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Financial independence in Australia is weird – hear me out

Tara Achieving financial freedom, Financial Independence Retire Early May 10, 2022May 11, 2022financial independence 0 Comment

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.

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!

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

Tara Achieving financial freedom, Financial Independence Retire Early August 1, 2021September 13, 2021Financial freedom, financial independence, financial independence retire early

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’

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 WORKING	TOTAL DAYS	TOTAL YEARS	% OF ADULT LIFE
20 hours per week	1875	5	10%
30 hours per week	2813	8	12%
40 hours per week	3750	10	17%
50 hours per week	4688	13	21%
60 hours per week	5625	15	25%
70 hours per week	6563	18	29%
80 hours per week	7500	21	33%

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:

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.
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!
Workplace culture – your workplace rewards long hours over outcomes. You’ve got to fit in.
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.
Your examples in life – your parents taught you to get a good job and work hard. So you did.
Your own notions of success – equating working long hours with doing a good job is common but it’s rarely accurate.
Avoidance strategy – you’re spending more time at work to avoid your life, and whatever is going on it.
Upward management – you’re not that great at managing the never-ending expectations of your boss, or you’re covering for them.
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.
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 July 28, 2021September 13, 2021

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:

your income
your savings
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:

Value your financial freedom above everything
Spend more time learning than earning
Set financial goals
Kick bad debt to the curb
Nail a monthly budget
Start a side hustle
Save your butt off
Make friends with your credit score
Get a lawyer (to structure your future investments)
Get leverage and buy or build assets
Pimp your assets (manufacture value)
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:

cut back non-essential expenses
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:

Getting yourself a credit card and showing that you can pay it off in full each month
Paying your bills (mobile, rent, etc) on time each month
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!

Inflation forecasts for 2021: how to hedge for financial freedom

Tara Achieving financial freedom, Financial Independence Retire Early, FIRE investing May 4, 2021July 26, 2021how to hedge against inflation, inflation 2021, inflation forecasts for 2021

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!

The 2021 DeFi lowdown – time to pay attention peeps!

Tara Decentralised Finance, Financial Independence Retire Early May 3, 2021May 10, 2022crypto, passive income from DeFi, What is DeFi

**Part one of our DeFi: the new financial frontier series**

Y’all know we’re passionate about financial independence, passive income and the FIRE movement. But not many of the leading FIRE blogs are talking about DeFi or decentralised finance. Well we at The Live Life Project think it’s time to pull back the covers on this new frontier of personal finance. Like all new frontiers, DeFI is a bit wild, wild west. So in this post we’ll explain what DeFi is, why financial freedom seekers should know about DeFi, and some passive income ideas from DeFi to get you started.

This is the first post on our DeFi: The new financial frontier series, where we will give you the lowdown on DeFi in 2021.

What is DeFi?

DeFi is a ‘peer to peer’ internet system of executing financial transactions. Transactions like lending or borrowing are performed directly between two parties using blockchain ledger technology. Transactions are executed by computer code, and secured by cryptography. Because it uses blockchain technology, DeFi is typically associated with cryptocurrency. Critically, DeFi is designed so it doesn’t require any middle men and gatekeepers like banks, exchanges and lenders. This means no more banks controlling our access to financial opportunities and earning a fat percentage profit of every financial and banking transaction we make.

To demonstrate just how DeFi has exploded, take a look at this graph of the total value of USD locked in DeFi. That number has skyrocketed from $914 million 12 months ago to more than $75 billion in 2021. And it’s still early days financial freedom seekers. You can also access a pretty reliable DeFi index here.

Traditional banking BS

I wanted to share an annoying bank anecdote that happened to us personally just this year to set the scene for ‘why’ DeFi. We have a couple of investment properties as I’ve mentioned and in March were in the process of selling our home. In addition to the owner mortgage against the home, we had a small equity loan of $60,000. Before we sold our home, we wanted to transfer the equity loan to one of our investment properties. We wanted to do this maximise the cash we have to buy our next home.The bank had valued the investment property as containing plenty of spare equity so easy peasy right?

When we went to the bank with this request, the answer was a flat ‘no’. But why, we asked? It’s just a matter of transferring the loan from one asset to another. The reason – there was no internal process to make this happen. Sigh. Because there was no process the bank required of us a completely new loan application on the investment property. This meant a total reassessment of our finances, tonnes of paperwork, another $500 in bank application fees, plus broker fees blah blah blah.

I bet most of y’all have a similar frustrating anecdote about unreasonable policies in getting financial services from traditional banks. We could all have a massive bank whinge-off into eternity. Yay us. But that’s the thing with decentralised finance, no more banks to deal with and more control over your equity and your money. Huzzah to that we say!

A new world of money?

DeFi is about more than just crypto. It’s an entirely new world of money. A new finance system built on trustless transactions that use blockchain and internet technology. Here’s a real world example of DeFI applied to lending. DeFi loan transactions are executed through what’s called ‘lending protocols’ like Aave, Maker or Compound. These protocols use ‘smart contracts’ – code on the blockchain – to execute a financial agreement between two parties when predetermined conditions are met. ‘What the hell….???’ I hear you say. Sounds like gobbledegook. But put simply, its computer code (program) to execute financial transactions on an immutable public accounting ledger (blockchain), so you no longer need a ‘trusted third party’ like a bank.

DeFi appears to be morphing into an alternate financial system with many of simple personal banking financial products offered by the traditional finance sector. Think borrowing, lending, term deposits and credit cards just to name a few. But this all happens without the middle man taking a big fat cut of the profits or adding fees on fees. You see, instead of the bank paying you 0.5% interest on your hard-earned savings only to lend that money on for 3.5% themselves, DeFI gives you the option to provide the liquidity directly and earn the higher interest rate. And that’s just one example of why people have started moving to DeFi. DeFi takes on the role of banks, exchanges and insurers today—like lending, borrowing and trading. It puts this role in the hands of regular people like us so we have the opportunity to earn more from our own assets.

If you are sick of earning 0% interest on your cash or bemoaning the lack of options in traditional finance to earn income from your savings, then it’s time to pay attention to DeFi people!

Making passive income from DeFi

There are two low-tech, beginner level ways to make passive income from DeFi with interest rates well above anything you can get in traditional finance. We’ll go into these in more detail in our next posts in this series. But here’s a summary to give you some simple passive income ideas from DeFi:

Stablecoin high interest savings accounts

You can earn interest on stablecoins you own by depositing them with different crypto currency liquidity providers. Stablecoins are cryptocurrencies that are pegged to and often backed by fiat currency – usually the US dollar. They’re called stablecoins because their prices don’t fluctuate as much as the prices of other crypto coins (they’re pegged to fiat that doesn’t fluctuate as much). Examples of popular stablecoins are USDT, DAI, USDC, TUSD.

Think of this product as a high interest savings account that you would ordinarily put your fiat dollars in, but with better rates than you can get from any traditional bank. Protocols or platforms like Aave, BlockFi, Gemini and Nexo offer stablecoin passive income products. Interest rates range from 2%, which is not really worth it, up to 10% or even more. You usually get paid in the same stablecoin you deposited.

To earn stablecoin passive income you buy the stablecoins with your fiat dollars on an exchange like Binance, Kucoin or Coinspot. You then set up an account with one of these liquidity providers and transfer or deposit stablecoins into that account and start earning. Some larger exchanges like Binance will pay you to hold your stablecoins in their wallet on flexible terms (unlocked).

Crypto staking

Crypto staking is more like a term deposit for your crypto currency. You deposit your crypto coins into a staking wallet. The coins are used to support the consensus process (validating blockchain transactions) needed to run a particular blockchain network. Stakers need to hold coins in order to validate blockchain transactions, for which they earn incentives. The more coins they hold, the better. When you stake your coins in a staker’s wallet they can either be locked or unlocked. In return for staking your coins you receive interest. If your coins are locked, then they must be held there for an agreed time period or the interest rate is foregone – similar to a term deposit.

You can stake your crypto directly on some of the larger crypto exchanges like Binance, in a hard wallet with providers such as CoolWallet, Trezor or Ledger, or via a staking platform such as Stake Fish. It’s easiest to stake on an exchange if you’re a beginner. Just like term deposits, rates depend on the type of coin and the term of your deposit as well as other native factors. Read the fine print! You can get terms from one to 12 months routinely. You get paid in kind (the same coin you deposited) or in what’s called a token. Tokens are a form of reward for partaking in an activity within a blockchain. They are blockchain network specific but are often tradeable on cryptocurrency exchanges like Binance or Kucoin. You can trade your tokens for other coins or exchange them into fiat currency via these exchanges.

Staking is higher risk than passive income from stablecoins because you are exposed to the fluctuating market price of your crypto while it’s staked. Crypto coin prices are extremely volatile and can and often do move either up or down more than 30% in a single day. You’re looking to stake crypto coins that are in a long-term uptrend. This way, you benefit from both the coin price and the passive income.

The final word – managing risk

Like traditional bank savings accounts and term deposits, DeFi staking and savings products differ. But unlike traditional bank products the risks are much higher. It’s your responsibility to understand the product and the risks. Remember, decentralised finance is about you controlling your money. There isn’t the same government protection and regulation in place if things go awry. DeFi coin prices are more volatile and returns can fluctuate. You must be comfortable with this to invest. You must manage your risk, such as by only using well established platforms with cold storage security, diversifying across platforms, and sticking to core Stablecoins. If riskier investments are for you , you could allocate a nominal portion of your investment portfolio/assets that you don’t rely on for weekly income or retirement. Start small!

We’ll review which platforms and DeFi passive income products are best in 2021 in an upcoming post in this series so stay tuned financial freedom seekers!

Til our next post in this DeFi series – Have fun, be happy, do good!

Financial freedom – 3 simple concepts to get started now!

Tara Achieving financial freedom, Financial Independence Retire Early, Financial literacy April 8, 2021January 16, 2022financial independence, financial independence retire early, how to achieve financial freedom

So, you’ve googled ‘how to achieve financial freedom’ and landed here. Huzzah! Our website is all about exactly what you want to know – how to become financially free and stay there. It can seem like an impossible task at first – overwhelming with no starting line in sight, let alone finish line. In this post we explain the key steps you need to know and take to get started on your financial freedom journey.

What does financial freedom mean – to you?

Technically, financial freedom is when your return on investments covers 100% of your expenses. But when you ask this question on a personal level most people have to think really hard because they just haven’t even contemplated what financial freedom would look like for them. So this is the first thing you should do.

Ask yourself, How would you spend your days if you didn’t have to work? Get comfortable with that. It’s where we are headed.

Financial independence means different things to different folks. For us, it’s the freedom to do what we want when we want. And that takes resources. Money for bills, food, water, power, health care and fun. So how do we solve for money, to get the rest of the equation? We’re all about keeping it simple and actionable. Here are the three things to focus on for financial freedom when you’re starting out:

What is financial independence?

In the interest of keeping it as simple as possible, we’ve broken down down financial independence into three primary steps:

Make sure your income is greater than your expenses
Invest the difference (your savings)
Maximise your assets so the income from them covers your expenses.

Financial independence retire early Australia

What is the ‘financial independence retire early’ movement?

Financial independence retire early (or FIRE) is about applying the three key concepts above… aggressively. The aim is to retire in your 30s or 40s instead of your 60s. So what’s the theory? Well, average personal saving rates are about 10 to 15 %. But that’s not enough for financial freedom. You just have to look at when Joe average retires (65) to know that. On the other hand, hard core FIRE starters aim for savings rates closer to 50 – 70% – either through frugality or by increasing their income. The FIRE movement proves that savings rates are critical to financial freedom.

FIRE investing is other big part of the FIRE journey. Actively making your money work for you. With inflation and negative interest rates one thing is for sure – sitting on your money will not get you to financial freedom any time soon. If you have your stash in cash it’s time to pick up your freedom game.

Your starting point and how aggressive you are with the three key concepts above will determine how quickly you get to freedom. That’s the beauty of FIRE – you can dial it up or down depending on where you’re at in life. You can also choose to focus on the income or the spending side of the equation, depending on what’s right for you. Although, take heed. There is a school of practice that says cutting your spending is way more powerful than upping your income because it has a tailing effect – it lowers the amount you need to live on every month for the rest of your life.

We at The Live Life Project are not here to argue one or the other. We do both, along with some clever independent wealth management strategies around the treatment of income, tax and debt. We’re certainly not about never eating out or holidaying again – life’s too short for that! We’re about finding ways to have fun and still make smart decisions every day in the right direction.

How to achieve financial freedom – knowing your numbers

If this sounds boring to a lot of people, that’s because it’s boring to a lot of people. I get it. Math was never my jam either. But with the same certainty as death and taxes I can say if you don’t know your numbers you’ll never be financially free.

E.V.E.R.

Financial independence is where you control your money not the other way around. This starts with the numbers. Savings/assets, income, expenses, residual. Put these numbers in a spreadsheet or write them down. There’s also apps for this of course, but we’ll get to those later.

Next, check out this awesome calculator. Put in your numbers. Be honest. It’s not gospel, but I put in our numbers for the last few years and it’s a pretty accurate reflection.

Our freedom

So here comes the big reveal. This is what did to get to financial independence, without revealing all of the juicy details in one post…

We saved from 30% to 65% of our net income each year for the last 7 years
We invested everything but our buffer money, mostly in property
We kept saving and invested this in maximising our assets
We also changed the way we earned our income so that we got to keep more of it – we’ll cover this in a later post so stayed tuned
We’ve recently made big life choices specifically to reduce our cost of living
Our income from our assets cover our living costs 100%.

Once you’ve put in your numbers look again at your income and your expenses. Making your way to financial freedom is about jigging these numbers – income up, expenses down.

Read through some of our posts on saving, borrowing, investing, digital assets and passive income ideas. These will help you gradually move up the dial on your money management. And this is where the magic begins.

Where to learn more about financial freedom

We have published a bunch of articles that step out the different pathways that you could take to financial freedom depending on where you are in life. Take a read and we hope you can learn something from our experience.

The final word – financial freedom is about how to eat an elephant (figuratively of course)

When something seems massive and unobtainable just break it down into bite sized chunks. You’re already on your way. Make sure you understand the 3 key steps to financial freedom and get to know your numbers. We know these things have worked for us. Stick with it. We know they can work for you too.