Why Financial Independence is Important to Me

If you haven’t heard about FIRE yet, read this post first.

So I’ve been thinking this past week about why I believe in and aspire to be financially independent. I guess the big attraction of financial independence for me, is having more choice. I can choose where to work, live, eat and travel, without having my choices constrained by my next paycheck. If I’m in a bad situation, I want the finances behind me to leave and not look back.

For me, the goal of FIRE is not necessarily about early retirement (although I may choose that), but the ability to make choices from a position of strength.

I think part of FIRE philosophy has been instilled in me by my mother, who, through her own hard work and smart investments, has been financially independent for most of her life. She made the decision to keep working because she wanted to, not because she had to. I believe financial independence is a worthwhile pursuit, because you buy back your time.

Yes, I may have to learn to live with less and find fulfilment in the simpler things in life, but I’ll be able to choose how my time is spent. In an ever-changing world full of chaos and uncertainty, the key truth is that it all comes to an end. We don’t know when or where or how, but we do know that it’s the only certainty in our lives.

So what am I going to do with my one chance at life?

I’m going to embrace change, step outside of the box, finish my studies, travel overseas, learn as much as I can at work and most importantly, start putting money aside in order to be financially independent within the next 20 years. Big goals with lots of planning — but there’s no second take, so why not!

To those out there who have told me that it’s a ridiculous goal to strive for and who have pointed out the many reasons why it’s not possible for XYZ reason — I’m quite aware that it’s a big goal. I understand that inflation may rise leaving me with less purchasing power, I understand that we may be in a bear market for an extended period of time and I also understand that if I have a family down the track the numbers will have to change. But even if I don’t reach financial independence by 40, I’m going to be in a much stronger position financially than I would without pursuing this path.

With this goal, evening failing to achieve the desired outcome will set me up in a much better position.

So what’s the worst case scenario if I don’t reach FIRE?

  • I have a solid understanding of my own approach to money and investing.

  • I know how to create and manage my budget.

  • I have enough saved up to ensure that I never run into financial difficulty if I get sick or lose my job.

  • I have learnt how to plan and work towards my financial goals.

  • I am comfortable speaking about money with friends and family.

  • I know how to invest and grow my money.

To me, the benefits of striving towards this ambitious goal are just as important as actually reaching it, so let’s catch FIRE! As I continue on my FIRE journey I plan to share what I learn and discover here, as a record of my discoveries and growth. Please feel free to share your FI questions or stories with me, I’d love to hear from you!

Until next time,

Kate

Personal Finance Book List: Edition #1

I absolutely love to read, and recommending books to others is an absolute joy. Today I want to introduce you to some fantastic books to read on your personal finance journey. They cover a range of topics from investing to minimalism.

The Year of Less — Cait Flanders

This is a phenomenal book that really makes you examine your relationship with the stuff in your life, and whether you are a mindful consumer. Cait provides a refreshing and honest view of she overcame her unhealthy relationship with money and material possessions. The book definitely made me start selling my unused items on Gumtree and think about my purchasing decisions. Ask yourself — ‘Do I really need it?’

The Simple Path to Wealth — JL Collins

If you’re looking for a book that gives you a no-nonsense approach to planning your financial future with the greatest level of ease possible, then this book is the one for you. Although written from a US perspective, JL certainly includes useful aspects in this book for all readers and is a huge advocate of making money simple and easy to understand. One of the reasons so many people stay away from the share market, is the sheer number of products and companies out there to choose from, but JL cuts through the noise and points you in the direction of index funds, or ETFs (for Australians) and examines the simple math behind building wealth through it.

The $1000 Project — Canna Campbell

This book has a big focus on starting your saving and investing journey, by breaking it down into achievable $1000 chunks. She goes through most of the traditional money saving methods such as selling your old stuff and renting out a room while putting her own spin on it. It’s worth a read if you want some help in setting your financial goals and intentions out.

Unf**k Your Finances — Melissa Brown

This is the financial freedom handbook for Gen X & Y. In this book, Melissa teaches you how to ‘financially adult’, by helping you sort out your financial life, become financially resilient and finally to become financially well. The book breaks down key financial concepts into easily digestible bites, from your financial goals to debt. Melissa runs an accounting and financial planning business and is a regular writer in Australian financial publications.

People say that money is not the key to happiness, but I always figured if you have enough money you can have a key made. ~Joan Rivers

Millennial Money — Patrick O’Shaughnessy

Patrick uses this book to explore one of young people’s greatest advantages, ‘the chance to build a fortune by making early investments in the stock market’. He clearly steps out how to get started, and reminds young people that holding cash over time erodes your purchasing power. The book introduces three key principles to follow when investing in the stock market: go global, be different, and get out of your own way.

Feel free to let me know your favourite personal finance books in the comments below.

Until next time,

Kate

June 2018 Letter

Welcome to my June 2018 monthly wrap-up! It’s been another big month at work with the launch of a new product, and I wrapped up another two university units. It feels good to be making progress on that front, and I’ll be glad to reach the halfway mark in a few months.

One of the interesting things that happened last week was speaking to a journalist from The Age on how and why I invest outside of my superannuation. It all happened very quickly, and suddenly I was on the front page of the Sunday Age Money section — they say we all get five minutes of fame! The article features a few different points of view and is worth a read, as I think it’s an important topic to discuss and think about.

I particularly enjoyed seeing a new face in the analyst team at Forager Funds Management by Chloe Stokes. Read her recent analysis of Zara and the fast-fashion industry over here.

Another great read on the topic of Self-Directed Education and transitioning away from the traditional education industry over on the Alliance of Self-Directed Education‘I wanted students to be empowered, take control of their own learning, and feel free to experience real life outside of the four walls of the classroom. Self-direction is a fundamental skill required to learn and adapt in the rapidly-changing world we find ourselves in.’

Are you looking for a job and want to brush up on your interview skills? Check out College Info Geeks recent article on How to Ace Your Next Job Interview: 35 Proven Tips.

When thinking about financial independence, an area I hadn’t really thought about was the hidden cost of working. Pat the Shuffler points out that ‘we spend more time on work than just our work hours, and we spend money on our work that needs to be taken into account when working out our real hourly wage.’ He also breaks down the costs of working, which are really interesting to see and consider.

If you’re interested in Exchange Traded Funds (ETFs) — check out his great little video by one of Australia’s ETF providers, BetaShares.

Until next month,

Kate

May 2018 Letter

Another jam packed month full of work, finishing more university subjects (yay!) and collaborations on the How To Money platform. I recently wrote about the importance of financial education on my personal site, which is an issue I am extremely passionate about. On How To Money this month we featured a guest post on diversification and the healthy investing pyramid, and recorded a podcast episode on comparing financial products with Finder.com.au.

If you’re looking for a phenomenal piece of writing, this option article written by American author Jessica Knoll is absolutely spot on. For Jessica, ‘success meant doing something well enough to secure independence’, which is something that particularly resonated with me. Jessica points out that ‘rich’ is still definitely a man’s word, and for a woman to say they want to be ‘rich’, it elicits a much different response from society.

In thinking about education this month, I read an article by Dr. Kevin Currie-Knight about the need to give learners time to fail. Dr. Currie-Knight highlights that the ‘freedom to fail without penalty, and the freedom to take the time one needs — are key to the learning process, but are often missing in school environments. As soon as one puts learning on a standardized time schedule, you preclude the learner from being able to take their time, and this means that failure now comes at a cost’.

Until next month,

Kate