Achieving financial freedom

Financial independence in Australia is weird – hear me out

Tara Achieving financial freedom, Financial Independence Retire Early 0 Comment
financial independence Australia

If you reach financial independence in Australia you’re going to have some some weird and unexpected encounters with your fellow Aussies. A lot of it comes down to our culture, education and the value systems we grew up with. Here’s what to expect and how to navigate the oddities.

financial independence in Australia

Why financial independence in Australia is totally weird

I’ve always been a black sheep of sorts. A contrarian thinker and do-er. So a little weirdness goes with my mojo. But if you’re an Australian working your way to financial independence, you many not be ready for what’s ahead.

Here’s a light-hearted journey through some of the oddness we’ve experienced since quitting well paying jobs to do more of what we want in life. 6 reasons FI in Australia is pretty damn weird:

1. You’re almost un-Australian

“So what do you do for a living?”

Work is a gigantic part of our identity and sense of self in Australia.

If you meet any Aussie in a social context expect to be asked what you do for a living. Usually, within the first 3 minutes.

If you’re financially independent, this can be a conversation killer.

Seriously, what do you say?

“I’m retired….”

Expect raised eyebrows if you’re under 60 year old.

The truth is I’m not retired – I just do a different type of work. And besides, I’m not old enough yet to be retired.

“I’m financially independent…”

Cue… ‘Well, what exactly is that Ms hoity-toity high and mighty?‘

Get ready for glazed eyes and distant looks if you open your mouth to explain…

2. Ohh, you mean you’re a bludger…

It’s weird, but if you don’t have a job in Australia people assume that you’re poor or on the dole. A bludger in the local lingo. Unconscious bias or not, you might find that people look at you and treat you differently because of that.

Expect the judgy-mcjudge faces to come out.

IRL financial independence is the opposite of this. It’s you taking the ultimate responsibility for your own financial wellbeing, so the government doesn’t have to look after you. Financial independence flips on its head the widespread Australian cultural myth that it’s the government’s job to rescue us, many times from our own decisions and choices.

Forget trying to explain this around the backyard barbecue tho. Just ignore the furtive glances and dig into your free lamb chops. Yum.

3. You’re definitely less relatable

What proportion of the Australian population is financially independent? I’d love to know the answer. I don’t, sorry.

What I do know is that I’ve never met in person anyone else in my age bracket or social circles who is. I’m not saying they don’t exist. Just that they’re rare.

The reality is your ‘tribe’ becomes smaller when you make the transition to financial independence in Australia. You may just find that people don’t relate to you as easily because they don’t understand your lifestyle or your choices. Barbecue conversations centred on work gossip and industry chit chat become foreign territory.

Financial independence is a different way of thinking than the mainstream. It can be a chasm too far to cross around the barbie or other social situations.

4. General social life weirdness

Expect your social life to take some weird twists and turns once you exit the workforce.

Forming social connections outside of work takes work. There are no protocols in place, like after work drinks or birthday morning teas, to meet people, network and become friends. There’s no team bonding, ‘us against the world’ kind of culture. There’s no driver to network.

When work life is no longer your social life, how do you make friends and connect with people?

Not the questions you thought you’d be contemplating with your new found financial independence, but seriously have a think about it.

I’ve made a lot of friends chatting over the front fence of our new home in rural Tasmania. That was unexpected and it’s been kinda fun.

How are you going to build your social networks when you’re financially free?

5. Your calendar is wide open

It sounds simple until you really think about it. When you’re financially free and don’t have to work for someone else anymore, your entire day is up to you! There’s no-one telling you what to spend your day on.

While the thought of this drives a lot of people to want financial independence, the whole concept of filling your own day every day can be a bit bizarre at first. Especially if you’ve worked a job your whole adult life.

What’s also odd is that all of your existing mates or friends are at work! So you can’t rely on them to keep you amused.

What to do, what to do?

This honestly probably scares a lot of people out of quitting their jobs, even though they have the finances to do it.

But we are here to say the world is diverse and so are your interest! You just have to form them again! In a world where the majority of folks commit 70% of their daylight hours each week to work, it’s easy loose sight of our interests and personal pursuits.

Financial independence is weird because it makes you think differently about your day, your week and what the rest of your life will hold. Get creative!

6. The ‘tall poppy’ takedown

If you haven’t heard of this, Tall Poppy Syndrome is an unfortunate part of the Australian psyche.

Google defines it as “a perceived tendency to discredit or disparage those who have achieved notable wealth or prominence.” It’s generally a tendency to cut people down for your achievements.

It’s a weird part of our culture and massive backfire to our collective success down under, but we do it anyway.

If you’re financially independent, there are times you’ll be a target, from friends, family, randoms, and particularly trolls online. It’s a hole bunch of crazy, but we’ve certainly come across it. So you can understand it and be prepared – here’s an article about how to deal with tall poppy syndrome.

How to navigate the oddities of financial independence in Australia

Here’s what we’ve learned to help navigate the weirdness that comes with attaining financial independence. No one really shares this perspective, so we hope it helps with your transition when you do get there.

Get ready for the questions!

“So, what do you do for a living?”….You’re going to get this question so best prepare for it. Think of all of the random forms you need to fill out in your everyday life that ask you about your current employment. What are you going to say?

If you’re like me it’s hard, after a great career, to swallow the words ‘I don’t work’ or ‘I’m retired’. We Australians are simply pre-programmed to equate not working with failure. And it’s simply not true. I’m as busy today as I was on an average work day. I’m just busy doing things I want to do! I still create jobs, help grow the economy and pay my taxes. I’m still a useful member of society, just not in the way most people are used to.

Here are some suggestions that I use when people ask me what I do:

  • “We’re self employed”
  • “I quit the workforce to work for myself”
  • “We’re full time investors”
  • “I work online”

What answer is going to work for you, when you no longer work for someone else?

Revive your creative interests!

I’m a learner. I love learning anew and I love sharing what I’ve learned. I’ll talk your ear off about all of the cool things I’ve taught myself since reaching financial independence – things I never thought I could ever do!

I’ve plumbed a water tank. I’ve built a wood stack. I’ve built bookshelves and grown a garden full of fresh food. I’ve up-cycled numerous bits of furniture into beautiful new additions to our home.

I’ve built this website, from zero prior knowledge!

Write down everything you used to love as a child, when you were single, or before you had kids.

What jumps out at you?

Pursue it!

Seek out ‘your people’

If your friends are at work 5 days a week, you might need to find a new tribe in alternative places. That’s ok!

So where can you look? Online!

Facebook groups can point you to local community pages where you’ll meet great people. You can also find other FI enthusiasts in these groups – you may find some of these are your people.

Twitter. We’ve found loads of people with similar interest on Twitter. We don’t meet up with them IRL but we do follow them and chit chat on the blue bird.

Forums. There are a tonne of online forums covering some whacky topics you wouldn’t even believe. Get on, join in, contribute.

Online communities. These pop up like parsley in our veggie garden on apps like Discord and Clubhouse. They are a great place to meet people and find your tribe.

Be open to new experiences

This sounds weird but when you get to financial independence, learn to say yes more than you say no.

I’m an introvert. Now I chit chat to random tourists who pull up at our front fence to take photos of our novelty letterbox and wild Tasmania views.

I’m a highly educated, multi-lingual, ex-diplomat, white collar professional. From time to time chew the cud with local farmers and wonder through neighbouring paddocks helping to stack hay.

Lay your biases to rest. Let go of any preconceived notions of who you are or who you think you need to be.

Instead, open your eyes to new world views and new kinds of people. Do different on purpose.

I promise this will enrich your life in ways you don’t expect.

Plan your purpose

While you build towards financial independence, think about what your purpose is in life. What drives you? Exactly what do you enjoy? What gets you excited to wake up in the morning. Is there a topic you inevitably stray to when talking to friends about over drinks at night? What do you want to contribute in life?

Work this out before you quit the rat race, and then write it down.

Not only will it help you make the leap to financial independence, but it will soften the landing when you do get there. It will help smooth out the weirdness, fill you calendar and give your new social life some direction.

Conclusion

The point of this post is to highlight the culture shock you’re going to feel when you reach financial independence in Australia, and spend a bit of time there. Life is just a bit different on this side of the fence. We hope this helps prepare you for the transition. And for those fearful to make the jump, we hope it can alleviate those fears. After all, time is your true wealth. When you work out what you want to do with yours, it’s all riches from there!

Til next post – have fun, be happy and do good!

10 powerful money affirmations that will have you drowning in dough

Tara Achieving financial freedom , ,
money affirmations

Does the law of attraction work for money? Probably not on its own. But paired with a clever financial freedom plan, money affirmations might just bring a laser like focus to your money ‘A game’ and put a rocket under your finances. So let’s test them out.

money affirmations

Some vouch for the power of money affirmations. They say they are a necessary tool if you want help to bring money into your life. Affirmations are a means to reinforce the laws of attraction, if you believe the universe will manifest for you that which your mind is focussed on.

In practice, money affirmations are positive statements that you repeat to yourself, about money, usually in the morning when you wake up and before bedtime.

The aim of affirming positive statements about money is to make you feel like more of it is already flowing through your life!

Whatever you believe, a little positive thinking about money never hurt anyone. So let’s start where money affirmations are designed to work – your money mindset.

Be a money mindset ninja

money affirmations

Your money mindset is important if you’re serious about becoming financially free. Why? Your money mindset dictates how you feel about money, what money means to you and your relationship with it. To have a positive money mindset means there’s no anxiety about not having money or road blocks to you making more of it.

If on the other hand, if your money mindset is one of scarcity one then money could bring up negative emotions in you because money represents fear and anxiety.

The concept goes, having a healthy money mindset will help you attract more money into your life and keep it because it has positive rather than negative associations for you. You get to become financially free much faster than if your money mindset was unhealthy!

Now let’s look at money affirmations.

What is a money affirmation?

A money affirmation is repeating a positive statement about money to yourself that’s based in truth.

For example; “I am becoming more and more financially free every day”.

This type of money affirmation aims to help you develop the right money mindset by helping to build your self-confidence around money, which in turn helps you attract money into your life.

Money affirmations are said to get their power from repetition, which is thought to be key when it comes to manifesting things in our lives. This includes money! The more you repeat the money affirmation, the faster that money affirmation will be written on your subconscious mind which will result in attracting money or anything else for that matter, into your life.

Do affirmations help?

Firstly, there are opposing schools of thought about how much help money affirmations are. Researchers seem split down the middle. Some research about using affirmations has found that they help because they release your mental resistance – in this case, to money.

Other’s are more skeptical.

Whatever your personal belief, we at the LLP are 100 per cent convinced of this:

As you think, so you are.

When can money affirmations help you?

Here are some situtations when money affirmations may be helpful for you:

  • If you feel like money is something that’s hard for you to attract or come by.
  • If money seems scarce or you feel a resentment towards people with more money than you money affirmations may help you change your negative money mindset.
  • If you have a hard time charging for your services or chasing money that’s owed you
  • If money is something that you worry about all the time.

How long do affirmations take to work?

Don’t expect money affirmations to manifest you fat stacks of cash overnight! Some people say it takes 21 days for money affirmations to take effect – so repeat your money affirmation every day until you notice a difference in the way you think about money and feel around money. Pay attention to what you say about money in everyday conversations and what goes through you mind when the topic turns to money.

Money affirmations can be very powerful, but they won’t do anything if you don’t do anything with them! We’re of the view that you get the best out of them if they’re supported with some real money action! Affirm and execute peeps!

Here’s where to start with your financial freedom action plan.

How to attract wealth with money affirmations

Here’s how to use the power of words and positive thinking to increase your own money vibe.

Express for success

When repeating money affirmations, you’re aiming you keep your statements positive and emotional. This is so that you can connect emotionally with what you’re verbalising.

For example, instead of saying “I hate money” say “I am a money magnet.”

It’s also effective if you speak to yourself in the present and not in the future tense. For example, say “I attract money” instead of “I will attract money.” The thinking is, you’re already in the shoes of someone that money comes easily to. You can more easily identify with and be that person.

Repeat your money affirmations in a quiet area with few distractions, where you feel comfortable and safe. Repeat your money affirmation to yourself rather than out loud.

How to release money roadblocks

If money affirmations don’t seem like they are working, try repeating money affirmations in a new way! If you feel stuck, ask yourself “What am I resisting right now?” and repeat an affirmation about releasing resistance towards money instead of focusing on attracting money into your life.

You may just be suffering from what is referred to as a money roadblock.

…money road blocks are the beliefs, habits and stories that stop you from receiving money in the most natural way possible.

Denis Duffield-Thomas, Author of Chillpreneur

In business, money blocks determine things like:

  • the prices you set,
  • your ability to charge people appropriately for your services.
  • How comfortable you feel chasing money that’s owed to you or
  • dealing with unreasonable refund requests.

What are your limiting money beliefs?

You can use money affirmations to release blocks around money. Try saying “I release all my money resistance”, and when you feel ready try adding a money affirmation on top of it such as “I am open to receiving abundance in every area of my life!”

Stay consistent with your daily ritual. Repeat your money affirmations for 21 days straight – this is the amount of time that psychologists agree upon.

Keep repeating money affirmations until you notice a difference in how you feel about money. If money is something with significant negative connotations for you, this could take more like three months.

Now its the list you’ve all been waiting for. It’s time to find those skin-tingling money affirmation to assuage any feelings of anxiety, release those money roadblocks and turn your negative money thoughts into a millionaire money mindset!

It’s time to be a money magnet

Here are 10 powerful money affirmations to bring more money into your life.

1. Money is abundant – I can always make more of it.
2. I am financially free.
3. I deserve to be wealthy.
4. Money is a wonderful thing that comes into my life easily and effortlessly.
5. I welcome money abundance in my life.
6. I am worthy of a wealthy life.
7. I am receiving money easily and effortlessly now.
8. Everything I need to make money is within me.
9. Money is the source of joy, comfort and security.
10. I release all money roadblocks and negative energy about money.

Money affirmations can be a great tool to help you achieve financial freedom, but they aren’t the only tool you need. If money affirmations don’t seem like something that’s working for you, try another money technique such as creating an inventory of your limiting money beliefs or reading up on how to have healthy financial boundaries.

And don’t forget, affirm and execute.

May you attract money in your sleep for the rest of your rich life!

Til next time – have fun, be happy, do good!

14 financial freedom quotes we love to get your money mojo flowing

Tara Achieving financial freedom , ,
Financial freedom quotes

I once stood awestruck and alone at the the top of the incredible Gama valley in the Tibetan Himalayas. I was also slightly panicked that I may just be lost and about die in the Tibetan wilderness. “But what has this got to do with financial freedom quotes?” you ask.

Our values and beliefs, the decisions we make, and where they take us.

You see, what popped into my head in that moment with the trek into Mt Everest in front of me was “How did a 22 year old girl from Oz, come to be here in the Himalayas, doing this?”. (Figuratively speaking of course. I had been bouncing around in the back of early model Toyota troop carrier for days, across vast and dusty valleys with no roads to be seen…)

The answer? A combination of my values, beliefs and decisions I’d made, taken from everything I’d learned and experienced to that point.

The same question drifted into my head yesterday as I stood at the Cow Bar which rests on the back fence of my recent cash-purchased home. I contemplated the stunning Valley of Views that I now live in, and my new life. The answer this time was the same; 8 years worth of building new values and beliefs about wealth, and decisions taken from everything new I’d taught myself about money.

This is where the financial freedom quotes come in.

What are your beliefs about money?

If you think the wealthy are a bunch of greedy bottom feeders you’ll probably never be wealthy. Because what you think about money determines the role it plays in your life.

What if I told you that our beliefs about money are based on myths from another era and hold us back in life? Here are some examples:

Myth money mindsetsMillionaire money mindset
There is never enough moneyThere is always more money and more opportunities
You have to work really hard to make moneyThere are easier ways to make money
You can help people OR make money, but not bothMoney gives people the opportunity to contribute to others and make a powerful impact.
Retirement is for when you’re oldRetirement is for when you want
The world is a zero sum game – if I get money I’m taking it from someone elseRemember, there is always more money (they’re printing it after all)

My advice on all of this is to explore your money mindset. And no, this is not not all rah, rah fairies and unicorns. Pay attention to the words that come out of your mouth when it comes to money. The things you say, like “Money doesn’t grow on trees you know”, reflect your values and beliefs about building wealth. Values and beliefs that can manifest and limit you to the status quo.

Write these things down. Then consciously challenge them.

One way to do this is to surround yourself with new values, new beliefs and different attitudes about money. Read books and quotes and re-educate yourself. The pay offs can be huge.

If you want to know more about how this works, ‘Chillpreneur” is a great, fun book to get your money mindset flowing.

Chillpreneur: The New Rules for Creating Success, Freedom, and Abundance on Your Terms

14 financial freedom quotes to live a wealthy life

The list you’ve all been waiting for! Here are the money beliefs and values that have guided us over the last 8 years, expressed in our favourite financial freedom quotes of all time.

I hung them on the fridge door, put them into my screen saver, read them on my daily commute and remembered them whenever I found a financial opportunity or saw a fork in the road. And things began to change for us.

These 14 evocative quotes reveal what we believe it takes to build wealth and get to financial freedom. They have provided us direction and driven our financial decision making every day for 8 years. We hope they do the same for you.

1. Time is our most valuable asset

“Everyday is a bank account, and time is our currency. No one is rich, no one is poor, we’ve got 24 hours each.” –-Christopher Rice

“Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.” —Mark Twain

Time is THE great leveller. We worked out 8 years ago that time is our most valuable asset. We were selling it so cheaply! So we went about putting our time to greatest use; spending it on building wealth to buy back our time in the future.

We also realised that each day what we did in the next 24 hours would determine the path of our future. The same for the day after that. Everyday we did SOMETHING that would help our financial future.

Financial freedom quotes

2. Life IS the goal

“The goal isn’t more money. The goal is living life on your terms.” –Chris Brogan

“Wealth is the ability to fully experience life.” –Henry David Thoreau

Our goal was born from a burning desire to take back control of our financial future after struggling to stay employed through an epic workforce slash and burn in 2012. We realised that life is the goal. And ours was passing us by in ways we were not happy with.

Financial freedom quotes

3. To build wealth, you have to invest in yourself first

“An investment in knowledge pays the best interest.” —Benjamin Franklin

“If you fail to plan you are planning to fail.” — Benjamin Franklin

So we began to learn about how to build and keep wealth. We read books, we attended training courses, we invested in our own financial literacy. We still do this today. We also came across the Financial Independence Retire Early (FIRE) movement and the crazy idea that working until you are 65 is, well… crazy!

Mind. Blown.

We started to reprogram our brains. We learned all we could about FIRE, building passive income, tax effective investment structures, and how to build wealth. We learned do-it-yourself renovating, real estate investment, property styling, the share economy, blockchain technology, digital assets… We’re still learning.

Financial freedom quotes

4. Money comes in abundance if you just plant the seeds

“Someone’s sitting in the shade today because someone planted a tree a long time ago” — Warren Buffet

“If you approach the ocean with a with a cup you take away a cup full. If you approach the ocean with a bucket you take away a bucket full.” — Ramana Maharshi

In 2012 we started planting investment seeds that we could harvest the rest of our lives, and tending them with patience. We’re still planting…

Financial freedom quotes

5. Thinking like everyone else will get you where everyone else is

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.” —Steve Jobs

I’ve always been a contrarian and challenger of mainstream thinking so FIRE appealed to me. We started following the FIRE movement in earnest. I’ve also been in tech and innovation for much of my working career, and leveraged these skills to help build wealth.

We consciously kept thinking differently. We challenged mainstream investment advice and made up our own minds in our own heads.

Financial freedom quotes

6. Passive income comes from hard work and persistence, with little pay off at the start

“The only place where success comes before work is in the dictionary.” —Vidal Sassoon

We worked our butts off going to our full time wage earner jobs and then creating wealth building side hustles on weekends. We did this 7 days a week for a few years, with little reward. We stayed focussed on our goals and our new values and beliefs. We knew the wealth would come if we persisted.

7. No risk no reward

“the biggest risk of all is not taking one.“ — Mellody Hobson

We took financial risks. Sometimes we lost money. That didn’t stop us. Instead, we learned from it. We thought about how to do it better next time. We kept taking risks and slowly they began paying off. As did our hard work to build passive income streams.

Financial freedom quotes

8. Bring value that no-one else brings

“Help a million people and you’ll make a million dollars” – Matt and Liz Read

“What we really want to do is what we are really meant to do. When we do what we are meant to do, money comes to us, doors open for us, we feel useful, and the work we do feels like play to us.” —Julia Cameron

“If you always do what you’ve always done, you’ll always get what you’ve always got.” — Henry Ford

With passive income streams in place, it’s now time to reinvent ourselves again. Get some fresh blood flowing through our veins, new thoughts ticking in our brains.

Our new goal is to help a million people online. We’re going to do it by being round pegs in square holes and focussing on what we love.

We’ll know when we’ve got there using the analytics for our websites. We also know if we can do this, we’ll be wealth and financially free.

Financial freedom quote

The Final Word – financial freedom is the feeling that you’ve made it

These financial freedom quotes may not resonate with you. But here’s the good news – you can go find your own!

Indeed, we hope this post inspires you to read some financial freedom books, plant some seeds, take some risks, help a million people. be trouble maker. Or even better – do your own version of all of these!

We promise, you won’t regret it. And it may just change your money mindset and your life.

Til next time have fun, be happy, do good!

How to be financially successful in your 20s

Tara Achieving financial freedom, Finance for twenty-somethings, Financial literacy , ,
How to be financially successful in your 20s

Millennials are coming of age and changing the world as we know it. They’re about to be the most influential generation since the boomers. But they’re also facing strong headwinds. The pandemic has hit many young millennials in their peak earning years. Encumbered with historic public debt, rising home prices, stagnant wages and less money to spend, young millennials will need more financial nous earlier in life to get ahead. If you’re a young millennial and want to know how to be financially successful in your 20s, this post is written for you.

What does financial success look like in your 20s?

Success is all about achieving a desired outcome so let’s first establish what that outcome should be for your finances in your 20s. You can’t hit a target you don’t know exists right?

What success looks like for you will be personal. But at a minimum, you want to be doing better at wealth building than your millennial peers. In some areas of finance that really matter, you’ll want to be doing A LOT better. If you’re a high achiever, then financial success in your 20s is all about setting yourself up for financial freedom in your 30s, which leaves you half a century to do work you love and enjoy a beautiful life. Sound totally fly to you? Let’s get on with it then.

Whether your aims are for total financial freedom or to simply be more financially secure, by the end of this post you’ll have tangible and concrete goals and steps to help you on your way.

The millennial financial footprint

Gross generalisations are generally unfair 🙂 so we’re going to take a look at some annual research statistics about millennial finance. Since recent stats are hard to find, we’ve had to dig back to 2015 for some of our benchmarks which are from the US.

Income – average millennial income in 2015 was a tick over $56,000. That’s gross. Take home income would be a smidge less than $50,000.

Expenditure – on average is just north of $47,000/y.

Savings – this leaves implied savings of, well, diddly squat and explains why around half of millennials report living paycheck-to-paycheck.

Debt – younger millennials report having student debt of around $26,000 and credit card debt of around $4700. Of those with debt, 16 percent say they owe $50,000 or more. 

This all paints a grim picture for many millennials and it’s likely things have gotten tougher since 2020. The good news is that with different money habits, you can be different. And the pandemic just might be a great opportunity to get ahead for financially savvy twenty something millennials.

Your twenty-something financial habits

Here are the financial habits you need to set in your 20s if you want to be successful with money:

  1. Earn more than you spend
  2. Avoid bad debt
  3. Save like crazy – 30% + of your take home income
  4. Start investing those savings in assets

It sounds easy but if it were, everyone would be doing it. So let’s break it down with 5 steps that you can start today if you want to be a financial success in your 20s.

5 steps to be financially successful in your 20s

Here’s 5 steps you should be taking in your 20’s to be financially successful. None of this is financial advice my millennial money masterminds. These are the 5 things we wish we’d known when we were in our 20s to win our financial freedom earlier.

Step 1 – Put your finances first

Literally no-one does this in their 20s, so if you can pull this off you’ll be well ahead of the pack.

Putting your finances first means becoming financially literate; learning about how to build and manage wealth and then starting to apply what you learn.

The first thing to know is that school doesn’t teach you anything useful about building wealth. All it does is teach you how to get a job, which is not going to translate to financial success or freedom. The other way people learn about wealth is from their parents. So if your parents are good money managers then you have a head start. If not, you’re starting from scratch. But that’s ok! Scratch is where we started and we got ourselves financially free in about 8 years.

Our tip is to focus on these things:

Learn about assets, liabilities, good debt, bad debt, cashflow and tax effective income and investment structures.

Here’s how to start today for under $100

  1. Read our blog. We mean all of it. Start here and here And we’ve got a total bonus for you – its free!
  2. Read these books on building wealth – sign up for Audible for less than $15 a month and get to it.
  3. Watch this webinar featuring wealth educator Robert Kiyosaki about investing in assets and using good debt. It costs a buck.

We promise won’t regret the hundred dollars spent.

Investing in yourself and your financial knowledge is the one thing most likely to determine where you end up in the next few years.

The learning doesn’t end once you’ve nailed these concepts, but there’s enough information in these resources for you to start applying what you’ve learned. Steps 2 to 5 assume you have your head around these concepts and are ready to put them to work.

Step 2 – Get an internet side hustle

The problem with wage earner income

Wage earner income is generally the go to income source straight out of school for most of the population. But it’s also the most highly taxed and time consuming type of income. Having come through 2020, wage earner income is also looking a tad risky. Earning all of your income through the one source that is out of your control means you’ve got nothing to fall back on if that source is suddenly taken from you.

What we are saying is wage earner income is likely where you’ll start, but it is not where you want to put all of your effort. There are income streams that don’t trade time for money directly and you can set them up to be far more tax efficient than a job. Meaning you’ll get to keep more of what you earn. Earned income is not how the rich make their money, if you get my drift…

In your twenties, spend the extra time you’d spend at work to get a promotion on smarter ways to make your money from multiple sources.

These smarter ways take time to build up – so you need to start now!

To be financially successful in your 20s the aim is to build alternate income streams using the skills you already have as… well, a millennial.

Learn how to make money online

Millennials are the first digital native generation which is a killer advantage when it comes to making money from the internet, so go and get yourself at least one alternative internet income stream in your 20s.

Why internet income? Internet income is super powerful because it gives you leverage. Leverage is when you do something once with a fixed cost or time, and it pays you over and over. The internet is where you can use Google, algorithms, coding, bots and online marketing to make money multiple times from one piece of work.

Millennials are really the first generation in history born online. Your 20s is when you need to put this early mover advantage to work.

And the lockdowns of 2020 proved a watershed for internet commerce. More of the world moved online than ever before so its no surprise that we think that is where there’s money to be made.

If you want to know more about leveraged income options, check out this page as well as our Fat Stacks blog where we share tried and tested passive income ideas.

You will need leverage to build wealth and get to financial freedom faster because in your 20s you don’t have access to a lot of capital. Deploying capital (savings and borrowings) is the other primary way you can build wealth and get to financial freedom. If you were in your 30s, we’d look at ways to build wealth using capital.

Step 3 – Become a seriously savvy saver

We’re not talking here about curbing your avocado toast munching, latte-swilling habits (a stereotype I know but a fun one). You need to get serious about squirrelling away your disposable income to be financially successful in your 20s.

Why? Because your savings rate is inversely correlated with your working career. In other words, the more of your income you save, the less of your lifetime you’ll need to spend at work. In your 20s you should be smashing this savings gig out of the park.

Also, because if you want to leverage other peoples money to build wealth in your 30s, you’re going to need some of your own money behind you.

How much should you save?

To put this question in context, average savings rates in the US, UK and Australia are around 10 to 15% of take home income. This won’t make you financially successful in your 20s. It won’t get you to financial freedom. Ever.

You should be aiming to save at least 30% of take home income in your 20s. If you want to be financially free in your 30s, it needs to be more like 50%.


In Australia the average weekly earnings before tax for a 21 to 34 year old is $58,600 a year, or roughly $49,000/y post tax. That’s $942 income a week. If you save 30%, you’ll have $650 a week to live on. Now that’s not a lot, which is why 30% savings is already way better than most twenty somethings.

But, here’s the clincher. You’ll also be saving $14,600 a year.

And this is where compound investing and youth make magic together. $14,600 invested, with a regular investment of $280 a week (your savings) gets you to $255,000 after 10 years. That’s with an annual compound return of 8%, which is less than the long term stock market and real estate return in Australia. We’ll talk about what it means to invest and get 8% annualise returns below.

In the meantime, let me shout it from the rafters – saving is massive part of being financially successful in your 20s. If you want to start your 30s with a net worth of a quarter of a million bucks, we’ve just shown you how.

Saving tips

To master saving you need to learn how to budget and practice delayed gratification. This is tough, when it seems like your besties are out splurging all of their disposable income (because they probably are!). Saving is about trade offs. Every dollar adds up and everything you don’t buy now will get your closer to financial security and if you want it, financial freedom.

  1. If you can’t afford to buy it outright, don’t buy it.
  2. Budget your online streaming, food delivery and ride sharing expenses – young Aussie millennials are spending way more on these things than they realise.
  3. Put your savings somewhere you can’t get to them easily.
  4. If you have to use credit, pay it all off in the interest free period. No exceptions.
  5. Use your online bank app to track income and expenses and manage your money.
  6. Under no circumstances should you be tempted to upgrade your lifestyle as your income grows. Keep it humble,

If there was a silver lining to the whole damn lockdown situation it is that we’re saving a lot more of our money. If that’s you, don’t be tempted to spend up big when restrictions ease! Invest that money instead.

Step 4 – Start regular investing in real assets

If you’ve invested time in your financial education, then you should have an understanding by now about assets and liabilities and how to use them to build wealth.

Your mission, in the game of money, is to accumulate assets and avoid liabilities. The younger you start, the greater the compounding benefits you receive. Huzzah!

Investments are only assets if they put money in your pocket each month. These are not easy to find or build – if they were everyone would buy them. You have to be creative. Here’s some investment classes you might think about that can put money in your pocket each month depending on what and when you buy. Some will get you more than an 8% annualised return (with more risk), some less. The lower down the list, the more capital you’ll need to get started. You may get to property investing by the end of your 20s, if you’re super disciplined with saving and investing.

  1. Bitcoin, Ethereum or other cryptocurrency with demonstrated real world use cases
  2. Digital assets – building, buying, renovating selling them
  3. Dividend stocks
  4. Exchange Traded Funds
  5. Investment properties

Consider dollar cost averaging in to your investments if you don’t have much in the way of savings to start. A regular investment will smooth out price bumps and also help you take full advantage of compounding over time.

Our Ms Mogul blog features a bunch of posts to to help get your head around the crypto asset class as well as the best resources to get you started in cryptocurrency.

When you get the capital behind you, think about buying an investment property before buying your own home. Also, think about buying a cheap home and doing it up while you live in it. These are all strategies we’ve used to build wealth and keep more of the money we make. If you want to know about our specific investment property strategy to build wealth and rental income, you can read all about it here.

Step 5 – Crush your credit score

Once you’ve built up enough capital you’ll probably want to leverage good debt to invest and build wealth, for example by buying investment properties. To do this, you’re going to need a good credit score.

Makes sense right? You need to demonstrate that you are financially responsible before lending institutions will lend to you. So what’s a good credit score and how do you go about getting one?

If you’re in the US, you’ll probably have a FICO score. The Australian system uses similar ratings to FICO, which are:

  • 800 and above — Excellent
  • 740-799 — Very good
  • 670-739 — Good
  • 580-669 — Fair
  • Below 580 — Poor

To borrow money for investments, you’re aiming for a rating of ‘Good’ or above.

Credit score tips

  1. Open a savings or checking account – most will already have this, but if not it’s way past time
  2. Establish a steady income paid into your bank account
  3. Put some bills in your name and pay those bills in full, on time.
  4. Get a low limit, low interest credit card and pay it down each month
  5. Don’t use all of the available credit on your credit card. Stick to less than 50%.
  6. Check your credit history and credit score once a year.

The final word – here’s to your financial success twenty-somethings!

So here’s what we would do if we had our time again, to be financially successful in our 20s:

  1. Become top 5% financially literate among peers
  2. Build multiple income streams – get an internet side hustle
  3. Save at least 30% of your income and don’t spend more as you make more
  4. Dollar cost average invest your savings aiming for 8% compound returns at least
  5. Pay your bills and your credit card each month and check your credit score annually

This my millennial co-conspirators in wealth is what financial success looks like in your 20s if you want to be financially secure in your 30s. If you want financial freedom, then your mission doesn’t end here. Take a look at this post to help you free your 30-something self. Here’s the good news for you – because you started in your 20s and are ahead of the game, skip straight to step 9. It’s time to put the pedal to the metal and win back your life.

Til next time, have fun, be happy and do good!

Working too much? How to avoid the 24/7 work trap

Tara Achieving financial freedom, Financial Independence Retire Early , ,
working too much

Working too much was the biggest regret she had looking back at her life….

When I’m in my 80s, I don’t want to be this woman. I don’t want to feel like I missed out on my life because I slipped into the habit of working too much.

So I did some things to make sure this wasn’t going to be me and The Live Life Project was born.

But the sad truth is, more and more of us are Googling this very thing. And it’s a world wide phenomenon. We are literally going to Google en masse to search for answers. In a clear upward trend over the last 15 years, we as humans are searching for more.

Well in this post we’re going to give you some answers. We’re going to share 10 legitimate ways to avoid the 24/7 work trap, win back your life, and put a smile on the dial of your 80 year old self.

Working too much? You’re not alone

Here’s a scary picture – the 15 year trend of Google searches for the words “working too much’. See the pronounced upward trajectory? And the data doesn’t even include the impact of global work-from-home changes during 2020. People in the US, Canada, the Phillipines, the UK and good old Oz are feeling the most overworked.

Google trends for the search term ‘working to much’
Where are we all feeling overworked?

How much of your life is spent at work?

Have you ever wondered how much of your life you’re going to end up spending at work?

Take a look at this table we’ve pulled together. Try not to completely flip your lid about how much of your adult life you’re going to spend at work if you keep on doing what you’ve always done.

The average work week is around about 40 hours which means the average person is going to spend 10 years straight at work, during their adult life. If you’re working 70 to 80 hours, then be prepared to spend a total of 18 to 21 years (solid) of your adult life at work.

LIFE SPENT WORKINGTOTAL DAYSTOTAL YEARS% OF ADULT LIFE
20 hours per week1875510%
30 hours per week2813812%
40 hours per week37501017%
50 hours per week46881321%
60 hours per week56251525%
70 hours per week65631829%
80 hours per week75002133%
Based on a 45 year career, 80 yr life expectancy

Why are you working too much?

Before we get to how to avoid the 24/7 work trap, here are 10 common reasons people work long hours:

  1. You love your work – this can be a legit reason you’re working long hours, but if you’re googling ‘working too much’ its unlikely to be why you’re here.
  2. Systemic expectation – we are part of a system that educates that we have to work to live. We learn to believe that the more and the harder we work, the better off we’ll be. We at The LLP we don’t buy it. There are other options!
  3. Workplace culture – your workplace rewards long hours over outcomes. You’ve got to fit in.
  4. Expanding lifestyle – you’ve got more and bigger bills to pay. Most of us experience lifestyle creep as our earning capacity increases. But it can be a total trap. The more you earn, the more you spend, the more you have to work. Until you’re 80 and full of regret that you missed your life.
  5. Your examples in life – your parents taught you to get a good job and work hard. So you did.
  6. Your own notions of success – equating working long hours with doing a good job is common but it’s rarely accurate.
  7. Avoidance strategy – you’re spending more time at work to avoid your life, and whatever is going on it.
  8. Upward management – you’re not that great at managing the never-ending expectations of your boss, or you’re covering for them.
  9. Poor work from home boundaries – you feel compelled (or obligated) to stay at work, even though its home time, because your work is at home with you.
  10. To make more money – you’re paid by the hour and you want to increase your income (irrespective of your lifestyle) so you work more hours.

A recent UK study found the most common reasons for working longer hours is more pay, where overtime was paid. The Economist surveyed people in 65 countries during 2020 and found that people working from home were working longer days.

But would we totally blow your mind if we said this:

The 40 hour work week is a relic of the industrial age.

Because that’s where it comes from. Things have changed since 1817. Technology, lifestyles and ways to make money have changed. So why hasn’t our thinking changed with it?

How to avoid working too much

If you stand back and take a look it, most of the 10 reasons we’ve listed above relate back to three things; values, education and finances.

So we’re going to tackle the issue at its root cause. We’re not going to tell you to get another job or go home earlier. Instead we’re going to offer you a different perspective and some more choices! If any of those 10 reasons above sound like you, here’s some ‘hopium’ that there is another way!

10 ways to stop working too much and avoid the 24/7 work trap:

1. Re-frame how you think about work

I totally understand how your personal beliefs about your self worth can be attached to what you do for work. Mine was. Our DNA is coded to think this way. We’re educated to think this way. We even introduce ourselves and socialise based on ‘what we do’.

But ponder it for just a second. Does working for 45 years so that you can live the life you want once you get to 65 even make sense to you? We’re here to encourage you to think your own thoughts. Tread your own path. Determine your own financial future.

2. Re-train your money brain (or at least read these books on your commute)

Money doesn’t have to come from a job. Only around 25% of our income is classed as ‘earned income”. So number 2 is about broadening your earning potential.That doesn’t mean heading back to university or doing a work sponsored training course. You need to swat up on your personal finance knowledge.

Learn the things about money that aren’t taught in school. Learn the things they don’t want you to know. Read these books. But be ready. These books will challenge what you think about work, life and money. They’ll also open doors to making money you couldn’t see before.

Our list if recommended personal finance books.

3. Work from home – with boundaries!

What if we said you’re working more hours just for the privilege of going to work? You can actually save a tonne of money – on things like coffees, transport, clothing, lunches – by working from home.

We saved $15,000 in one year working from home, which is the equivalent of a $20,000 pay rise (accounting for tax).

Just by working from home you can work one whole day less per week without impacting your financial situation.

Why? Because the cost of going to the office to work!

Check out this article where we show you how ….

But if you are going to work from home so you can work less, you have to set and stick to boundaries. Turn off the computer at home time. Make sure your boss understands this.

4. Cut your living costs

If you cut your living costs, you can cut your working hours.

Start with a budget and look at all of your monthly costs. For every expense over the last month, ask yourself: “How many more hours will I have to work to pay for this?”. Take the cost of any expense and divide it by your hourly wage to work this out.

This process makes me think about whether I really need that item or not and helps me pair back and stick to my budget each month.

Is a straight-off-the-showroom-floor SUV worth the extra 250 hours you’re going to have to work to pay for it? Or can you make do with a demo model? Do you really need Netflix and Stan and Amazon Prime?

Cutting your living costs will give you some breathing room so you don’t feel like you need to work all the time just to pay your bills.

“Normal is getting dressed in clothes that you buy for work and driving through traffic in a car that you are still paying for – in order to get the job you need to pay for the clothes and the car, and the house you leave vacant all day so you can afford to live in it.”

5. Prioritise living life

Our time goes where our priorities are. When you’re about to ascend the Pearly Gates or whatever you believe, you’re probably not going to reflect at that moment on what a great work life you had. You’re more likely to think back on the richness of your life. Your family. Your friends. Your experiences. When you were happiest. So prioritise those things with your time!

“We have two lives and the second begins when we realise we only have one.”

– Confucius

6. Stop buying in to the “time for money” trade

Working more hours is not the only way to make more money. In fact, overtime may just be the hardest way to earn more money if you understand the rules of the money game. The more you trade your time for money, the more tax you’ll pay. It’s just how the system has been set up.

Instead of working more hours or getting a raise, think about starting your own side hustle. And don’t earn as an individual. There are more tax efficient ways if you want to keep more of the money you make. If this has piqued your interest, take a look at this post that explains how to make money so you get to keep more of it.

7. Diversify where your money comes from

If you only earn your income from your job, then it’s understandable you’d feel trapped into working more to earn more. But there are lots of different income streams other than earned income.

The freedom of multiple income streams gives you a greater sense of financial security and helps you set boundaries and say ‘no’ at work when the inevitable overtime expectations begin.

We have 5 different income streams that we’ve built up over time specifically because we don’t want to feel beholden to a job and an employer for our security.

It’s not something that you can do overnight, but if you never start you’ll never get there. For the traditionalists, dividend income and rental income are pretty common secondary income streams. But there’s a whole new world of making money online that is open for the taking. It’s not the ‘trading time for money’ kind of income you’re looking for. Instead, it’s income that pays you multiple times for the one piece of work. It’s called ‘leverage’, and if you want some more ideas about how to make money this way, check out our page about it here.

8. Divert your overtime hours into investing

If you’re tempted to work overtime for the extra money, spend this time on your next investment instead. I’ve refused opportunities for promotion at work because I knew they came with the expectation that I’d spend more of my time at work. Or they came with an ‘on call’ expectation. We say don’t give your time away so freely and easily – it’s the most precious thing you have! The one thing you can’t buy more of.

Instead of spending more time at work, spend it research investments and on investing. Use the knowledge you’ve learned from the books and resources we recommend here, and elsewhere. You don’t need to start with a fortune. But the sooner you do it the more you’ll benefit from the compound nature of investing.

Have you thought about joining an investment club or personal finance group? You can find them online and many are free. It may sound unrelated but if you’re surrounded by wage earners all working long hours, then maybe it’s catching. Just kidding. But it could be all you really see in front of you. Find some people who are doing things differently and hang out with them. Virtually or in real life. See how they make their money and what they do with their time. You might be inspired and you might find opportunities to work less that you could never have dreamt up yourself!

9. Resist the upsell on upsizing

Upsizing your lifestyle feels like the natural thing to do when you get a raise or a better job. The desire for more, for bigger for better – you earned it after all! It’s what your friends are doing; getting larger mortgages and fatter credit cards to buy bigger houses, better cars, more toys. But it’s also the very thing that is keeping a lot of high income earners working longer and longer hours. The question you might ask yourself if you’re working too much is: is bigger and flashier worth it?

“Desire is a contract you make with yourself to be unhappy until you get what you want.”

– Naval Ravikant

Every time you upgrade your life, you’re committing to working more.

The desire to upsize your life is the modern version of indentured servitude in our view. Except your servitude is not to the middleman recruiter, it’s to your bank!

Earning more but keeping your lifestyle at the same level means you’ll have money left over to save and invest. Over decades, you’ll save hundreds of thousands of dollars in mortgage and car loan interest. This is money you can use to invest in assets that put money in your pocket so in the future you can work less!

10. Make finance a family affair

Let’s face it, your children are not going to learn anything useful about money at school. They’re just going to learn that the way to make money is to get a job. So it’s all going to come from you! We’d say, teach your children about the rules of money as you learn them yourself. This is what the rich do! Make saving and investing a family affair. Get everyone involved. Practice delayed gratification in front of your children. Explain why you’re doing what you’re doing. You may just face less friction when it comes to applying these steps so you can escape the 24/7 work trap. And chances are the ‘working too much’ cycle that you probably learned from your parents may just stop with you.

How to be financially free by 30

Tara Achieving financial freedom, Financial Independence Retire Early, Financial literacy
How to be financially free by 30

Congratulations on the most important decision you’ll make today. Maybe even this week. Hell, this year! If you are new to personal finance, your future (hopefully 30 year old) self will thank you for it. Because you are about to learn how to be financially free by 30.

So turn the music down and your phone onto silent. It’s time to become a money badass.

How long does it take to be financially free?

If you really knuckle down to it – a realistic expectation is 7 to 10 years. It took us 8 years but we started in our 30s.

In reality, how long it takes you to be financially free depends on where you are at today. If you’re thinking you’re going to be financially free in 2 years, it’s pretty unlikely. But 7 years is doable depending on how aggressive you are about it. And hopefully you’ll read our blogs and learn a few short cuts along the way.

The three key ingredients to cooking up your financial freedom fast are:

  1. your income
  2. your savings
  3. your time

If you want to know how these combine to serve up a great big steaming hot dish of financial freedom, check out this post that explains the concepts.

How to be financially free by 30 – in 12 steps

Here are 12 steps to be financially free by 30 that will totally transform your life if you want them to:

  1. Value your financial freedom above everything
  2. Spend more time learning than earning
  3. Set financial goals
  4. Kick bad debt to the curb
  5. Nail a monthly budget
  6. Start a side hustle
  7. Save your butt off
  8. Make friends with your credit score
  9. Get a lawyer (to structure your future investments)
  10. Get leverage and buy or build assets
  11. Pimp your assets (manufacture value)
  12. Reinvest your equity and income

Once you’ve done these steps, rinse and repeat…The ‘rinse and repeat’ should go on until your assets produce enough income to cover your expenses. Once you reach this point – boom! You’ve made it.

Oh, and order matters peeps! Some steps must come before others. If you mix the order, there’s a risk you mightn’t have the financial wherewithal to be successful. Now let’s take a quick look at what you need to do for each of these steps.

1. Value your financial freedom above everything else

This first step is about mindset. No its not all rah, rah unicorns and fairies. It’s just a simple fact. If financial freedom isn’t your most important value, then you’re unlikely to get there. You certainly won’t make it by 30.

The reason? Because it takes trade-offs, sound decisions, dedication and commitment. If you want to be free by 30, you won’t be able to do what other twenty-somethings are doing. But it can also be really fun and its totally freakin worth it.

I can’t help you with this step. All I can say is that Step 1 is going to be tested at every other step along this journey. Not everything is going to go the way you planned. Your values are what will keep you full steam ahead when this happens.

“Be unapologetic about your financial freedom. Be a Mogul. Build wealth. Keep it. Learn to live off it. “

Flip the bird at anything or anyone that tries to distract you. You’re gonna need that single-minded focus to get where you’re going….

2. Spend more time learning than earning

You need to kick things off by learning about finance. This is particularly true if you’re in an employee in a wage earning job. There are a few things you’re going to need to change about how you earn money if you want to be financially free. There’s a whole game of money you need to know how to play, with a tonne of tricks to it. But we’ll get to that.

Dedicate a minimum one hour a day to reading about personal finance. I used to do it on the commute to work each morning. Hell, you can even put on an audio book if you drive to work. You can learn and earn at the same time, just get started today with your learning and keep on with it.

What you need to know about personal finances to become financially free

Here’s a little bonus for you. Personal finance is a huge space and we don’t want you to get bogged down at the start. So just focus on this helpful list of what you need to know about, with links to the best resources to get you started:

  • The rules of money – what are assets, liabilities and cashflow, and how can you use them to become financially free

This is the resource that changed how we think about money and got us started – the Rich Dad education suite.

  • Financial freedom strategies – what works and what will work for you

Here are the financial freedom books we learned the most from. And here are the financial freedom strategies that we have used and know work (most of which we learned from the Rich Dad education).

  • Tax effective investment and income vehicles – how to earn income so you can keep it (pay less tax!), how to benefit from corporate tax deductions, and how to use family and discretionary trusts

There’s no, one compelling resource that will give you all the answers here. We’d suggest starting with the Rich Dad education to learn about how to earn income tax-efficiently. Then google ‘tax’ for the particular type of assets you’re looking at – whether it be property, stocks, digital assets.

  • Personal finance products and how to use them to your advantage – credit cards, offset accounts, ETFs, managed funds, loan products, loan to value ratio

Here’s where we explain each of these products and how they’re relevant to your financial freedom.

  • Side hustles and secondary income streams (for when you get to Step 4).

Here’s a link to our growing list of secondary income and passive income ideas. Remember to check back as we keep adding to this list.

3. Set 1, 2 and 5-year financial goals. Reverse engineer your 1 year goal.

Some people hate this step and some love it. We say just do it. Write down what you want (financially), why you want it (usually not financial) and by when. Set a 1-year goal, a 2-year goal and a 5-year goal.

“If you fail to plan, you plan to fail.”

Financial freedom goals

Be specific and write down your financial goals as though you have achieved them. Here are some examples to get you started:

  • It’s September 2021 and I have eliminated my credit card debt.
  • It’s July 2022 and I have a side hustle doing X that earns me an extra $X per month.
  • It’s December 2021 and I’m saving X% of my income each month
  • It’s July 2023 and I make $X in annual income
  • It’s July 2022 and I own X investment properties
  • It’s December 2021 and I currently invest $x per month of my savings into X

Now here’s the bit where the rubber hits the road. Backwards engineer each of your 1-year goals, month by month. Write down and map out what you will need to do each month for the next 12 months to hit that goal. Excel is a great way to do this.

Check back on your goals from time to time and track your 1-year goal closely. Do everything you’ve written down.

If you’re not willing to take this step, then do not pass go and do not collect $200. Just kidding. But maybe financial freedom isn’t your most important value.

This is also where Step 2 comes in handy. If you haven’t swatted up on assets, liabilities and cashflow, you’ll probably have no idea what steps you’ll need to take to hit your 1-year goal.

4. Kick bad debt to the curb

Bad debt is a trap that keeps you poor. Simple as that. Don’t buy anything with borrowed money unless it puts cash in your pocket at the end of the month. Want a car? Save until you can pay for it in full. Same goes for a holiday.

“Delayed gratification my friend, is the secret sauce to your financial freedom.”

Pay down your most expensive debt first. This usually starts with a credit card. Pay down your credit card to zero. Arrange in your bank app to set up an auto sweep of your credit card each month so that you pay zero bank interest. Never use your credit card to withdraw cash.

Pay off your car loan or any personal loans you may have taken out.

Cup up your store cards unless you use them to buy things you need (like groceries) and they pay you cash rewards for doing so.

Any time you feel the urge to buy something, calculate what it’s worth in terms of hours of your life. Divide the cost by your hourly wage. Ask yourself “Is this new TV worth the 28 extra hours I’m going to have work to pay it off?” It sounds dramatic, but it works for me. 90% of the time, my answer is no! (and that’s how I know financial freedom is my most important value).

5. Nail a monthly budget

We recommend a monthly budget because it allows you some flexibility to move the timing of expenses around. It’s easier to manage your money and still come in on budget at the end of the month. But if you’re bad with budgeting, we’d suggest 2 weeks. If you want to nail your budget it’s easier when you practice these habits:

  • Pay yourself first – set aside your savings as soon as you are paid
  • Put your savings somewhere you can’t get them
  • Have some reward money set aside for when you make budget for 3 or 6 consecutive months – budget this in.

6. Start a side hustle

We say start a side hustle but what we mean is increase your income. We did this with a side hustle because you can structure it in a way that means you keep more of the money you make.

You can also increase your income by negotiating a raise at work or getting a higher paying job, but you’ll also lose more your ‘hard earned’ to tax. Why? Because wage earners pay the most tax. Pfffst!

We started some side hustles, set up in a corporation. You might want to skip to Step 9 before you get started on this step. Get some professional advice from someone qualified in tax effective income and investment structures. This advice can help you keep 15% more of the money you make (in Australia). And you get a shed load of tax deductions. So even if you have to pay for this advice, it should pay you back in spades.

By far the best side hustle this side of 2020 is Airbnb. And as you haven’t hit step 10 yet, you may be interested in this post on How to earn money on Airbnb without owning property. Yep, without owning any property yourself. You can set it up and be earning thousands in extra income all within 6 months. We know this because we did it.

We’ve had a lot of success with this side hustle. Just check out how much we made in one month with this one apartment that we didn’t own.

If Airbnb is not for you then check out our other passive income ideas.

7. Save your butt off

There’s lots of different theories about how much of your income you need to save to be financially free. There’s a direct correlation between how much you save and how quickly you get to financial freedom. You’re not saving to have cash in the bank though, you’re saving to invest.

Your savings rate is the key defining factor that makes you different from folks that follow the conventional route to retirement. If you’re saving 10% to 15% like they are, expect to work for 45 years like they will.

“From our experience, you need to be saving 50% of your income and then some.”

But if you’re at 47% don’t sweat it! There’s two ways to save more:

  1. cut back non-essential expenses
  2. make more money

This is why you’re starting a side hustle before you knuckle down on your savings. Starting your side hustle first is designed to boost your savings rate (because that’s exactly what you should be doing with the side hustle income). It will generate momentum, and keep you on your financial freedom path.

8. Make friends with your credit score

You’re going to need this when you get to Step 10, so start now.

What is a credit score, why is it important, and how do you get a good one?

A credit score is a rating that lenders like banks use when they decide whether to lend you money or not. It’s based on how much you borrow, whether you pay what you owe on time, and how many credit applications you’ve made.

A credit score is important so that you can leverage ‘good debt’ to invest later on. Good debt is used to buy assets that put money in your pocket each month.

Your credit score is something that you need to build up over time. It’s a history of your behaviour with money. If you’re in your early 20s, you’ll be at the start of this process. If you want to be financially free by 30, you’ll need to go about consciously building your credit score as early as possible.

You can get your self a good credit score by:

  1. Getting yourself a credit card and showing that you can pay it off in full each month
  2. Paying your bills (mobile, rent, etc) on time each month
  3. NOT making excessive credit applications – just the one credit card with a small limit is enough.

9. Get a lawyer (to structure your future income and investments)

Not all income is equal. There is highly taxed income and then there are rich people that pay very little tax because they paid for good advice instead. Those rich people don’t earn highly taxed income. They structure their investments and income in ways that allow them to pay as little tax as possible. They also use the same structures to claim tax deductions that are not available to average income earners.

All of this means that if you want to keep the money you earn, you need to get good advice on how to set up your investments and income. This should ideally happen before you own assets or income producing vehicles, as its tough to change ownership once you’ve started and often there’s a cost (a tax of course!) to do so.

We’ve probably spent around $10,000 on tax effective structures and advice over the last 10 years. But that investment has paid us back around 18 x. Not a bad return…

10. Get leverage and buy or build assets

When we say leverage, we mean either capital or programming code. No, you don’t have to be a programmer. If you are lost at this point take a look at this page where we explain these two different types of leverage you can use to buy or build assets.

  • Financial independence (the traditional way) uses capital (or other people’s money) to build wealth.
  • ‘New financial independence’ uses the internet (or code) to build wealth.

What you’re trying to do is buy and build assets. An asset can be digital – like a website or cryptocurrency. It can also be tangible – like property or a business. If you remember the Rich Dad education resources from the beginning, then you’ll know this one vital thing:

An asset is something that puts money in your pocket.


Don’t buy assets that cost you money each month. That won’t get you financially free by 30.

Everything you’ve done so far has led you to be successful at Step 10.

  • Step 1 is your mindset that has gotten you to this point…
  • The knowledge you’ve gained at Step 2 means you know what sort of assets to buy, why ‘good debt’ is a critical financial freedom tool, and how to manage both.
  • If you’ve completed Steps 5, 6 and 7 you should have a nice nest egg to invest.
  • Steps 4 and 8 have helped you build up a great credit score, which means the banks will lend you capital.
  • Because of Step 9, you’ll know what ownership vehicle to use for the asset, regardless of whether you build or buy it.

11. Pimp your assets – manufacture value

Step 11 is just about squeezing the most out of your assets – both in terms of income and capital growth.

You can’t do it with all assets, but you can do it very effectively with the following types of assets, which makes them great leverage options.

  • Real estate – by buying well and renovating cleverly
  • Companies – by building the business and earnings
  • Digital assets like websites – by improving them and their monetisation.

You can also maximise your assets using a range of new online services, technologies and platforms that are collectively referred to as ‘the share economy’.

We’re big on using the share economy to generate more income from our assets.

You should be too, if you have a goal to be financially free by 30.

12. Reinvest your equity and income

This final step is about compounding your income and capital growth.

Your aim is to grow your assets to a sufficient level that they produce enough income to cover your expenses.

Some examples here might be:

  • Refinancing a property investment and drawing out any equity. Then using that equity as a deposit on your next investment.
  • Diverting business earnings into business growth
  • Automatically reinvesting dividends into more dividend producing stocks.

You want to look to do this once every 12 months.

By the time you get to Step 12 you need to have the lived experience of every single previous step. Especially if you’re leveraging further good debt. You need to know exactly how to manage cashflow and risk. You need to have a buffer built up in savings. Your lender will look for these things in order to lend to you. By Step 12 you’re officially a money badass so you need to have the skills of a badass to make it.

The final word – how pass ‘go’

Remember Monopoly? Well, just like in Monopoly you can roll the dice on your financial freedom and pass go in plenty of different ways. How you become financially free by 30 is ultimately up to you.

But unlike other blogs with their vague ramblings about how to be financially free, this ‘step by step’ guide is tried and tested. We know it works because we’ve done it.

We muddled through in 8 years. Now, with this guide at your fingertips and our kick-ass blog, you don’t have to.

So what are you waiting for?

Til next post, have fun, be happy, do good.

If you dig the vibe here, please share our post and help us get the word out!

A wealthy mindset: How we 10x-ed our net-worth by thinking differently about wealth

Tara Achieving financial freedom, Financial literacy , ,
Wealth

If you want financial freedom stop spending all of your time at work.

I know, it sounds backwards right! Different to everything you learned from your parents and at school.

Well if you’re stuck in a 9 to 5 grind and want out, maybe it’s time to think differently?

Here’s a story about how we 10xed our net worth by learning to think differently about wealth. In this post we’ll share what we learned and what we did with that knowledge. There’s no catch dear readers. Once you read this, you’ll discover that you can do it too.

Living the Aussie dream

I started my money making life in my early 20s in a respectable job as a wage earner with a university education. Sound familiar?

As expected, I quickly worked my way up the ladder to an executive position and then fought tooth and nail to win a coveted diplomatic posting to one of Australia’s Embassies overseas.

When I won that posting, I’d worked for 4 years and amassed a measly $7000 in savings. Granted I was young and just starting out with basic household goods to buy. But it wasn’t a good showing for 7,800 hours of work. My wealth had grown by less than one dollar for each of those hours I’ll never get back.

Damn…

But, about to embark on a well paid overseas gig, I then took that $7000 to a free financial planning session paid by the government and they helped me invest it in managed funds. They took their fees of course. Before I got on the plane I signed up to a stock market newsletter and bought a couple of stocks on the Aussie exchange. I had an inkling I needed to invest, but that was all I new to do at the time.

For the next three years I was living my dream – a diplomat in China earning Aussie dollars, spending Chinese Yuan with a large whack of my living costs paid by the government. All in return for being on call 24/7 as the frontline of Australian sovereign border to North China and North Korea.

It was a great experience and one of the highlights of my employed life.

The gravy was, at the end of that three year posting I came back to Oz with $160k in the bank. I felt rich! It turns out you can save a lot of your Aussie income when your living costs are in Chinese Yuan. And one of the stocks I bought took off to boot. Booyah!

Incidentally, I returned to Oz with $160k in my pocket right after the GFC. This was just as the 7% interest I was earning on bank savings began its free-fall to the 1% savings rates of today. A tangent, but a related one.

Back to the story….

With $160k behind me, I thought I’d take a leap of faith and change careers. So I went back to uni and re-trained in environmental science because, folks, that was all I knew to do… $15k in student loans later I had a Masters in front of my name. I didn’t think this way at the time, but all that degree did was put me in debt and prime me for another job as a respectable wage earner.

That new job came along and whaddayaknow I was suddenly a renewable energy expert kicking off a new career working the same old 9 to 5 grind.

When sh*t got real

3 years into that ‘new career’ the government I worked for was subject to its largest cut backs in history. 14,000 people lost their income earning jobs.

I was a contractor at the time. My head was at the front of that queue for the chopping block. As the main breadwinner – sh*t had gotten very real for me.

What to do, what to do? I had some cash in the bank but faced the looming prospect of unemployment. How did I get into this position?

I’d done everything I’d been told to do – I gotten good grades, a higher degree, a respectable job. I had parents who were wage earners and an unspoken understanding that this was also the path cut out for me. I’d worked hard and saved studiously. And yet, I was facing zero income and little hope of local reemployment due to cut backs

I remember I was angry and confused. Over the months I spent dodging and weaving to keep my job what crystallised in my mind from the anger in my gut was this – I didn’t want to be reliant on someone else for my financial security ever again.

Fast forward to 2020 and you hear the same familiar shattering of reality for tonnes of people across the globe.

But at that pivotal moment in my life, I realised I needed to DO different to GET different.

‘If you always do what you’ve always done, you’ll always get what you’ve always got.’

– Henry Ford

And so began my unconventional financial education. I say unconventional because it wasn’t about finance per se. Also, it was the first education I’d had that was not from a school or university. It was all about a subject I’d had zero personal experience with and one they don’t teach in class.

How the rich make money.

Lessons from a Rich Dad (how to build a wealthy mindset)

One of the first financial educators that came into view for me was Robert Kiyosaki. Kiyosaki is a well known financial educator and successful investor and entrepreneur. I can’t quite remember how I stumbled across him but looking back now I’m super bloody grateful I did.

Kiyosaki’s Rich Dad lessons opened my world and blew my mind. The Rich Dad teachings were just different to everything I’d learned and utterly challenged everything (I thought) I knew about money and wealth.

I knew if I could learn to think differently in the Rich Dad way, I could ‘do different to get different’. So I focussed on reading everything I could from the Rich Dad education suite and attended Rich Dad webinars.

Multiple books and online events later I’d distilled down to six the take away lessons that resonated with me. These six lessons taught me to think differently about money.

Here are the lessons I learned, and what we did with them.

Lesson #1 – Become financially literate and learn the rules of money.

There are a bunch of rules that govern wealth creation and that are not taught in school. Who knew right?

Some of them are revealed below and many of them Kiyosaki talks about in his books and online webinars.

If you want to make money you need to learn the rules of the wealth game and become financially literate. Not the finance degree kind of learning. The wealth building kind of learning. You need to learn about where to focus your time and effort, what to invest in, and how to keep the money you make.

What we did.

We put aside some of our surplus income each week to invest in our financial education. Not learning from schools. Learning from successful and wealthy people. In my spare time I read books, attended webinars and took courses. I focussed on everything the Rich Dad lessons had to say about money.

If you want to become more financially literate and learn the rules of money – start here with a Rich Dad webinar like we did. If you read on you’ll see how learning the Rich Dad lessons and rules of money – and then applying them – has paid off for us. We now have a life we couldn’t imagine when our Rich Dad journey started.

Lesson #2 – Savers are losers.

In school we’re all taught to get a job, save up, get a mortgage and pay it down with 100% interest over its life.

Kiyosaki teaches that this system is obsolete. Why would you save money when they’re printing more of it?

Savers have been losers since 1971 when fiat currency was de-pegged from the gold standard and government’s started printing as much money as they needed to keep economies out of trouble. Just check out the money printing that’s been going on.

how to build wealth
US dollar money printing

People are still walking around scratching their heads 13 years after the GFC about why the stock market keeps going up and up and in Australia, the US and the UK house prices are hitting record levels. It’s not the price of these assets going up in isolation. It’s their relative value in fiat currency. If you’re saving your money in fiat currency, you are going backwards at a rate of knots. If you’re trading from asset to asset in the same market, you’re less impacted.

What we did.

In 2011 we took the $160k in savings we’d had in the bank for two years and decided to invest most of it. We have only ever kept an emergency buffer as cash in the bank since learning the plummeting value of fiat currency. Cash is trash peeps.

Lesson #3 – The rich don’t work for money. They have money work for them (by investing it).

Woaah, what? Takes a minute to wrap your head around, but news flash here – truly rich people don’t have jobs. They don’t work as employees of other people. They’re investors or entrepreneurs or business owners. They certainly don’t trade their time, in units, directly for money. So having a job was never going to make me rich or even financially comfortable. I was always just going to be trading my time for money. No way Jose.

What we did.

We set financial goals around not having jobs. We made financial plans that were reverse engineered with the single outcome of escaping the rat race.

When my friends were busy climbing the corporate ladder to VP and Managing Director positions, I was busy trying to get my ass out of a job.

We decided not to chase promotions at work because the higher up you go the more of your life they want from you. I had multiple friends over this period pushing me toward career ‘promotions’; so called ‘higher paying jobs’. It was clear that they thought I should have been doing better. Several bosses asked me why I hadn’t ‘taken the next step’. I remember smiling and mumbling something incoherent on these occasions. Explaining what I was actually up to seemed an impossibility. Where to even start?

Instead of the path expected of me, I found a wage earning position that paid well but that also had flexible working hour arrangements (accrued time). I spent my accrued work hours becoming more financially literate and investing every last effort and dollar into building my assets column – outside of work.

Lesson # 4 – An asset is something that puts money in your pocket. You home is not necessarily an asset.

This is an underpinning of the Rich Dad financial education – knowing the difference between an asset and a liability. The rich buy assets, the poor buy liabilities. Assets put money in your pocket and liabilities take money out of your pocket. Rich Dad financial education is practical because Kiyosaki talks about what kind of assets to buy and how he went about accumulating them from a time when he was stone cold broke-ass like many of us have been.

What we did.

We started to invest in assets. We didn’t even have a home mortgage at the time – we were renting – but we bought our first investment property instead of a home. Because of the Rich Dad lessons about assets and liabilities, we knew what to look for. We looked exclusively for an investment property that would put money in our pocket. A property that would produce an income in rent and capital growth. We bought a run down dual income property – three apartments on one title with three independent income streams.

Lesson #5 – The rich use the income from the their assets to live and reinvest the surplus into into more leveraged assets

The Rich spend time building up their asset column and then use the income their assets produce to buy what they want. The poor stay poor buying liabilities like big homes, cars, holidays and gadgets that they can’t afford – to look rich.

The rich buy assets using other people’s money (good debt) and manage risk. The poor take personal debt (bad debt) to buy liabilities or are fearful of taking on debt at all.

What we did.

We started to use good debt strategies with our investing. The multi-family property we bought was leveraged at 90% so that we could make our own money go further. We kept as much as our own cash as we could to renovate the three apartments and increase the rental income.

By renovating our first investment property we had created some equity so we used that to buy another investment property leveraged at 90%.

We managed the cashflow from our wage earning jobs and our investments carefully – something Kiyosaki also teaches. And we always kept a buffer in case things went wrong.

The next step we took was to invest in our financial education again. We learned how to supercharge the rental income from our 4 investment properties. If you want to learn more about how we did this, you’ll find the details here.

Lesson #5, about using good debt and not getting into bad debt, was as much about what we didn’t do as what we did.

When our peers were dropping $700k on homes to live in and taking on massive personal mortgages, we didn’t. Instead, we paid $40k with a $360k bank loan for a modest little cottage right by the beach. It was a house we knew we could one day turn into asset that put money in our pocket. We invested our surplus income and sweat equity into renovating the cottage, mostly DIY.

As we watched our friends and peers buy new $50k cars with finance straight off the showroom floor, we didn’t do that either. We bought both our cars as either demo or second hand models no more than 2 years old and paid cash for them.

When maxing out your credit cards on retail therapy and expensive nights out was the norm, we didn’t buy stuff we didn’t really need. Instead, we used our rewards credit card to get maximum value from our home offset account (reducing our interest payments and getting cashback). We paid the credit card in full every month and rolled it into a mortgage package so the bank waived the annual credit card fee. This credit card strategy uses smart structuring and is a total home loan interest killer. It’s something a lot of folks can do, but simply overlook.

Lesson #6 – Taxes are your single largest expense. The rich don’t pay taxes – the educated upper middle class pay all the taxes.

Kiyosaki teaches that high paid employees pay the most taxes. Just look up income tax rates around the global versus company tax. The worst place to be if you want to keep the money you earn is an employed professional.

Corporations pay less tax than individuals as an incentive from government to create tax paying jobs. Investors pay the least taxes.

The lesson we took away? If you want to keep your money, earn it as an investor or in a corporation. Far out brussel sprout. I couldn’t believe I’d been a tax mule all these years and so ignorant about it…

What we did.

We structured our investments in trusts and companies. We focussed on moving our income streams from the highly taxed employee basket, to the low tax corporation basket. Eventually we’ll move more and more of our income into the investor basket.

We currently earn and then spend and then get taxed for 75% of our income.

Before our Rich Dad education we earned, got taxed and then spent for 100% of our income.

Changing the way we earned income has reduced our personal cost of living by thousands per year due to favourable company tax rules. Our net worth has also benefited by $130k to $170k by using the rules of money we learned from our Rich Dad education.

The final word – our wealthy mindset results

Building a wealth mindset and applying the Rich Dad concepts that we learned in the Robert Kiyosaki webinars has set us financially free. I’m happy to report that I’m no longer an employee. 🙂 I’m free to do what I want each day – which is play with our beautiful Vizslas, set up our new home, start our homesteading project and write this blog.

We’ve also just bought that new home with cash – all part of the financial freedom plan.

Our net worth is over 10 times what it was when we started applying the Rich Dad rules of money.

We live off the income generated by our assets via tax efficient company structures.

Any surplus income we have we look to reinvest in other income earning assets.

We work as we chose to, because we’ve got new goals in life. Mostly, we enjoy life and our time is our own.

None of this required epic mastery of anything special. We just learned to think differently, build a wealthy mindset and do what the rich did.

Thanks to Mr Kiyosaki and his Rich Dad.

Til next post – have fun, be happy, do good!

And if this post got you thinking about your financial future maybe get yourself to a Rich Dad webinar and please – share the love!

The wealth building potential of dual income property

Tara Achieving financial freedom, Real estate , , 3 Comments
Dual income property

This is the intro post in our series ‘The wealth building potential of dual income property’. We own dual income property and it’s been a fundamental strategy in our financial freedom plan. We’re going to take you dear readers through the wealth building potential of dual income property using a bunch of different value creation techniques. You’ll get the real story, warts and all – not the BS sales pitch that real estate developers want you to believe. You’ll also get our tips from the trenches; we’ve made the mistakes so you don’t have to!

So if you’ve been wondering whether a duplex or triplex investment is right for you, read on financial freedom seekers.

What is dual income property?

To start you off, check out this little intro to dual income property on our Traditional FI page. In short, a dual income property is multiple apartments or town houses in one property, giving the owner more than one rental income stream. You’ll often hear dual income properties referred to as duplexes, triplexes or multifamily properties.  These are typically in a small complex or are semi-detached in that they share a common wall and some common areas. At the big end of town, they’re entire multilevel apartment buildings.

Dual income property
Our first property investment was this dual income property

Picking the right investment property for your financial freedom plan

There are two things about property investment that make it attractive as a financial freedom or wealth building strategy – capital gains and cashflow. When you’re looking for an investment property, it often boils down to a choice between the two.

Capital gains are the increase in the price of the property over time as the market moves (not all property increases in price while you hold it, we’re just saying that this is what you’re aiming for). If you’re aiming to build a property portfolio you can live off, you need capital gains to fund your deposit for future property investments.

Cashflow is generated from the rent your tenants pay you. You need this to be able to service future bank loans to leverage your deposit into more property.

There are also a couple of generalisations in the property market (which itself is a generalisation!) to know about when picking what property to invest in and where:

  1. City properties are capital gains properties – they tend to be more expensive, grow in price faster over time, and because of this they produce a lower yield
  2. Properties in smaller regional towns are better cashflow properties – they’re cheaper to buy and the yield is better, but there’s not the market demand to drive high price increases.

We’ve observed these generalisations in real life across different property markets around Australia, although there are always exceptions. Investment properties that give you both capital growth and cashflow FROM THE OUTSET truly are the holy grail of real estate investing. We say from the outset because if you hold an investment property long enough and pay down the mortgage it will inevitably produce some capital gains and you’ll be cashflow positive with rental growth and smaller loan payments….

Anyway…This is all good context to understand where you are at in your investments and your financial freedom planning, what you need to take the next step (cashflow or capital growth) and how dual income property it might fit in to those plans.

What is the benefit of investing in a dual income property?

Cashflow

Dual income properties are typically labelled a ‘cashflow play’ in property investment – because you get more beds, baths and kitchens than in a single-family dwelling. That leads to more rental income. Cashflow is seen to be the major benefit of dual income property investing and it’s what we focussed on when we were looking for a dual income property.

Income diversity

Dual income property gives you a couple of independent income streams. This is an important advantage over single family properties especially if you have a sizeable loan against the property. The thing with rental properties is, tenants vacate them. And when they’re vacant, your rent stops. With dual income properties, you can spread out the rental leases and the natural vacancies that occur between tenants and you always have rent coming in. Huzzah!

Value creation opportunities

The benefits so far are all around income generation. But dual income properties also have massive value creation opportunities and this is why we’re devoting an entire series to exploring how dual income strategies can catapult your wealth building and financial freedom! In terms of a property investment, multifamily properties are extremely versatile and can be a real blank slate opportunity for the motivated, active value creation type investor. Once you’ve set them up, they can also become low risk passive investment – all depending on how they’re run.

Building wealth from dual income property

So how do you leverage this type of property to build wealth? In our dual income property series we’re going to take you through the killer wealth building strategy that we used to pour rocket fuel on our dual income property investment – step by step dear readers.  Over the coming weeks, we’ll post about:

  1. How to buy the right dual income property
  2. How we turned a $60,000 investment into a $180 per week income and doubled our money in 12 months
  3. How to explode the equity in a dual income property – twice!
  4. How we’re killing it with our secret dual income strategy  
  5. Options to cash out from a dual income property

We’re going to take you through what we did, all of the numbers, our tips from the trenches at each stage, and we’ll even share photos along the way. We’ll also reveal some traps for the uninitiated and things we wish we knew BEFORE we got started.

The final word – is dual income property a good investment?

You’ll have to make up your own mind dear readers, once you read through this series and have weighed up the pros and cons yourself. Only you’ll know whether it’s right for you.

One thing to note upfront – dual income property is not an advanced investor strategy! Our first property purchase was a dual income property – before we bought our home! We were property novices – so if we can do it, you can too!

Stay tuned!

Part 1 – How to buy the right dual income property

Part 2 – How to make passive income from property, double your money and pocket a 15% annual return

Until next post – have fun, be happy, do good!

The game of money is changing – so what is DeFi?

Tara Achieving financial freedom, Decentralised Finance ,
what is DeFi

Part 2 in our series DeFi: the new financial frontier

A new financial architecture is being built by super smart computer technologists and even some economists. It’s called DeFi crypto and it’s about much more than just crypto. It’s going to be bigger than Bitcoin. Perhaps even bigger than the internet V2.0. In fact, it’s the single most important thing you as a financial freedom seeker can get your head around – now. But what is DeFi? What does in mean for your financial freedom in practical terms?

Our DeFi: the new financial frontier series is helping financial freedom seekers understand the monumental shifts in the tectonic plates of our global money system. If financial freedom is all about how well you play the game of money, then that game just got new rules so stay tuned to this series as we explain them.

Who controls the ledger controls the money game

Ledgers have historically recorded financial and commercial transactions between people – the ‘who owns what when’ – since, well, a long time.  If you think about it, for any significant exchange of value, there’s a central record of the transaction kept by someone. Ledgers are more than just a record. They’re also about trust. An independent third-party bearing witness to the exchange of value between strangers and so on. Whoever controls the ledger has significant power in the game of money. Over the rules that is. How transactions must occur, between whom, and how much they cost.

So, who controls the ledgers? Middlemen such as banks, insurers, brokers, auditors and policy makers, and the institutions they have created do. And through this the centralised control of money has become the norm. But will it always be?

What is DeFi? The new rules of decentralised money

what is DeFi

DeFi is the decentralisation of financial products using blockchain technology.

DeFi uses Blockchain technology to replace the role of middleman in financial and commercial transactions and decentralise the control of money.

Blockchain was created to act as a ledger that no one entity could control but that needs the participation of many to operate. It seems simple on the surface but in its very design, blockchain technology fundamentally ‘up-ends’ the money game as its currently played. That’s why there is a lot of scrambling going on in the halls of traditional financial institutions, about Bitcoin and cryptocurrency. But cryptocurrency and bitcoin are just white noise once you step back and take a look at the bigger picture of Blockchain meets Money.

Blockchain meets money

Blockchain technology’s decentralisation of money – Decentalised Finance (DeFi) – will profoundly change our money future.  The changes have already started. The introduction of Blockchain technology to the world of finance is seeping into the money system under the cover of crypto and Bitcoin. Over the coming decade, DeFi crypto will likely impact the way you save, where you put your money, how you borrow, where and how you invest in assets, how you manage them, the stocks you buy, your retirement nest egg, your investment income and any trading you might do. Just about everything to with your money.

You see, Blockchain changes the money game in four critical ways:

  1. It acts as an immutable public ledger through which participants can validate transactions automating the trust element between third parties,
  2. Its design decentralises control over that ledger,
  3. it allows the tokenisation of assets by fractionalising ownership of those assets, and
  4. It transcends national borders, putting opportunity in the hands of the masses and millions of unbanked across the globe.

What does DeFi mean for your financial freedom?

The real-life impacts on your financial freedom due the structural changes being bought borne out through Blockchain and DeFi crypto are profound peeps! Here are just a few we can think of:

  • Faster financial and commercial transactions – blockchain now provides an easy way to send money quickly and cheaply across the globe
  • Fewer middlemen and rent takers = fewer fees and charges = you keep more of your hard earned assets
  • Lower barriers to entry – no minimum investment requirements for example that apply to some of the most profitable instruments in financial markets
  • Lower cost to buy in to financial opportunities so greater access to markets
  • Fairer ways to grow wealth
  • More transparency to replace the opaque rules that currently apply to the game of money – particularly gold investing, and
  • The biggest of them all: You get to control your money – no custodians, banks, no gatekeepers clipping the ticket or saying no to your financial future

The final word – may the odds be ever in your favour

I really want to focus on that last dot point because it is exactly what financial freedom is about. You taking control of your money. DeFi crypto can give you new tools to do exactly that – if you learn the rules of the game and get comfortable with the tech. Don’t be afraid, but do get educated. And do manage risk! The new game of money is here.  It involves investing in cryptocurrency and decentralised finance. As they say in the movies, may the odds be ever in your favour!

Check out part 3 in our DeFi series to see how to earn double digit interest on your money with DeFi crypto.

Until next time – have fun, be happy, do good!

Inflation forecasts for 2021: how to hedge for financial freedom

Tara Achieving financial freedom, Financial Independence Retire Early, FIRE investing , ,
Inflation forecast

Well that was a few hours of my life I’ll never get back. Researching the latest inflation figures and economist viewpoints. Now, let’s see if I can turn those few hours into a three minute engrossing read for you. Challenge accepted!

In this post we take a look at inflation forecasts for 2021, the debasement of fiat currency, how these might impact our passive income and financial freedom goals and how to hedge against them.

Mainstream media, at least in Australia, has been awash with stories about increasing house prices in capital cities and skyrocketing prices in regional areas. Apparently prices in February rose in every capital city and every rest of state region in the entire country. This hasn’t happened since 2010. Fuelling the growth, they say, is the recovery after lockdown.  Government building incentives and low interest rates. Add to that the fact that Aussies have returned in their droves from overseas and now need a place to live. It’s certainly not population growth as gone are the days of immigration led economic boom times. At least temporarily.

Stocks have also been on an unrelenting run up throughout 2020 bar the March dip. Price to earnings ratios are through the roof. Economists keep calling the top, but we never quite seem to hit it. By any Warren Buffet measure, markets are overheated and a correction is imminent.

Are we in an inflation economy?

We’re all aware that governments have been printing money at record levels to keep the economy afloat during Covid. Quantitative easing that has dwarfed the money printing of the Global Financial Crisis. But did you know that in March, the International Monetary Fund magic-ed out of thin air $650 billion in what they call ‘Special Drawing Rights’ – cash they intend to lend to a bunch of member countries? This didn’t make the 6 o’clock news.

Special Drawing Rights were a tool created a few decades back to deal with what was thought to be an impending US Dollar crisis. They’re a basket of 5 fiat currencies that used to be pegged to the Gold price but now are pegged to nothing. Since their creation in 1969 $200 billion has been issued in SDRs, so this year’s efforts are a tripling of that. SDRs can fly under the radar because they prop up member economies without adding to their official debt levels.

What I’m getting to with all of this is, if you thought the world was awash with cash already, you can add another $650 billion to that tidal wave that won’t show up as debt on government books and that no-one we know really knows about.

So are house prices really going up because of economic recovery and returning expats, or is the value of the fiat cash in your pocket or bank account dropping like a lead balloon with inflationary monetary policy?

So what the hell is going on?

Some economists say it’s a myth that money printing causes inflation, but if you’re worried about the price of goods and assets going up and things becoming unaffordable, you’re not alone.  Just search on Google Trends and you can see the search engine data for yourself. And here’s some Australian consumer price data as a cherry on the top.

Inflation 2021 - consumer price growth
ABS & CBA data. Australian consumer prices. Source

It is true that inflation as calculated by economists has many inputs including wage growth and spending. If you look at the money printing that happened during the GFC and inflation rates afterwards, you’d be put somewhat at ease about what’s coming. Quantitative Easing didn’t lead to rife inflation in the OECD post 2008.

Inflation forecast 2021
OECD inflation data and forecast from the GFC until now.

You could argue that wage growth and spending were the two missing factors then and now. They’re just not happening. The velocity of money (transactions) in the economy has fallen through the floor. Companies and people are hoarding their cash uncertain about what the future brings. Household savings rates have ballooned. Who can blame us?

Inflation 2021 - household savings
ABS data. Australian Household savings jumped during Covid as did savings rates around the world. Source

So without wage growth and spending, inflation forecasts for 2021 are moderate across the board. The OECD has them ticking upwards along with the Reserve Bank here in Australia, but at historically moderate levels.

The answer is no-one really knows. Read this and you’ll see that the head of Australian economics at the Commonwealth Bank of Australia isn’t even sure. To take a trading view, he argues you could build a bullish and a bearish inflation forecast for 2021.

Fiat currency debasement

Meanwhile, is anyone else thinking that the prices you’re paying for property and other assets seem to bely what the government data and forecasts say? Has anyone noticed that stock markets are on an unending tilt upwards while the economy and jobs have tanked? Has anyone realised that since 2008 central bank balance sheets have been growing by around 13% each year? If you haven’t heard about this, have a listen to Raol Pal or Michael Saylor.

So maybe it’s not inflation at all (with CPI based on the price of a basket of consumer goods). Maybe with the printing of money world wide and the crazy growth balance sheets what we are actually experiencing is the debasement of fiat currency on a global scale. Maybe this is just causing assets to rise (or just to hold their value against fiat currency), but not consumer goods. It’s something to get your head around but without a doubt, things are changing. Quietly in a way that is creeping up on us, we’ve moved into unchartered financial territory.

So, what we’re saying is, if you’re planning to be financially free at some point in the next 5 years then it’s time to keep your eye on the ball. We may not know until afterwards whether covid economic recovery will be inflationary or whether all fiat currency is debasing and hence the value of assets rising against fiat. But in this time of enormous uncertainty you need to hedge your bets.

How to hedge against inflation or debasing currency

If the value of your cash disintegrates over time and you didn’t do anything about it when it was happening, financial freedom will be much harder to attain. But what do you do financial freedom seekers, to hedge against inflation?   How do you keep moving forward on your financial independence journey?

Cashflow is still king

Let’s face it, income is your first concern to pay your bills and put food on the table. So passive income is still a massive focus in your financial independence journey and will continue be a cornerstone of our blog.

On top of maximising your income, FIRE (Financial Independence Retire Early) talks about savings rates being the single biggest determinant of financial freedom and your retire early strategy. In 2020 the RBA provided explicit forward guidance that we won’t be getting anything for our savings anytime soon by stating that “the Board does not expect to increase the cash rate for at least 3 years.”  If we’re in an inflation economy or fiat is debasing, cash is a losing game – you’ve got to use it or lose it peeps!

So what do you do with your excess cashflow and passive income? What do you invest in if inflation surprises to the upside?

Digital assets

Let’s face it, if banks are going to keep giving you 0% on your savings for the next 3 years, your cash in the bank is going backwards. Bank bail-out laws, at least in Australia, also put your cash in the bank at risk in event of some kind of catastrophe. One thing is sure, with uncertainty comes risk. Don’t assume your cash in the bank is safe and you’ll be protected dear readers. Squirrelling may not be as safe as you once thought. The independence part of financial independence is more important now than ever.

Bitcoin was made for this very situation and while the price is pulling back there may be an opportunity to hedge any currency risk right there. If fiat currency is debasing at the same rate as central bank balance sheets are growing, you’re looking for assets that can maintain a growth rate over 13% just to tread water. This would explain the growth in equities and in crypto. And as blockchain brings tokenisation to more assets, Bitcoin is just the start of a migration to digital assets and the internet of value.

DeFi

There are other ways to beat the bank rates but they involve more risk. You want to find returns for your cash that sit above the real inflation rate or currency debasement rate to stay ahead. We’d personally be aiming for something over 5% for short term interest. With companies stashing their cash too, these kinds or returns in dividends are harder to come by. Check out this post where we talk about ways to generate more passive income from your savings in the emerging DeFi financial services arena. We staking crypto and lend stablecoins and are earning rates as high as 30%. But remember, it’s buyer beware as always when it comes to the wild, wild west of crypto. But we’d say that cash and investment risk is rising across the board with mainstream products, you just don’t know or hear about it because rules of the centralised money game are transparent to but a few.

It’s time to think about your wealth allocation

Another strategy worth giving some thought is to migrate some or more of your tertiary wealth (paper and digital wealth) into secondary wealth (products) and primary wealth (primary resources, raw materials). For the average person, primary wealth building is usually with property, land, or monetary metals. We think over the next 5 years you can add Bitcoin to this list of primary assets and some other digital assets that don’t exist yet but will emerge as assets tokenise on the Blockchain.

Most of the wealthy 1% already know that if fiat currency is debasing then a way to hedge against that is to borrow fiat now and buy assets, which will adjust upwards as currency weakens. Governments are applying oil to the wheels of big debt by relaxing lending rules. Stimulus packages too. So if it’s available to you, this is one strategy you might think about. It’s definitely why we will not be parting with our real estate investments any time soon.

What we’re not saying is put more of your wealth into ETFs that claim to be back by those primary and secondary resources. Have a read of this article on The illusion of Owning Gold. If it smells fishy, it usually is. Resource ETFs are a tertiary asset. You need to make sure whatever assets you invest in, the legal title for the asset is in your name in part or in full. Like it is with digital assets on the Blockchain.

The final word – we’re not stashing our cash

Inflation and fiat currency debasement can be like the proverbial frog in boiling water for financial freedom seekers. We don’t know it’s eroded our wealth until it has. Keep a watching brief on the prices of primary products – monetary metals like gold, sliver and copper. Stay across the price of raw commodities like timber. Watch the prices of asset classes and real estate instead of the consumer price index and government inflation numbers. If assets are what we need to build our nest egg and produce income, any price rises in assets will flow though to your financial future. No matter what the economic data says, this is where the rubber hits the road to financial freedom.

The temptation in uncertain times is to save for a rainy day and collectively we’re doing it more than ever. But right now, if you’ve got your wealth in cash and you’re on a wage you’ll be going backwards. And that’s not a recipe for financial independence. None of this is financial advice dear readers but definitely food for thought.

 Until next time – have fun, be happy, do good!

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