number 1 this episode. Very much related to this, common mistake number 2 is spending more than you earn. You don't need the mental powers of Einstein to figure out that this can't work, yet it is an easy trap to fall into. The most common ways I see this unfold is through credit cards, and the generosity of well-meaning but ill guided parents. Credit cards, and I guess general consumer debt like interest free periods on white-goods, is the most common way of spending more than you earn. If this is you, you'll know it. So do the budget exercise mentioned earlier, understand why your expenses exceed your income, and devise a plan to do something about it. Perhaps you can come up with a way to increase income. Most likely there will need to be some strategy to reduce expenditure. As with the investment problem identified in part one of the post, the key is don't procrastinate. Identify the problem and take steps to resolve. You may not come up with the perfect solution straight away, but make a start in changing things, and refine as you learn more. The less well recognised way that people fall into the habit of spending more that they earn is through the generosity of well-meaning parents. I've had retired clients over the years whose retirement savings have been draine

Enough people have hit their thumb with a hammer for you to know that it hurts quite a lot. You don't need to do the experiment yourself. I've been helping people as a Financial Planner now for almost 18 years, and I've meet many, many wonderful people. Often people put off seeing a financial planner until they're at some sort of cross roads – they've been made redundant, or retirement is rapidly looming, or they've separated from their partner. So prospective new clients often come in to see me with some baggage. Something that's not working, or that they've put off dealing with, and that's why they need our help. Of course over that time you see some common challenges that people face. Issues that repeat again and again. So today I'm going to share some of those with you, the product of my 18 years of helping people, so hopefully you can skip over these common financial mistakes, and reach your goals sooner. We've talked a lot so far in past episodes about strategies you can use to help get you to your goals and dreams. Getting a handle on your cash flow, the Survival and Capital strategy mix in moving to self employment, and things like side hustles. Equally helpful though in getting to whatever goal you've set, has to be avoiding financial mistakes that don't need to be made. Now don't get me wrong, there are some things we have a go at, and they don't quite work out as planned. But we get really valuable learning from them. I think you can often learn a whole lot more from things that don't work out as you'd expected, than when things do just fall into place. But what we're talking about today are mistakes that have been made by people over and over again, and for which you can get the learning without having to repeat the exercise. As I said at the top, enough people have hit their thumb with a hammer for you to know that it hurts quite a lot without you needing to do the experiment yourself. When I started planning for this episode, I wrote down a simple dot point list of the common financial mistakes that I see, and I came up with 12. I'll try to group them together a bit for ease of absorption. Let's start with investing, because several of the most common financial mistakes fall into that broad category. Number one is Procrastination. Not starting. I appreciate this can be a broader life problem, but for now I just want to focus on procrastination in an investment context. Whatever your Financial Autonomy goals are, having some wealth behind you is likely to make it easier to succeed. The stronger your financial position, the more options you're likely to have. Now building up some savings in a bank account is a really great start, and an essential foundation, but at some point those savings need to be put to work. The problem is we fear the unknown, and even more so when the unknown involves money that we've worked really hard to save. But at some point you need to invest. Buy some shares, or Exchange Traded Fund (ETF), or invest in a managed fund. It doesn't need to be enormous amounts to start with, more important is the learning. An element of the initial discussions we have with new clients is to discuss their risk tolerance or risk profile. There is no exact science to this. We have a series of questions we often go through with clients, but sometimes we just have a discussion about their past experiences. The interesting thing is how people's thoughts around risk vary depending on what they've experienced in the past. So for instance I spoke with a client recently who initially told me they were a fairly conservative investor. Now in a Financial Planning context, a text book conservative investor would have somewhere less than half of their investment portfolio in shares and property, and somewhere north of half the portfolio in low risk things like bonds and term deposits. So this guy tells me he's a conservative investor, but we then get into how he has invested his super and it's 95% in shares. So we have a discussion around that and he tells me that he just focuses on the dividends, he doesn't worry much about the prices going up and down. So when he says conservative, he means he only invests in shares that pay nice steady dividends. To him, having a portfolio that is 95% in shares is conservative, whereas most people would consider that very aggressive. So why is he comfortable having such a large exposure to investments that fluctuate in value. Well it's because he's invested in shares for over 20 years. Has dabbled in things here and there. Some have worked out, and some haven't. But over time he's found what is comfortable for him, and what works for him. So when markets had a tough time through 2008, he didn't love it, but he didn't get particularly distressed, and importantly he didn't sell anything. He could do that because he had experience investing, was familiar with the up and downs, and knew that his dividends wouldn't change much, even if prices did. He's a better investor

Having a job and a regular wage is comforting and secure, except if you lose that job. UK stats say that 45% of workers will be made redundant at least once in their working life. I'd expect the Australian numbers would be much the same. In that sense, being a full time employee is very binary. Very secure and reliable whilst you're employed, but when you're not, there's nothing. If Financial Autonomy is about having choices in life, then how does that align with being fully reliant on an employer to provide you with the income that you need to keep all the balls in the air? Most of us do work for an employer, and that suits us very well, so how can we align the desire for financial independence, with the financial dependence associated with being a full time employee? I've called today's episode The Security Illusion, because I think for many people, they overestimate the level of financial security provided by their employer. So what steps can you take to truly be financially secure? Well, that's what we'll be looking at today. Financial security. Who wouldn't want that? I often talk about financial independence, using it fairly interchangeably with financial autonomy as I think the difference between the two is fairly minimal. Could financial security be another interchangeable term? To me, the difference is in the mindset. Someone whose goal is financial security is thinking about controlling the down side risk. The risk that things will go bad. And that's no bad thing. The old "hope for the best, but plan for the worst" is certainly something we try to incorporate into our client's financial plans. But can you really control poor management decisions made by your employer, or industry changes that render your area of expertise redundant? When I think about the goal of Financial Autonomy, I think of it as something more proactive. Unlike financial security, where the goal is to find somewhere safe, Financial Autonomy is about consciously building a situation where you have control, and where you're not reliant on others. Financial security, in the form of full time employment alone, is I think an illusion. But that doesn't mean that you can't be a full time employee and achieve Financial Autonomy. Indeed that's how most people would achieve their Financial Autonomy goal. So how can you transition from valuing your job for the illusion of financial security that it brings, to valuing it for the potential it provides you to achieve Financial Autonomy, a far more useful aspiration. Here's a few ideas I've come up with. I'd welcome your feedback as to other options you can think of. Broaden your skills – always learning To me the most obvious way to reduce the risk of being out of work for a sustained period is to have more strings to your bow. If your desirability to an employer is built around your skill with a particular software package for instance, then what happens when the industry moves on and a new software solution becomes the norm? This is an exercise in seeing the forest for the trees. You need to take a step back for your day to day activities and think about where your industry or profession is heading. Are you building the skills now that will be relevant in 5 or 10 years? Very often employers have budgets for staff development and training, so if you see an area where you think you should develop your skills, hit up the boss to support you. The other good thing about undertaking some learning is that it highlights to your management that you are someone with aspirations. You don't plan on sitting in the current role forever. You want new challenges, and if they don't find them for you, they run the risk of losing you to a competitor. It may be that you take that helicopter view of your industry or career path and find that the road ahead isn't paved with gold. In fact what you need to do is plan for a shift altogether, to an area with better long term prospects. This is something we looked at in the last episode – Is Your Ladder Against the Wrong Wall? So check that one out if you haven't already given it a listen. The side hustle Another way you could improve your financial security is to be less reliant on that one employer. Is there a second gig you could be doing to earn a few extra dollars? I only came across the term side hustle in the past year, but I love it, and it's certainly a viable way towards Financial Autonomy. Let's say you have an office job Monday to Friday, but have always enjoyed photography. Perhaps you could develop a little business photographing weddings or children's portraits after hours. That way, if ever you where to find yourself out of your regular work, you have some money coming in from the side gig, which you could potentially even ramp up some more with some spare time. A side hustle could be a good way to try out an idea you've had and see if you can find a market. If you get some traction it could even become your full time gig. I was listening to a pod c

How long since you've taken a step back from your professional life and considered where it's taking you? Is your current professional activity taking you to somewhere you want to be in 10 or 20 years? Is it leading you towards inner happiness? It's easy with the pressures of mortgage repayments or rent, perhaps kids, and just the normal expenses of life, to push on, head down bum up. The problem is that can lead you to a destination when you are perhaps in your 40's or 50's and with plenty of working life ahead of you, of middle management restructures, possible redundancies, and industries changing. Or perhaps the outlook for your profession is good, but will it take you to your personal goals? How many people throw their whole life into their work, only to neglect their family and home life, and then one day find themselves divorced, or just distant from their kids and partner? So today we're going to ask the question, "is your ladder against the wrong wall?". So you're climbing the corporate or professional ladder. There's the normal politics and set-backs, but on balance, you're progressing, you're moving up. But have you paused and looked at what's at the top of that ladder? Is it actually where you want to be in 10 or 20 years? And if you were at the top of that ladder, how's the view? In reaching that pinnacle, are you living the life that you aspire to? The aim of today's audio blog is to get you to take a step back and consider whether in fact you are on the right ladder. You've only got the one life. Let's make sure you don't look back in your old age and regret how you used it. The first step in determining whether your work life is taking you in the right direction is to develop your goals, and for this exercise, it's the medium, and especially the long term goals that count. Where do you see yourself at 50, 60, or 70? Will you still be living in the same city? The same country even? Do you hope to have family around you, perhaps even later in life some grandkids? Or would you anticipate a life interacting within your particular communities, be they professional, cultural, or geographic? Setting out some long term goals is such an important foundation stone, not just in a financial planning context, but in a broader life planning context. A goal that my wife and I set several years ago is that once our youngest child completes secondary school, we'd like to be able to live in a foreign city for 2-3 months each year. We don't want to be tourists. We want to continue working, just remotely, and experience what it's like to really live in the city – to read the local news, to develop in your head a bit of a mental map of the area, to hopefully get to know a few locals, and just take in the little differences. Now it's still 8 years away, but when I'm thinking about how I grow my business, or even if I grow my business, I'm in part thinking about it with a side thought as to "is this going to help me be able to work remotely for 2-3 months a year one day?" Similarly my wife works in tourism, and she determined that as a sector, it was where she wanted to be. But the employer that she had worked for was not where she wanted to remain. So in thinking through her next step, we again discussed, "well, how is whatever you do next going to help in us achieving our goal of being able to work remotely for 2-3 months a year?". It was a factor in deciding that a good solution would be for her to buy a business in the tourism sector that she can develop, and build it over time so that working from the other side of the world for a few months each year would be possible. In developing your goals, a common framework to use is called SMART goals. This acronym stands for: Specific Measurable Achievable Realistic Time bound Regular listeners will know that with each Financial Autonomy audio blog there is a downloadable toolkit to help you in implementing the ideas in each episode. In the Toolkit for this episode I have a template for you to flesh out your SMART goals. We'll also have in there our Dream Planner template, which helps you make progress on achieving the goals that you've set. Let's take a quick look at how you might use the SMART goals framework to flesh out one of your goals. What if you had a goal that you wanted to own a house near the beach one day. It's something that perhaps you would retire to later in life, but you'd like it to be a holiday house until then, just somewhere you and your family can escape to. So the first step is Specific. Where do you want to have the beach house? How many rooms would it need to have? Your goal might then become, I want to own a house near the beach, in the Inverloch region, that has at least 4 bedrooms and two bathrooms. The next step is Measurable. Do a little bit of internet research and determine what it's likely to cost. Let's say you determine that a suitable property is likely to cost around $400,000. On to Achievable and Realistic. Given your current fi

When thinking about financial autonomy we are typically talking about medium to long term goals, and then developing strategies to get to those goals. The transition then is a planned one. What if your transition was thrust upon you? I met someone recently who faced this challenge, and with her permission, I thought it was worth sharing with you a little of her story and the learnings that we can all take. Financial autonomy is about standing on your own two feet and not being reliant on others. Having choice. Part of that should be having the capacity to withstand adversity. Having the financial resilience to not lose your house or be forced to ask family for hand-outs. Lets take a look at Jenny's story, I think there are some great lessons we could all benefit from. I met Jenny at a social function a few weeks back. Through the course of our conversation I mentioned that I had made a podcast called "Financial Autonomy" and told her a little bit about what that was all about. She said, "That sounds exactly like the help that I could use," and so started to tell me a little bit of her story. I had never come across something like it before and thought it would be a fantastic thing to share to my listeners and those in the community. So I have subsequently had a phone call with Jenny and got a little bit more detail and that's what we will be sharing today. So I guess Jenny's story started when her and her husband were in the process of separating and they were selling their house. The day that the sale went unconditional Tim, her ex husband, was diagnosed with pancreatic cancer. It happened really quickly, he was just feeling unwell and within a few weeks he had turned yellow. With this diagnoses, pretty soon after he went in to have some surgery. The surgery wasn't particularly successful. The surgeons couldn't get to where they needed to, and so the advice was that he had 6-12 months to live. 12 months if he goes on chemo, but going through chemo is pretty unpleasant, so there is a quality of life consideration. But he came back two weeks after the surgery for a checkup, and they found that the cancer had actually shrunk. The surgeons couldn't really understand why, but I guess you just take it if you can get it. So that was some good news. Now in the process, Jenny and the kids decided to move back in with Tim to help care for him. He migrated from England and he didn't have any family here so that was obviously a fantastic thing that she was able to do for him. So Jenny moved back in with Tim into a rental property, the house has been sold, and they each got their half of the money. Now that was in some ways fortunate because Tim had no insurance. Ironically Jenny did have insurance, and this had been a cause of a bit of tension before they were separated. I guess Tim, probably like a lot of males, assumed it would never happen to him, and didn't want to spend the money on having insurance. Also Jenny was telling me it was a bit of a factor that he was self employed so things like Income Protection weren't easy because the insurer required financials, and so it wasn't an easy straight forward solution as if say he was a regular employee. Although he didn't have any insurance, Tim at least had his equity from the house that had been sold. This was very fortunate, because if he didn't have that money to support himself, all he would have had would have been Centerlink and that would have been a pretty grim outcome, resulting in most likely sharing a house with a stranger. Could you imagine going through chemo in that kind of scenario, just horrible. So any way, he was very lucky to have Jenny there to move back in with him to support him and they battled away. They went through the chemo and all the things you have to do. Fantastically, now about 6-12 months since treatment (I'm not sure of exactly how long) he seems to have made a recovery. He needs to go back in for some chemo for about 5 weeks coming up. Generally the prognosis on pancreatic cancer isn't good, but in Tim's case it looks like perhaps he has beaten it and the signs are pretty positive. Another consequence of going through this together is that Jenny and Tim have gotten back together as a couple, which is lovely too, especially for their kids. It's funny how sometimes the dark times can produce some good things as well. But something that Jenny was telling me that is something that really stresses the both of them out is that, Jenny has been a property owner since her early twenties, and Tim similar. And here they are mid to late 40s and they don't own a house. Usually the thing that is keeping people out of the property market is that they can't save the deposit, but that's not the case here. Tim didn't go through all the money he got back from the sale of their previous home and of course Jenny has her share of it as well. So their issue is not the deposit, it is demonstrating that they can service a mortgage. Hopefully, Tim will get ba

Financial Autonomy is about managing and planning for major transitions in life. A transition that many of us face unfortunately is divorce. I understand researchers have found that going through a divorce can be one of the most stressful things you can experience in life. As a financial planner, I often work with clients who have been through or are going through a divorce, and assist them in the planning necessary to get them back on their feet financially. In this post I've broken down the things you need to be thinking about into 4 key strategy elements. If you can work through these, you'll be in a position to get your financial life back on track, and with this stress removed, hopefully your life back on track too. Divorce is certainly no fun. But it does offer the opportunity to hit the reset button in your life. With some good financial planning, this next chapter in your life can be the best yet. Fortunately the days of couples sticking together in relationships that no longer work are behind us. Divorce provides the opportunity for a fresh start. But of course beyond the very significant emotional pain of getting through a divorce, the financial consequences are also very significant. There may be many reasons for getting divorced, but improving your financial position is rarely one of them. Whereas you and your partner once shared a roof over your head, there is now a need for separate housing. Often children are involved, so considerations of being local and having enough room for the kids can be a big challenge. It's not an option to move half an hour or more away to find more affordable housing when you don't want to turn the kids' lives upside down. You typically also go from two incomes and sharing expenses as a couple, down to one income with little change in expenses, so budgeting becomes a real challenge. Often one of you will keep the family home so as to minimise disruption for the kids, but this may mean borrowing a significant amount so that your partner is able to move on with their life and get a new house of their own. How will you service this new debt? You may be required to pay child support, which, on top of new housing costs can be a real strain. And thinking longer term, retirement plans are often significantly disrupted. Often one member of the couple took time out of the paid workforce to help raise the children. This means their superannuation balance is typically considerably less than their former spouse who worked through. This difference is allowed for in your financial settlement, but the result is that you are both now facing a less generous retirement outlook than was once the case. So divorce has big financial impacts. But as I mentioned at the start, divorce also provides an opportunity for a fresh start. It provides you with an opportunity to steer your life in the direction that you want to head, possibly without the compromises that you needed to make when you were in your former relationship. You can set goals and work hard towards them without the potential for your former partner to decide they need a new car, or some other distraction. Financial Autonomy is about giving you choices, and managing key transitions in your life. Divorce is quite clearly a significant transition, and also an opportunity to gain choice. So let's look at a few strategies that might help you get back on your feet. 1. Budgeting The starting point must be gaining clarity around how much you have coming in and how much you have going out. Following the divorce your household arrangements have changed, and possibly there is child support obligations and spousal maintenance to meet. Or perhaps in reverse, you have these support payments coming in and need to ensure they are used wisely and appropriately. You can create your budget in a spreadsheet. We also have a sample budget template in the toolkit for this post. There are also budgeting apps available. Gain a clear understanding of how much you have coming in and how much you have going out. Allow for the fact that bills are lumpy, and large expenses such as car servicing and council rates come up. I suggest having a separate bills account with your bank. If you determine that over the year your bills, including things like getting the car serviced, will be say $20,000, divide that by 26 (assuming you get paid fortnightly), and then arrange that amount, $769 in this instance, to be automatically transferred from the account that gets your income, across to your bills account each pay day. Ideally you would kick your bills account off with a few thousand dollars to allow for the fact that a big bill could come up 3 weeks after you started. You might even wish to put your mortgage or rent payments in here too. With this set-up, you know that all the bare necessities are covered, and what is left in your account is what you have to live off. You can start to move forward with confidence. 2. A roof over your head In Australia there is no

Many people that I speak to seek freedom from the need to clock on and clock off. To not be answerable to a boss. To not having to devote time and energy to things that they're not passionate about, just for the pay. The dream therefore becomes to retire early, and the sooner the better. In Australia superannuation is the primary vehicle that we use to save for retirement, and access to superannuation is available from age 60. So, when we're talking about early retirement, we're referring to retiring earlier than age 60. But what does being retired before the age of 60 actually mean? Does that mean sitting at home all day looking at the TV? I certainly hope not. Of the people I talk to with the ambition to retire early, I believe their goal is to have choice and freedom. To be able to say no to things they don't want to do in a work sense. Early retirement links very strongly with financial independence, and that is where we will be focusing the attention of today's podcast. So your dream of early retirement might be leaving the normal full time paid work force at age 40 and working as a fishing guide 6 months of the year in Northern Australia. Perhaps it's leaving the paid workforce to help your daughter care for your grandkids. Or you want to become an independent film maker. The point is, early retirement isn't about retiring from life, rather it's escaping the captivity of the workforce and spending your time as you wish to. It's recognising that we don't have a limitless life span, and so the sooner we can pursue the things that make us happy, the better. If you are to retire early, you need to develop a plan to support yourself. I've come up with 5 things you could do to gain the financial independence that you need. They are: Understand your livings costs. Save Invest Minimise/avoid debt Downsize/tree change Let's take a look at each in a bit of detail: Understand your livings costs. Is all of your spending really necessary? You need a budget and a cash flow management plan. For you to be in a position to quit your job, you need to know how much money you require to live. Is it $30,000 per year or $80,000 per year? Here's some overly simplistic maths for you, just to illustrate: If you wanted to build up a portfolio of investments that would generate $30,000 per year for you to live off, rising with inflation, and with a high level of confidence that it won't run out in your life time, you would need investments worth approximately $750,000. If, instead of $30,000, you needed $40,000 per year, that would rise to $1million. So to have just an extra $10,000 per year, you need to save an extra $250,000. (Note that I haven't allowed for tax here, this is just a really simple illustration). So to flip that, if you could reduce your living expenses by $10,000 per year, then the amount you need to save to be financially independent and retire early is reduced by $250,000. How much sooner would that mean you could escape your current employment captivity? You may have heard of the book The Millionaire Next Door. It's quite US focused, but it has some interesting insights none the less. The two authors studied households whose net-worth (ie. assets minus debts) exceeded one million US dollars. One really interesting finding was that millionaire households were disproportionately clustered in blue collar and middle class suburbs, and not in the higher income, white collar, more affluent suburbs that you would assume. Digging into why this was the case, the authors found that the higher income earners devoted more of their income to luxury items and status symbols, often funded with debt. These people tended to neglect savings and investment. In order to retire early you are going to need to build some wealth. It may not need to be millions, that depends on your goals, but owning a roof over your head is probably a minimum starting point. The authors of the The Millionaire Next Door to me missed the point about the purpose of money, which in my mind is to give you freedom and happiness. I've certainly met people who never spend a cent, and as a result would meet the criteria of having considerable net wealth. But they don't seem to me to have lived happy lives. The beneficiaries of their estate are likely to be the happy ones! So I want to be quite clear that I don't see the building up of a large pool of wealth as being the marker of a successful life. That may happen, and it's no bad thing, but money is a tool which allows you to do the things that make you happy. So, with that caveat established, it is undeniable that if your goal is to retire early, you will need to build some wealth. And the findings of these authors does highlight the difference between those who do successfully build wealth and those that don't. Very interestingly, having a high income is not a pre-requisite to building wealth and becoming financially independent. The lesson from TMND would seem to be, don't lease the expensive car, don'

I've known Nish for over 25 years. He was there when I started my first job out of school, and over the years our careers and lives intersected. These days, as well as being a friend, Nish and his family are also clients. For many years Nish was a financial planner, even running his own firm for a period. To have someone with that professional skill and background decide to engage me and my firm to act as their financial planner is to me, one of the greatest professional compliments you can receive. Today I'm really excited to share with you a little bit of Nish's hugely successful transition from the corporate world to running his own photography business – Nish Photography. But it doesn't just stop there. Because Nish and his incredibly supportive wife Janine made a second transition a few years later by making a sea-change. Leaving the big smoke with its big mortgage and hecticness, and moving the family to a small seaside community about an hour out of Melbourne. Nish and his family have never been happier. I asked Nish how these two major transitions came about, and I think there is absolute gold in what he was able to share. So let's dive in and take a look at this real life example of someone who has achieved choices in life, true financial autonomy. So far in Financial Autonomy – the audio blog, we've looked at different transitions that you might make in your life – moving from being an employee to starting your own business, reinventing yourself after a redundancy, or rebuilding after a divorce. In future episodes we'll be exploring many more, like planning financially for starting a family, making a career change, and retirement. Today though I'm really fortunate to be able share with you a real life experience of someone who has successfully achieved not one but two major transitions. In preparing for this piece I interviewed Nish to gain a better understanding of how his move from the corporate financial world to running a photography business unfolded, and then how he and his family subsequently made the transition from inner city life to a small seaside community. I started by asking why he decided to make the initial move from the finance world, where he had worked in various roles for around 20 years, into photography. He attributed the initial steps in that direction to a discussion he had with a psychologist who encouraged him to spend more time and energy doing the things he loved. His two great passions beyond his family were music and photography. So he took some singing lessons and picked up some small gigs playing his guitar and performing. Now that's no small thing. First you need to acquire the skill of singing (he already knew how to play the guitar), then you need to have the courage to get up and perform in front of real people, and then you need to find venues and convince them to let you play, ideally with you receiving some money for the effort. He did it. Next came photography. Nish told me he'd essentially missed the transition in photography from film to digital, so as with the singing lessons in pursuing his musical interests, there was a financial and time investment to be made in bringing his skills and equipment up to the level required. He recognised that the singing wasn't likely to be a viable alternative to his current career, but saw that photography presented the possibility of building a business and giving him an option to escape corporate cubicle captivity. So he launched his photography business as a side project, working on weekends. His initial focus was family portraits and weddings. He built his web site, and promoted himself through word of mouth. He gained valuable experience and knowledge. He operated this way, working his normal job, and developing his photography business on the side for roughly 12 months. This is a great strategy to progress towards a transition, and one you certainly should consider if this is your financial autonomy goal. Eventually, and after a significant nudge from Janine, his wife, he quit his job and devoted himself full time to his photography business. I asked Nish what steps they took financially to make this huge step possible. The key things were: Janine always monitored their family budget, and so had a good sense of how much income the household needed to keep afloat. She was therefore confident that they could manage on her wage alone for a period. They changed their mortgage to interest only to reduce the loan repayments. They approached the change as a 5 year plan, with the understanding that Janine's income would be the primary income to the household during this period, and then at the end of that 5 year period, Janine could potentially pursue her own transition, perhaps working fewer hours, and Nish's business would by then be at a level where his income could be the primary support for the household. In addition to these financial planning steps, through Nish operating the business as a side project for a year,

Starting a family is a huge step in a great many of our lives. Bringing a new little human into the world. So much hope. Scary too! Completely life changing. Financial Autonomy is about you taking control of your finances, and not being controlled by your finances. The focus of this audio blog is to think through the financial implications of taking this big leap, and what you can do to prepare for this major transition in your life. Also, if you're reading or listening to this during the pregnancy phase, and are anything like my household was prior to the birth of our first child, you've probably read enough books like What to Expect When Your Expecting, and Up the Duff. I promise there will be no references to what pregnancy will do to your body, or any of the seemingly infinite ways we can be a terrible parent and ruin our child's life. My name's Paul Benson, and thanks for listening to Financial Autonomy, the audio blog. Let's dive into today's episode, how to be financial ready to start a family. How to be financially ready to start a family could easily be rephrased as "How to survive on less income and with more expenses". The stereotypical scenario is that dad continues to work full time after junior's arrival, whilst mum stays at home and try's to maintain her sanity. Of course there are all sorts of permutations and combinations of how different families make things work, but almost inevitably, there will be less money coming into the household than there used to be. On top of this, you now have an extra person in the household, who maybe doesn't eat that much (yet!), but goes through nappies like it's an Olympic event, and for whom every little cough is diagnosed by the new parents as likely bird-flu, requiring your next month's wages to be donated to the local chemist. So financially, starting a family is a very big deal. But with some planning, it needn't be stressful. Sleep deprivation will be stressful enough. So where to start? You need to understand your cash flow. How much money comes into the household, how much goes out, and where does it go? The cash coming in is fairly straight forward assuming you are an employee. Possibly less so if you are self-employed, though hopefully you have a good sense of the normal cycles of your business and can forecast your income with a reasonable level of certainty. If one of you runs a business and the other is currently an employee, there may be scope to split income after the baby arrives. It's a bit of a curiosity with the tax system, but two people each earnings $40,000 will end up with more money in their pocket after tax, than a couple where one person earns $90,000 and the other nothing. This may also point you to a solution of each parent working reduced hours, instead of the more typical one at home and the other working full time. Something to consider at the very least. So in terms of being financially ready to start a family, you've got a clear picture of what the income piece will look like once bubs arrives. What about the expenses? Hopefully you've got a budget. If not, visit the resources page on the financialautonomy.com.au web site and download our template. Look up your bank statements via your internet banking, fill in the figures, and away you go. It is important to understand where your money is currently going and then think through how that will change once your family moves from 2 to 3 people (or maybe more if you're really efficient!). Maybe public transport fares will drop. You may spend less on eating out. But of course you will now have the cost of nappies and all the other bits and pieces a new born demands. Once you have your head around the numbers, it may be valuable to adjust to living on one wage before the baby arrives, assuming your plan is the most typical scenario of one parent at home and the other in the workforce. If you can demonstrate that your household can manage on that one income, you can have a high confidence that you are indeed financially ready to start a family. Another approach that I have seen is where the couple assumes and focuses on mum staying at home for 1 year. The solution they are trying to find therefore is not necessarily the long term plan, but rather just a one year solution. Sometimes they approach it that way because planning further ahead is just too daunting. Alternatively that approach might be adopted to recognise that there is a lot of uncertainty in this phase of a couple's life. Perhaps the member of the couple staying at home might hate it and want to return to the paid workforce full time as soon as possible, or at the other extreme, couldn't imagine leaving bubs with a carer and wants to remain a full time stay at home parent beyond maternity leave. Options around returning to work part time are not always known 12+ months out too, so sometimes, just focusing on the one year makes a lot of sense. So if you are focusing in on a one year solution to being financially ready to

One fantastic and I find often overlooked way to achieve financial autonomy is to buy an existing business. In comparison to starting your own business where cash flow starts at zero and you need to support yourself whilst the business becomes self-sustaining (refer episode 1), when you buy an existing business, you have cash flow and customers from day one. Buying a business is something I can talk about with quite a bit of experience. I've bought two businesses, and for a couple years I was a licensed Business Broker as a side line to my financial planning practice. The thinking at the time was that my business owner financial planning clients would need to sell their businesses when they retired, and so perhaps offering business broking services was a sensible expansion. I ended up concluding that the two services weren't especially complementary, but I picked up some great learnings that make me a better advisor for my business owning financial planning clients, and for those seeking financial autonomy through buying a business. Just as an aside, something that I believe really strongly about business endeavours, but also life more broadly, is that we can't be afraid to try. I heard someone trying to sell business coaching recently and their tag line was 98% of business fail within 10 years. What a ridiculous statement. I assume their definition of failure is that the business isn't around 10 years from when it started. So? Does that equate to failure? I operated as a part time business broker for 2 years and then made the decision it wasn't sensible for me to continue to devote time and effort into that area. At the end of that period I had $35,000 sitting in my Business Broking bank account, and had learned an enormous amount. In fact even if there was no money in the bank account from that business, I'd still say it was a success because I learnt so much. So if you hear people trying to convince you that your plan or idea will never work because most businesses fail – don't believe it. People start businesses, and people wind up businesses. Their lives change, new opportunities come up, industries change. Sometimes people just come to the conclusions that they could make more money doing something else. That's not failure – that's having a go and then having the intelligence to reflect and chose a new path. In Silicon Valley jargon, that's a "pivot". Anyhow, sorry for the rant but that's just something I feel strongly about – you can't live your life being afraid to try. So when you look at buying a business, here's the process: You search the various web sites such as businessforsale.com.au and find a business that looks interesting. You submit an enquiry to the broker. The broker will send you a Confidentiality Agreement which you need to sign and send back – most business owners that are selling want to keep it quiet. They don't want their customers and staff to know that they are looking to exit. The broker will then send through to you an Information Memorandum (IM). The level of detail in here will vary depending on the scale of the business and it's complexity, but the IM will give you some good information about the business, it's history, and some figures around how revenue and profit have been tracking. Having read through the IM you should be able to determine whether this is a business you really want to look into in a serious way. Expect to look at quite a few IM's in your hunt for a business. They cost you nothing and it's always useful to see the figures for different businesses. So let's say you've found a business that looks like it may fit your needs. The next step will be to get the detailed financials – at least 3 years worth. So what to look for? The Profit and Loss is the most important. First of all, is the business making a consistent profit? This will be the number at the bottom of the Profit and Loss. If it's losing money it's tough to see how it's worth anything, so let's assume it is showing a profit. Is that profit after the owner has received a wage? There should be a wages or salaries item in the Expenses section, and often in the financials there will be an explanation of what this is made up of. If it's not completely clear, go back to the broker and ask for a breakdown of what the wage's expenses are. It is very common in a small business for the owner not to take a wage, and just live off the profit. Consider this example. One business you look at shows a profit of $30,000 last year. The other a profit of $90,000. At first blush the second business looks more attractive. But you dig a bit deeper. You find in business one that in fact the business owner has paid himself a wage of $80,000, and also paid super of $25,000. In business two however, you learn that the business has paid nothing to the owner, and in fact in this case the husband works on the business 6 days a week and his wife does the book work one day a week. $90,000 rewards for all that effort is startin

I've named this podcast Financial Autonomy. So what is Financial Autonomy? What does it mean? Well that's what we're going to explore in today's podcast I'll give you a big hint – Financial Autonomy is about gaining choices in life. Buckle up – let's dive in! Financial autonomy or financial independence if you prefer, is about being in a financial position to have CHOICE. In my role as a financial planner, every day I talk to people about their financial plans. In almost all cases, amongst their financial goals will be retirement plans. For the past 50+ years, most people in developed countries such as Australia have lived on an expectation that they will enter the work force in their late teens or early 20's, and work through until somewhere in their 60's, whereupon they will cease work entirely and live out their remaining days in "retirement". This scenario is perhaps a bit male centric, as for many women, paid employment is often put on pause when children arrive. But none the less, in more recent times this is a rough sketch increasingly applicable to both the sexes. [caption id="attachment_13" align="aligncenter" width="919"] Financial independence[/caption] Whilst this trajectory remains applicable for many people, increasingly the feedback that I'm getting is that this is not how many people wish for their life to unfold. Instead they seek a path perhaps looking more like this: Financial autonomy, is about getting yourself in a position where you can move to yellow section above. Where you have CHOICES. Where you don't have to work in a job you hate, or with a boss who is a moron, simply because that's your lot in life until you reach 65. Financial autonomy might mean reducing your normal paid employment from 5 days per week to 3 or 4. And in those now freed up days, you might chose to study, do a different job, care for your kids or grandkids, or get involved in the local community. Financial autonomy might mean a career change. Initially the pay might be less, maybe even permanently so. But you spend a lot of your life at work. Do you really want to waste so much of the limited time you have on this earth in a job you hate? Financial autonomy might mean starting your own business. There will be many challenges and certainly risks. But you will have the flexibility to work when and how hard it suits you. Do something you are passionate about. Take holidays when it suits you. And if your son or daughter is getting presented with a student of the week certificate at assembly, you can go without having to ask the boss for a favour. Whilst financial independence in the extreme might mean not having to work again, for most people this is not what they want. Financial independence is about having choices in life. So where to start? First you need to clearly identify your goal or objective, and then you need to quantify it. Vague "one day I'd like to …" won't get you anywhere. Let's say that your goal is for a career change. You currently work as a company accountant but have lost the passion for this profession and are finding the stress too great. You would really like to re-train to become a primary school teacher, something you feel you were born to do. So what are the financial challenges associated with this change? To retrain you would need to take 2 years out of the paid workforce to attend uni and complete the on-the job training required. The pay for a teacher will be lower than you are currently on – approximately $30,000 per year less initially you estimate, though this will narrow a bit as you gain experience. You and your husband own a house with a mortgage of $300,000. Your husband works full time, enjoys his job, and believes it is quite secure. As a household therefore you have confidence that during your training period, some money will be coming in from your husbands earnings. But what if any, is the shortfall? , ie. what is the difference between your husband's take home pay and what it costs to keep your household afloat? You need to know what you are spending. We have a budgeting tool in the Resources page of our web site. I know household budgeting is no fun, but there is just no way you can gain choices in life through financial autonomy without knowing how much it costs you to live. So let's say mortgage repayments are $2,100 per month, and from the budget tool you have determined that your living expenses average $2,600 per month, and bills average another $1,200 per month. So your household expenditure is $5,900 or $70,800 per year. You should allow some money for the unexpecteds, so let's assume $75,000 is the current need. Note that we have not allowed for lavish holiday's here, or a new car. This is just what the household needs to function. Your husband's bring home income is $53,000. This is after tax and lease payments on a car. This is net income. So you have a shortfall of $22,000. To achieve your goal, this shortfall needs to be plugged, both during the initial 2 year t

Redundancy – not something most of us like to contemplate. Yet it is a reality for many of us in our working life. So rather than redundancy being seen as something negative, let's flip it around - your redundancy could be the best thing that has ever happened to you. Financial autonomy is about building financial strategies to give you choices in life. And very often these choices present themselves at moments of transition. In this case, your transition is leaving the comfort of a work place you've been at for many years, maybe even decades, and moving onto the next chapter in your life. Today's podcast will explore how you can make this transition a successful one. I'm Paul Benson and you're listening to the Financial Autonomy audio blog. Let's dive in! It's not you, it's them. Over the years I've dealt with many people who have been made redundant and so I know it can be a huge confidence sapper. But I want to tell you, if you are currently facing redundancy that you being made redundant is almost never about you – your performance, skills, or work ethic. You've been made redundant because the industry has changed, or the company you work for has changed. In some cases there is simply a natural pyramid structure with lots of workers needed at the customer facing coal face, but far less managers and senior people as you move up the pyramid, such that workers need to be shed over time to accommodate the new blood coming through. Being made redundant can be distressing – how will you keep a roof over your head and food on the table? Where will you find a new job? And there is also the loss of regular contact with your work colleagues. But there are positives too. Give some thought to the opportunities your redundancy presents. In a career sense, perhaps you can try something different. Maybe you could start your own business. Perhaps the payout you receive puts you in a stronger financial position so you can have more flexibility in your working life. Does it continue to be essential that you work 5 days per week? Financial autonomy is about building financial strategies to give you choices in life. And very often these choices present themselves at moments of transition. In this case, your transition is leaving the comfort of a work place you've been at for many years, maybe even decades, and moving onto the next chapter in your life. Be completely assured – you can make this transition a successful one, and we're here to help you do just that. Before jumping down the first path that presents itself, let's take a moment to consider the range of options you have available. I've come up with 8 – let me know if you can think of more: 1. Apply for a new job in the same field as you are currently working in. 2. Apply for a new job in a completely different industry, but which still draws on some of the skills you have built up in your old job. 3. Retrain to do something completely different. 4. Start a business to become self-employed. 5. Buy an existing business. 6. Freelance. 7. Work part time and pursue other passions 8. Retire Applying for a new job in the same industry that you were in probably doesn't require a lot of planning. If you worked in a bank for instance, there is every chance that you will find work at another bank. For many, this is not an option due to industries winding down, or they've simply had enough of working in that sector. I've worked with a client who was on the production line at Holden, and is now working in the food manufacturing industry. He's in a completely different industry, but it still utilises many of his skill in production line automation. Someone else I know worked at Kodak. When made redundant from that dying industry, he found work at the company that prints our bank notes – different industry but still using his skills. Take a step back – what other industries use the skills you have? This redundancy could be great opportunity to move from an industry in decline into one on a growth path. Retraining can present another great opportunity. Often we finish our formal education and then fall into a job – just go with the flow a bit. Before we know it we've got a mortgage and perhaps a family, and the thought of changing stream now is just unfathomable. But a redundancy might provide the perfect opportunity to make that change given you will receive some sort of payout to reflect years of service. With some good planning around managing your cash flows, this redundancy might give you the opportunity to finally pursue the thing you were born to do. What about starting a business? In episode 1 we looked at getting yourself into a financial position to start your own business. We made this our first episode because this is an ambition for a lot of the people we work with. Making it a reality is tough though because most businesses make little money in the first year. But your redundancy package may be just the thing you need to make that transition a reality. If you haven'

So you've decided you're ready to take the big plunge and start your own business. Congratulations. Having transitioned from being an employee to running my own business, I can tell you, you will be in for some challenges, but also many rewards, not least of which is flexibility in how you manage your time. I know of self employed people who like early morning, quiet, thinking time, and so choose to work for 2-3 hours from 6am, then take a break, do some exercise, have something to eat, and sit back down to continue working late morning. Others work better at night, hitting full stride at 10pm and working through until the early hours. Of course many businesses require you to be on deck during normal business hours to respond to customers, but even here you have flexibility, especially when you employ staff, to decide when you will be "at the coal face". So you've made your decision, but how to be financially ready to start your own business? You need a roof over your head and food on the table. Perhaps you have a family to support. Most often the thing holding people back from taking the plunge into self employment is the financial worry. But that is where good financial planning comes into play. I don't know about you, but sometimes I have pieces of work that need doing, and I just really don't want to do them, primarily because I don't know where to start and so it's daunting. So I keep pushing them aside thinking maybe I'll feel in the mood to tackle that one tomorrow. Eventually I bite the bullet and my usual strategy is to make it the first thing I do in the day. So often, once I get cracking, I find it actually wasn't nearly as big a deal as I had thought, and the piece of work I had been dreading is knocked over in half an hour. Now whilst a financial plan to get you ready to start your own business will certainly take more than half an hour, I think it is common for people to put off planning for the move because the thought of doing the planning is just too daunting. They just don't know where to start. Well let's solve that for you! None of us are getting any younger, so the sooner you transition into the thing you are passionate about, the more of your life can be devoted to that dream instead of clocking in doing something that is not totally fulfilling. There are two elements required for you to be financially ready to start your own business – a Survival Strategy, and a Capital Strategy. By Survival Strategy I mean how will you (and your family if relevant) survive financially whilst you get this business off the ground? How will you maintain a roof over your head and food on the table? The Capital Strategy concerns your new business – how will you fund the start up costs, marketing, perhaps fit-out costs and the like? Step 1 – the Survival Strategy The starting point in developing your survival strategy is for you to be clear on how much you spend. That means doing a household budget. Now I know that for most people doing a household budget is about as appealing as taking an ice bath in the middle of winter, but if you want to transition successfully from being an employee to running your own business, it just needs to be done. I would set-up a spread-sheet (I have created one you could use, which can be found in our Resources page here), but if you're not comfortable with that, hand written on a piece of paper will work too. Set up something like this: Start with your housing costs – mortgage repayments or rent. These are likely to be your largest expense. Of course if you're lucky enough to own your house without a mortgage, well done you, you can skip past this bit. Record expenses as either weekly, fortnightly, or monthly, and then tally that to a yearly figure (the sample spread-sheet will do this automatically for you.) So now you know how much it currently costs per year to live. Save that one, now create a second version with what is necessary to survive. Let's be realistic – if you want to pursue your dream of starting your own business, some sacrifices will be required. Perhaps you will need to forgo an annual holiday. Maybe spending on clothing and eating out will need to be cut back for a while. Short term pain, long term gain! An option you may be able to explore if you have a mortgage is reducing your loan repayments down to the minimum required, as most of us, very wisely, pay more than the minimum. You could also explore having the loan structured as interest only. In both cases this is not intended to be a long term thing, but it may be helpful for a year or two as you get established in your new enterprise. Okay, so you've crunched your numbers and the minimum amount of money you need to survive is let's say $42,000 per year. I would divide that by 12 to get a more meaningful number of $3,500 per month. Now of course bills are lumpy so some months it will be a little more and some a little less, so a bit of a buffer of cash in the bank is needed. But you now have a target t

A brief outline of what we'll be doing in the Financial Autonomy podcast.