5 most impactful ways to invest in yourself (that wont cost you a fortune) – Episode 29

Right now you’re listening to this podcast, or reading the blog article.


You’re curious, and have a thirst for knowledge.  You want to learn new things.  You want to improve yourself.

We usually think of investment as being a financial thing.  But investing in yourself – your skills, knowledge, and health, can be just as important and impactful.  And just like a financial investment, diversification pays.

In past Financial Autonomy episodes we’ve looked at investing in the share market, buying or starting a business, getting debt under control, and various other topics that tend to have dollars and cents as a core element.

And whilst the money side of things is unquestionably important in you attaining Financial Autonomy, there are other essential ingredients required for you to achieve success.  Motivation, health, happiness, self-awareness, creativity.

There is a lot on the net about self-improvement and investing in yourself – I’ve spent hours reading it to research for this article.  So what I’m going to share with you today is the 5 ideas I’ve been able to identify that will have the greatest impact in you reaching your Financial Autonomy goals.

  1. The starting point must be your health. It’s no good achieving Financial Autonomy at age 50 say, only to drop dead 6 months later.There’s 2 elements to investing in your health – activity and food.On the activity front, the important thing is to start.  If you’re currently doing very little physical activity, start by taking regular walks.  Build up the distance over time.  Perhaps you could extend that to jogging.  There are podcasts available based on the couch to 5k approach that I know people have found useful.

    If you already have some level of fitness, think about setting yourself a new challenge.  Last summer I set myself the challenge of completing a triathlon.  Swimming has never been my thing, so I had to put quite a bit of time into training for that component of the event.  The funny thing was, when the tri season ended and I focused back on running, I found my running had improved, even though I hadn’t given it much focus over the summer.

    When thinking about the activity component of health, just remember the “R” in the SMART goals acronym – realistic.  The surest way to side-step success in this area is to set some crazy high goal, that you quickly become discouraged by, and you defeat yourself before you make any progress.  Start small.

    The second component to investing in your health is food.  As important as activity and exercise is, if you head down to KFC for a post work-out feast, you’re probably not going to maximise the health benefits of your exercise.  I’m not a nutritionist, so I can’t give you any particular guidance on what you should and shouldn’t be eating, but just reflect on your eating habits and consider whether this is an area worthy of investing some of your time to research and improve.

2. Get your creative juices flowing! For many of us, creativity seems to die when we leave primary school.  But it doesn’t have to.  Indeed as technology like self-driving vehicles and AI eliminate many of the traditional jobs in our economy, the ability to think creatively takes on far more value and importance.

Pick up some blank paper and a grey lead pencil and have a go at drawing that tree in your back yard.  Is there a musical instrument floating around the house that you could teach yourself to play.  If there isn’t a YouTube video showing you how, I’ll eat my shoe.

How about expanding your cooking repertoire?  There’s no shortage of cooking shows to give you ideas.  Many years ago my wife and I made a new year’s pledge to cook something we’d never cooked before, once a week.  We subscribed to one of the monthly cooking magazines, and so that was the main source of inspiration each week.  There were 2 or 3 weeks during the year where we didn’t achieve our goal, mainly due to the very reasonable excuse of our first child being born.  But there were several other weeks where we tried 2 new recipes, so over the course of the year we felt we’d ticked the goal well and truly off.

And it’s paid long term dividends.  Once you learn basic cooking skills, and what goes with what, you gain the ability to ad-lib.  Substitute what you have in the cupboard for what the recipe is asking for.  Cooking skills can also help with your health goals, and be good for the household budget.

How about learning a new language?  There are great podcasts around.  I’m currently having a go (pretty unsuccessfully so far) at Coffee Break French, interestingly enough taught by two Scottish people.

Perhaps writing is your thing.  Short stories, a novel, or poetry. Worst case, no one reads it but you.  Make a start, have a go.  Only good things can flow.

3. Expand your knowledge in an area you are already good at.

Professionally we operate in a competitive world.  I make my living providing financial planning advice.  But there are many financial planners in the world.  So just being competent isn’t enough.  I need to be an expert.  Over the 17 years that I’ve been providing advice to clients I’ve become an expert in Self Managed Super – I even wrote a text book on it.  And in recent years I’ve pulled the treads together to become an expert on Financial Autonomy.

The reason I’m able to get articles published in quality brands like the Sydney Morning Herald and The Age, is because of that expertise.  It’s also the reason I was nominated as 1 of the top 3 Certified Financial Planners in Australia this year.

So when we’re talking about the most impactful ways that you can invest in yourself, moving up the ladder from competent to an expert must to be right up the list.

So what professional development opportunities are there for you?  If you’re an employee, many employers will have staff development budgets.  Make sure you get your share.  Is there a conference you could attend, any short courses you could enrol in, webinars or books to read?  Maybe you even take it up a notch and go for a Masters or Phd, though this a significant investment not to be taken lightly.

How much could your income rise if you became the expert in your sector?
4. Build your team.

I heard a great quote last week from Dr Susan Carland, most well-known as being the wife of TV host Waleed Aly, though unquestionably an intellectual powerhouse in her own right.  She observed “you can do anything, but you can’t do everything”.

What are your key strengths?  What are you really good at?  How can you focus more of your time and energy on those things, and get others to do things that a) you’re not strong on, b) don’t especially enjoy, and c) someone else could do better or more quickly than you?

Whether it’s a business coach if you are self-employed, a personal trainer for a fitness goal, a cleaner or a gardener for your home, or a financial planner to maximise your financial opportunities.

Sure, you could try and do it all yourself, but is that really going to deliver the best result?


5. Perhaps linked to building your team, is finding time for yourself.

Value your time.  You’ll only live this day once.  Your kids will only be this age once.  Busy does not equal success.

Find time to read a book or listen to a podcast.  And not just about topics in your professional life.  Use your time to broaden your perspectives, get fresh ideas, and take on new knowledge.

Take a break and relax.  Our mental health is so easy to overlook, yet so fundamental our well-being.  Go for a walk, watch some TV, or go to the footy.  You’re not slacking off – you’re achieving balance in your life that will enable you to be far more effective when you then devote your time and energy your income generating activities.

Finally try to incorporate some travel into your life.  It could be as simple as a camping trip a few hours drive from home.  Travel recharges your batteries, expands your perspective, and deepens your relationships with your travel companions.  It provides life long memories that are impossible to attach a financial value to.

Well, that’s it for the top 5 most impactful ways to invest in yourself.  Investing in yourself can definitely help you make progress in your Financial Autonomy goals.  It can also make you happier – you’re more challenged, more fulfilled, and more connected with those around you.

How to make money with Amazon – Episode 28

With Amazon now in Australia, we talk to John Cavandivish from FBA Frontiers on how to make a side hustle by becoming an Amazon seller.

Before starting his Amazon Europe journey, John had zero experience with running an online business. After university, he joined the corporate world in London but rapidly realized that it was not for him.

After launching his first Amazon brand in 2014, John was soon able to quit his job to travel the world and network with other successful Amazon sellers from around the globe. Today, he’s generating 6 figures of revenue per month from over a dozen products in Europe. John’s experience led him to develop a specific, step-by-step system to find success with every product launched.

John developed FBA Frontiers because so many sellers he met had great businesses on Amazon.com, but had completely dismissed Europe. He’s since made it his mission to help sellers overcome the barriers to entry in the EU and find success by bringing their products into Europe.

In this episode we cover:

  • What is Fulfillment by Amazon (FBA)?
  • The territories in which Amazon operate and how the fees are calculated
  • Getting started as an Amazon seller
  • The low risk business model as an Amazon Seller
  • How to find the right products
  • The profit margin you need to
  • The importance of having an ad spend on Amazon when launching
  • How Amazon ranks products
  • The lifecycle of the product
  • The benefits of doing a niche product
  • What you need to for branding when getting you
  • The minimum quantities you need to get started
  • Things to consider when FBA starts in Australia and the first mover advantage locals have
  • What the future holds for Amazon

Links mentioned in this Episode

FBA Frontiers Course

Jungle Scout

Attaining financial independence doesn’t need to be hard – Episode 27

In the interview I did with Adam Murray in episode 20, he spoke about how he reduced his expenses in a significant way when he worked through his employment transition and gap year.  And you might recall, he found living on less made him more happy, not less.

Another key element in your financial independence plan is to have a financial buffer, an emergency fund, to get you through the unexpected.  Perhaps you already have this, but if not, you want to build this up.  Everyone’s needs are different, but you’re likely to need $2,000 to $10,000 in there to make you secure.  This assumes you’ve got appropriate insurances in place.

Once you have that emergency fund in place, savings can go towards investment.  We’re not going to get into potential investment strategies in this episode, but the key point here is that the goal is to build up some investments, so that in future they can generate passive income for you, to help cover your expenses.  It might be rental property, shares, or if you’re real risk averse, term deposits.  But the key is that whether it’s rent, dividends, or interest, they will all throw off income for you to use, without you having to lift a finger.

Envisage that you determine that you need $40,000 per year to cover expenses.  If you could build up an investment that was capable of throwing off half that each year, then you only need to work in some form of paid employment to earn the other half – $20,000.  You might be able to do that working a few days per week, or doing jobs in the gig economy.  The key is, you’ve gained choice.  You’ve gained financial autonomy at that point.

Expenses are one thing but income is the other side of the ledger.  Your income earning capacity is crucial to achieving financial independence.  In the previous example, where you needed to earn $20,000 to achieve your goal, if you are a well-qualified GP, you could probably earn that working once a fortnight.  Whereas if you are in a low skilled job, you may need to work 3 days per week to get the same result.

So nurture your professional skills and invest in yourself.  This will help you enormously in attaining financial independence.

Whilst thinking about income, is there anything else that you could do to boost your income?  Push hard for a raise.  A side hustle perhaps.  Or chasing a job at a competitor that might pay more.

We’ve spoken about side hustles quite a bit in previous episodes (21 and 22 especially).  This could potentially be a great path towards financial independence.  You are generating income doing something you’re passionate about.  And you can put in as much time and effort as works for you.

What other things might form part of your plan to reach financial independence?  Avoiding credit card and other non-productive debt is likely to be wise.  I’m not someone who believes credit cards are always evil.  For those who can manage them, the consumer protection and rewards benefits they offer can be really valuable.  But if you don’t pay them off each month, the interest you will pay will very quickly outweigh any of the other benefits.  So think about whether your credit card is working for you, or whether you need a change of approach on that front.

Similarly, loans for holidays, furniture, and the like are likely to be costly, and drive you away from reaching financial independence.  If you have these already, then an early focus of your plan might be to clear these debts.

How else could you trim your expenses to make your financial independence goal more attainable?  Usually it’s about simplifying your life.  Maybe changing some habits.  Could you become a better cook so you eat out less?  Would a housemate be a possibility?  On a larger scale, could you downsize or make a tree change?  Perhaps this would reduce your rent or mortgage.  If you’ve got an inner city home with a mortgage, perhaps a move out of town might leave you with a debt free home even, which would make the achievement of financial independence for you that much more reachable.  Episode 6 – Nish’s success story had an example along these lines.

It feels a bit harsh to say, but do you need new friends?  If you surround yourself with people who spend money like it’s water, it’s going to be very tough to rein in your own spending and gain the flexibility and independence that you are trying to achieve.  The type of car you feel the need to own is often a function of the social network that you’re in.  Our friendships and social networks are of course a foundation of our happiness, so I don’t raise this lightly.  But it is certainly worth reflecting on whether you have certain friendships that are detrimental to you achieving your goals and dreams.

Well, I hope that’s given you a kicking off point on your goal to attaining financial independence.  Determine your why, consciously own the goal and commit to it, and develop a plan to get you there over time.

Of course if you want help in developing your plan to achieve financial independence – that’s what I do every day for people.  So visit the Work With Me page on the financialautonomy.com.au web site to learn how we can work together.

Attaining financial independence doesn’t need to be hard.  But you need to take action.  Hopefully today’s episode has started you on that journey.

Don’t forget to grab the free toolkit for this episode.  We’ve got the Budget Tool in there to help you get across your cash flow, the Dream Planner template, 9 tips to combat procrastination, and a piece on how to use the SMART goals methodology.

Important Information:

This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.

Shaun Farrugia – Could a trust structure turbo charge your wealth creation? Episode 26

Following on from Episode 23 on Multi-Phase solutions for Retirement  we are joined today by Shaun Farrugia from Optimised Accounting & Finance to talk all things Trusts.

Check out our free download  Multi-Phase solution for Early Retirement

In this episode we cover:

  • The dummies guide to what exactly a Trust is
  • How it can work as a funnel and the tax flexibility that it allows
  • The two types of people that generally use Trust structures
  • What are franking credits
  • Three case studies of how Shaun clients are using Trust for tax flexibility

Case Studies as mentioned in this episode

Scenario 1:  Couple approaching retirement / early retirement.  (Dramatically reduce tax)

  • Distribute investment / business income to a ‘bucket company’
  • Allows for tax to be paid at the company tax rate – accrues as franking credits
  • Funds pile up and are invested within the company
  • Upon ‘retirement’ dividends can be streamed out with franking credits attached
  • Draw down $13,000 each financial year to remain below the tax free threshold with a tax refund of $5,572 – effectively a zero tax rate
  • Draw down $26,000 each financial year and receive a refund of around $6,800 back – 11% tax rate.

Scenario 2: Young Couple – DINKS / Side Business  (flexibility)

  • Couple both working full time on incomes > $90,000
  •  Have a side business and investments
  • Currently there isn’t much of a tax benefit however couple is looking at having kids in the medium term
  • Wife will take a year off work, and then in the 2nd year the husband will take a year working part-time
  • Trust allows the couple to distribute the income from the side business and investments to whichever member of the couple has the lowest income at the time.

Scenario 3: High Income Earner with a property

  • Client is on the highest tax bracket
  • Purchased a rental property at the coast
  • Client is looking for a tax-break whilst being able to achieve capital growth
  • Wife is entrepreneurial and keen to run an AirBNB
  • Client is time poor and not interested in having a bar of it
  • Property is leased at proper market level rates to a family trust setup by the wife
  • Client receives rent as normal
  • Wife runs business
  • Kicker is adult son in Uni – profit from the Air BNB is effectively tax free.

Links mentioned in this Episode

Optimised Accounting & Finance

Multi-Phase solution for Early Retirement

My 68% return. The power of gearing – how smart borrowing can accelerate your journey to financial autonomy – Episode 25

Way back in 1996 I bought my first home.  It was a two bedroom flat in a very ugly brown brick building, probably built in the 70’s with nothing done since.  It wasn’t flash but it was within my budget and in a good location close to town – Kew for the Melbournites.  I paid $107,000.

Now I know that for those looking to buy their first home, $107,000 is probably pretty sickening right now, but 20 odd years ago that was the going rate.

4 years later and I’d meet my now wife, and it was time to move from a flat to a house.  We were starting to think about having a family.  So I sold the flat for $189,000.

Now those straight numbers – $107,000 purchase price, $189,000 sale price, look pretty good right?  And they were.  It equates to 15% per year growth.  I wish I could say that I got that return due to a whole lot of research and planning, but the truth is it was pure luck.  I bought when I could afford to buy, and I sold when I needed to sell.

But that 15% does not tell the true picture, and that’s what I want to explore in today’s episode.  My actual return was just over 68% per annum.  Yep you heard that right – 68%!

Gearing.  Borrowing to invest.  It’s about magnifying outcomes.  Gears are used in engines and other mechanical devices so that one small turn over here can lead to a really big or fast turn somewhere else.

This magnification of outcomes may be the key to you reaching your financial autonomy goals in the time frame you want.  It’s an accelerant.  But as with all accelerants, gearing also has risks.  It’s a tool you can definitely use to gain the choice you desire.  But it’s one to use as part of a well thought out strategy, with the potential downsides considered and mitigated against where possible.

Property investment is the most common area where we see gearing, but it can just as easily be done with shares, exchange traded funds, or managed funds.  Given the interest costs associated with borrowing, gearing only makes sense into investments that are likely to grow, and where the expected return after tax is greater than the interest cost.  So for instance it wouldn’t make sense to gear into a term deposit investment – the return on the term deposit would be less than the interest expense.

So let’s get back to my 68% per annum return.  I’d be disappointed if you weren’t a bit sceptical.  The Financial Autonomy community is a savvy bunch and you know the old saying, if it sounds too good to be true, it probably is.  But stick with me, in this instance it really did happen.

When I bought my first home, I put down a 10% deposit.  So that meant I put in $10,700 and the bank funded the rest.  Of course there was some stamp duty but it wasn’t a lot at that price point, and I had a friend help me with the conveyancing so that cost me next to nothing.

Over the 4 years that I owned it, for much of the time I had a flat mate in the spare room, and her rent helped with the loan repayments.  I didn’t really make much of a dent on the loan during that 4 years, but it went down a little, and I had a roof over my head.

So I sold for $189,000.  The first thing to happen was that the associated loan needed to be repaid.  With that done I had around $93,000 in my bank account.  Now of course I had to pay a real estate agent for the sale, and some legal costs.  I can’t recall exactly how much they were, but being conservative, let’s say I was left with $87,000.

I bought my flat for $107,000, and sold it 4 years latter for $189,000, a gain of about 15% per year.  But the real story here, the one relevant to me, is that I put down almost $11,000 of my savings, and 4 years later, that had become $87,000 – my savings had multiplied by a factor of 8!

Now as I said at the start, whilst I’d love to say that I got this amazing return because I was some sort of property investment genius, the truth is it was pure luck.  But you make your own luck.  I wasn’t to know the property value was going to increase that much, but by saving a deposit, finding something in my budget (even though it was a long way from my dream home), and making a start, I enabled that luck to happen.

And the power of gearing significantly magnified my outcome.

So how could you use gearing to magnify your investment outcomes and get to your Financial Autonomy goals quicker?

A popular strategy that we use with clients a lot is regular gearing.  You might put $1,000 per month into an investment, and we arrange a lender to lend a matching $1,000 so that each month you are buying $2,000.  Your investment exposure is therefore doubled, and by doing this monthly, you are averaging out your entry price – dollar cost averaging is the jargon, which serves to reduce risk.

There are also products that will allow you to buy a parcel of shares or funds, and put down a deposit in the same way you would buy a property.  You then make monthly repayments on the loan in the usual way.  This enables you to have a potentially large exposure to the market right from day 1.

There are also some offerings that have protection built into them, typically created via options contracts.  With these, there will be a set term, say 5 years, and at the end of that term, if any of the shares are worth less than what you bought them for, you are not up for the loss.  Now of course you have to pay for the protection, but some people appreciate the peace of mind.

And then of course there is the traditional investment gearing avenue – property.  Banks have always been very comfortable lending against property, so your ability to magnify outcomes is quite high – in my example I only put down 10% and the bank provided the other 90%.  The less you put in, and the more that is financed, the stronger is the gearing impact.

Now it’s appropriate at this point to talk about risk.  All through this piece I’ve talked about magnifying outcomes.  Outcomes can be good and bad.  If the numbers in my flat example had gone the other way, and I had turned $87,000 of savings into less than $11,000 in 4 years, I’d have been a very unhappy person.

So gearing magnifies outcomes – both good, and bad.  So what can you do to reduce the risk of a bad outcome?

The primary tool is time.  The longer you hold the investment, the greater the chance of a positive outcome.  Buy some shares or a property and sell it a year or two later, and the chances of a negative outcome are quite high.  But hold those investments for 10 years, and the likelihood that the value of the asset will have declined since purchase, is fairly low.

As a rough rule of thumb I would suggest not going into a geared investment strategy unless you felt it was likely to be able to remain undisturbed for at least 5 years.

Of course in contemplating commencing a gearing strategy you need to have a good handle on your cash flow – can you afford the loan repayments?  Should you fix the interest rate to provide greater certainty?  If you’re investing in property, how would you go if there was no tenant for a few weeks or months?

It would also be wise to check that your Income Protection cover is adequate.  Given the importance of investment time frame to your gearing strategy, you don’t want a period where you are off work due to illness or injury to force you to sell your investment at an unfavourable time.

If you are investing into property, things like landlords insurance may also be of value to reduce your risk.

Before I wrap this post up, I thought it was worth touching on a question I get quite a bit – what is negative gearing?

With any gearing strategy you have money going out – primarily the interest expense on the loan, but in the case of a property, also expenses like council rates and insurance.  You also have money coming in – rent or dividends.

Negative gearing refers to a scenario where the money going out, is more than the money coming back in.  So for instance an investment where there was $20,000 going out each year, and $15,000 coming in.  There is a loss here each year of $5,000.  This investment would be term negatively geared.

Were the scenario reversed and there $5,000 more coming in than going it, it would be called positively geared.

So a negatively geared investment is losing money each year in a cash flow sense.  Yet negative gearing is usually described in the media as some sort of investment secret of the wealthy or well informed.  What’s going on?

There’s two elements.  One is that in the case of shares and property, the return isn’t just the income they produce.  There is also the expected growth in the value of the investment over time.

The second element is that the loss amount in a negatively geared scenario can be tax deductable.

So an investor entering into a negatively geared strategy will be hoping that over time, the value of the tax deductions, plus the growth in the value of the investment, will make the whole exercise worthwhile.

It’s worth highlighting here that whilst the tax deductions are helpful, in isolation they aren’t enough to make a negative gearing strategy sensible.  Growth in the value of the underlying investment is a must if this strategy to produce a successful outcome for you.

Well thanks very much for using some of your precious time to consume this post.  I hope you got something useful from it.  As always, we have a toolkit made up to help you take action. I’ve summarised the key ways to manage risk when embarking on a gearing strategy, which I hope will empower you to take action.  I’ve got some other bonus items in their too so check it out.

Important Information:

This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.

So what is Bitcoin? Episode 24

In this episode we are joined by ICT professional and cryptocurrency expert Ivan Jasenovic, who describes himself as having his head in the cloud, his soul on the Blockchain, and his heart in decentralized Healthcare.

In this interview we cover:

  • The benefits of Blockchain technology and whether you truly need to understand how Blockchains work
  • The different types of cryptocurrency and examples of when you would look to use each one
  • How bitcoin works and has the same value per unit no matter where you live
  • Whether different cryptocurrency would merge together and their future specialised uses
  • Why reputation is the most valuable thing in this space
  • How cryptocurrency could be used in health and other industries
  • Case studies of Shaun and Jimmy and their experience investing into blockchains
  • How getting hacked increased their blockchain investment
  • The concept of a wallet in the cryptocurrency world
  • How you need to act like ‘the bank of you’
  • The importance of back-ups and password security
  • How a lost hard drive located in landfill is now worth millions
  • The question of regulation and the future of Governments in cryptocurrency
  • The battle between white and black hats

Links mentioned in the show

Email – [email protected]

Sunshine Coast Blockchain  Meetup


Early retirement – the multi-phase approach for Australians – Episode 23


The goal of early retirement is one many Australians aspire too.  And certainly, when thinking about achieving Financial Autonomy, retiring early is very often baked into those goals.

But what is the best way to bring that goal to reality, given the uniqueness of our system – superannuation, franking credits, negative gearing, and means tested Aged Pensions, just to get you started.

The approach I’m going to take you through today is a multi-phase approach that I’ve built specifically for the Australian early retirement landscape.  Its aim is to use the opportunities we have, such as franking credits and superannuation, to get you to early retirement as quickly as possible.

We’ve actually built a special PDF just for this post. I’ve put all of the diagrams in there for you.  You know what they say – a picture tells a thousand words.  And I certainly think visualising this approach is helpful.  So ideally have that in front of you as you consume this episode, but if that’s not practical, then at least download it latter.

Early retirement in Australia – an overview

To survive in our modern world, you need income.  Long gone are the days where we grew all our own food, hunted for our meat, and lived a subsistence life.  So retiring early necessitates solving the problem of how will you generate the income you need to meet your expenses, if you cease being in your current paid employment role.

Let’s start with the helicopter high up in the air.

We all know that in Australia we have the superannuation system to assist in funding our retirement.  Considerable tax concessions are provided to encourage us to build up saving within superannuation.  And then when we retire, we are able to convert our superannuation savings into an income stream, and receive even more generous tax concessions.

Income drawn from superannuation is tax free from age 60 for the majority of people.  Given the tax favoured status superannuation receives, you’d likely be wise to utilise this system to the maximum extent possible to generate your retirement income after you reach age 60.

But what do you do before age 60?  Well if early retirement is your goal, you need to have built up other investments, likely shares and property.  In this pre-60 early retirement phase, you can rely on the income these investments produce, and you perhaps also sell them down progressively to live of the gains and proceeds of the investments, remembering that when you hit 60, you gain access to a new pool of savings – your superannuation.

Okay, so that’s the overview – pre 60 you’re living off investment income, and perhaps also some employment income, and I use that term loosely – it could mean as an employee, but it’s just as likely to be some freelancing work, a short term contract, or as an advisor or consultant.  Even if you’ve left your normal job, there’s a good chance that whatever you find to do with your time, you’ll pick up some income along the way.

Then after age 60, superannuation is the primary solution for your income needs.

The sub phases

Let’s bring the helicopter down a bit lower now.  Within these pre and post 60 phases, I believe you can break things down further.  In the pre-60 phase, I’ve termed these two sub phases the Transition phase and the Investment Income phase.  And in the post 60 phase, that can be split into the Active Retirement phase, and the Feet-up phase.

Imagine that perhaps in your 30’s you’ve decided that early retirement is something that you aspire to.  You crunch your numbers and determine the amount of income that you’d need to afford the early retirement lifestyle that you want.  You could wait until you have enough investments and superannuation that you can live a total life of luxury.  But most people I work with prefer instead to retire earlier, but still earn some income.  I call this the transition phase.  Maybe you back off from 5 days per week to 3.  Remember episode 20 where I interviewed Adam Murray.  He’d cut back to 3 days per week as a paid employee, and actually spread those hours across 4 days.  Then he had time to pursue other projects, and be the father that he wanted to be for his 2 boys.

So during the transition phase, you’re still earning some income, just less than pre-early retirement, and perhaps you’re also earning some investment income.

As you get closer to 60, your investments have grown.  In particular it’s highly likely that you’ve used some borrowings to build the wealth, for example borrowing to buy an investment property, and hopefully somewhere in this pre-60 phase, the debt gets repaid, meaning the rent which was going to loan repayments is now freed up for you to live off.

So the second sub-phase in the pre-age 60 segment is the Investment Income phase.

In the Investment income phase you’ve scaled any paid employment right back, possibly given it away altogether.  You’re primarily living off your dividend and rental income, and perhaps even selling down investments in the knowledge you’ll be turning on the superannuation tap come age 60.

Franking credits will keep your tax down here, and you can plan any capital gains tax events to get you the best possible outcome.  Not anti tax

Now let’s look at the post age 60 sub phases – Active Retirement and Feet-up.  The Active Retirement phase is likely to be from 60 to 70 or 75.  During this phase you’ve slowed down a little but still remain active – traveling and participating fully in your recreation activities like golf or yoga.  As a result your income needs are likely the same as pre 60.

Because you’ve turned age 60 and are retired from the work force, you can now access your super.  And it’s likely that you will turn on an income stream from these savings, given this is the most tax advantageous element of the entire superannuation system.

Thus the bulk of your income in the Active Retirement phase will come from superannuation.  But it’s likely you will still have some investment income coming in as a bit of a top-up.  Perhaps this can pay for the annual overseas trip.

This Active Retirement phase could be an excellent time to realise any significant capital gains liabilities, for example selling a rental property, as your superannuation is a tax free income source so your total taxable income is likely negligible.

The final post age 6o phase is the feet-up phase.  At some point later in life you’re going to have done all of your traveling, and the realities of getting older mean that you slow down.  Expenses tend to reduce, and medical appointments rise.

During this phase the bulk of your investment have been used up, and you’re now living on your superannuation.  Depending on your circumstances, an Age Pension may also come into the frame at some point, which will help in prolonging the life of your superannuation savings.

An early retirement example

So let’s play an early retirement scenario out, so that you can see the how your income need might be meet in each phase.

Imagine we first sit down and develop an early retirement plan for you when you are 34.  We work to that plan, refining as we go along, and by age 45, you’ve built up enough assets to be able to quit the high pressure career that has got you to the position you are now in.

The first phase is the Transition phase.  You’ve still got great contacts in your profession, and so whilst you want to step back from all the stress and travel of your corporate career, you’ve got an opportunity to do some consulting work for one client for a day a week, and another long-time professional friend has asked if you could do some overflow work for them as it comes up.

Your income in the transition phase is therefore generated perhaps 2/3rds from these employment type earnings, and 1/3rd from the dividends from your share portfolio, which until now had been reinvesting all its income.

You have an investment property too, but at the moment there is still debt on this, so the rental income goes entirely towards paying down this debt, and meeting the other bills like council rates and maintenance.

Further on into your early retirement now and you enter the Investment Income phase.  The rental property has been paid off, freeing up the rental income to further meet your expenses.  The 1 day per week consulting gig has finished, but you’re still getting occasional overflow work from your friend.  Your income split perhaps now flips, to be 1/3rd or perhaps even less from employment type income, and the bulk of your income comes from investments – share dividends, rental property income, and the occasional share sale when a lump sum expense comes up.

You reach 60.  You’re in the Active Retirement phase.  You’ve told your friend you don’t wish to do any more overflow work – you don’t have the time!  What with golf 2 days a week, volunteering as the treasurer of the local Rotary club, keeping up with the family, and regular holidays, you’ve got more than enough on your plate.

So now you turn on the superannuation income stream.  You’ve sold down most of your share portfolio by now but you still have the rental property so you have income from that in addition to your super.

You have a great time during this phase, but by age 74, you’ve had a few health issues and are starting to slow down.  You’re still playing seniors golf on a Friday, but you don’t fancy overseas travel any more and are happy to live a bit quieter life.  You’re in the Feet-up phase.

Maybe you sell the investment property around now.  The maintenance is getting a bit of a bother and it’d be nice to have the cash available.

Between the proceeds from the sale of the rental property, and your super, you see out your days without a financial worry in the world.

So what do you think?  A plan you could work towards.  Early Retirement in Australia is possible and I think many people could imagine living out a scenario something like what I’ve just gone through.

The reason most people don’t live that life though is because they never TAKE ACTION.  Don’t let that be you.

Don’t forget to download the guide because the glide path diagrams I’ve put together I think will be super useful to you in seeing how you might be able to retire early in Australia.

Important Information:

This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.

Ruby Lee – Side Hustler and Career Guru – Episode 22

In this next interview episode on the Financial Autonomy Podcast we chat to Ruby Lee the founder of The Careers Emporium and head of HR at Cogent.

In this interview we cover:

  • The benefits of a side hustle in achieving your financial goals
  • The 18 month journey Ruby when through when changing careers
  • Identifying your strengths and knowing when the time is right for a career change
  • How daily journaling helped Ruby gain clarity when dealing with financial and career issues
  • How she turned a new blog of helping people with their careers into a money making side hustle while on maternity leave
  • Why job seekers are now seeking personal branding help
  • The importance of understanding a position gets made redundant, not the person.  Listen to Ep 2 Redundancy – What a Great Opportunity episode
  • Ruby’s tips for starting a blog and building an online community for your side hustle
  • How she juggles balancing her full time job, being a mother and building a successful side hustle.  
  • How automation and programs such as Hootsuite  help her build The Careers Emporium while working full time
  • How a business coach helped her to gain clarity and change her mindset amount monetising The Careers Emporium
  • Current trends in employment and the rise of the contractor/freelance and ‘gig’ economy
  • The rise of partnering between employers and employees
  • How employers are now understanding the need for employees to build personal brands and how that can help both parties.

Links mentioned in the podcast

The side hustle – your ticket to Financial Autonomy? Episode 21

What do Apple, Nike, Under Armour, Instagram, and Groupon all have in common?

It’s not just that they’re hugely successful, multibillion dollar companies.  They also share a common birth – they all started life as side projects of their founders.

I’ve been reading Nike founder Phil Knight’s autobiography Shoe Dog recently, and I highly recommend it – very readable and interesting.  He was working as an accountant at Price Waterhouse whilst establishing what we now know as Nike, and when he needed to spend more time on the business, he switched to become an accounting professor at his local university.  It was several years into the business before he quit his day job and devoted himself full time to his enterprise.

So if businesses as enormously successful as these can spring from a side hustle, perhaps you can attain your Financial Autonomy goal by using the same approach.  Let’s take a look at what a side hustle is, and how you might be able to use this approach to gain the choices in life that you’re yearning for.

NBN Co commissioned some research earlier in the year looking at how Australian’s were using the internet to generate additional income.   The report found that the majority of Australians (80%) are looking to this as a way of finding fulfilment outside of work, and 1 in 4 are already earning additional income online.  A similar study in the US found that 28% of those aged between 18 and 26 were working on their own, on the side.  Of those almost all (96%) worked in the side hustle at least once per month, and 25% said they earned more the USD500 per month.

Certainly the increased comfort and normality of internet commerce is a key enabler in the rise of the side hustle trend around the world.

And whilst online businesses are perhaps the most popular of side hustle options, plenty of other opportunities exist too, from running a food stall at a local market, to teaching yoga classes of an evening, or pet sitting for people when they go on holidays.

Perhaps before we go too much further, let’s just define what a side hustle is to ensure everyone is on the same page.  What we are talking about here is something that you do outside of your normal method of earning an income, that produces additional income.  So in the Phil Knight example I mentioned earlier, by day he worked as an accountant, and then in the evening and on weekends, he built this little running shoe business.

Now in the Nike example this ultimately became his full time job, but that doesn’t have to be the objective.  Maybe your side hustle is just a way to build up some savings, or pay down the mortgage quicker.  There are all sorts of ways that you could use a side hustle to achieve your Financial Autonomy dream.

I used to work with a guy who hired out inflatable jumping castles for kids parties on the weekend.  He ended up employing his daughter in the business full time.

Research undertaken by Manpower Group also highlighted how the side hustle concept linked to the idea of the “gig economy”, finding that 40% of Australian millennials preferred to work a number of part time jobs, rather a single, Monday to Friday, 9-5 job.

One aspect of the side hustle concept that I really like is that it enables you to give things a try, to experiment.  To test ideas and see if real people are willing to part with their hard earned cash for your idea.

I’ve spoken in the past about the Lean Start Up methodology.  A key concept in there is how many cycles can you go through of putting an idea out in the world, obtaining real customer feedback, tweaking your offer based on that feedback, and going back out to market again.  The more times you can run through that cycle, the greater the likelihood you will find a sustainable business that you can grow.  Working through those iterations as a side hustle can be fantastic, because you’re not relying on the new venture to put food on the table or a roof over your head.  You can experiment and discover, and if those experiments don’t play out as you’d hope, you can live to fight another day.

A side hustle may also give you increased financial security.  As I explored in The Security Illusion post (episode 11), being a full time employee feels like the low risk, secure option, but the reality can be the exact opposite.  I was only listening to an interview with someone this morning who had worked as an architect at Mirvac in Brisbane, and in the space of 14 months that team went from 100 people to 4.

So having a side hustle might give you that safety net.  A second source of income to help keep the household afloat until you find you next job.  Or maybe it’s something you feel can be scaled up now that you have more time to devote to it.  How great would it be to have a running start in this new chapter of your life – being self-employed?

So how might you get started on your side hustle journey?  As you know, I’m a keen podcast consumer, so I’d suggest you check out the Side Hustle Nation show.  He’s got over 250 episodes online, so scroll through and pick a few that jump out at you.

In the downloadable toolkit for this episode we’ve compiled a list of the 50 most popular side hustle ideas we’ve come across on the web.  We’ve done the research leg-work for you here, so make sure you visit the financialautonomy.com.au website and grab yourself a copy of that.

It seems to me there are two mostly likely paths you could go down to find a side hustle that works for you.  One is to think about your hobbies and passions.  Is there scope to turn a dollar doing something in that space?

The other avenue is to consider what skills you have, and weather you can monetise those skills outside of your regular job.

So on the hobbies front, let’s say you love playing the guitar.  Could you pick up some work in a cover band on the weekend?  Or do guitar lessons.  Maybe you could create an online course on learning the guitar, or tuning a guitar, or whatever.  Perhaps you could import guitars and sell them on Ebay or Amazon.

There’s a cliché that if you love what you do, you’ll never work a day in your life.  And whilst it is a cliché, I think it does hold some truth.  Earning some money in a space that you love and are passionate about might be fantastically liberating.  Chances are you have a community already around you who share your interest, which could be an incredibly useful sounding board for your plans, and perhaps even customers one day.

Then what about turning your skills into some extra cash.  This is perhaps where the internet has provided the most liberation.  If you’ve got design skills for instance, you could pick up work at 99 designs, AirTasker, Freelancer and no doubt plenty more.  Of course in the case of AirTasker and Freelancer, there are opportunities for those with plenty of other skills too – from cleaning to web site design, there will be an avenue for you turn those skills you’ve acquired into extra money in your pocket.

Perhaps your skills point to selling a particular product that you know a lot about.  Market places like Amazon and Ebay can open up enormous opportunities.  Fulfilment by Amazon is an opportunity of enormous magnitude.  I know of someone who designed a bag to hold medical items for children, such as epi-pens for instance.  These bags could then be put in their school bag, or wherever they needed to go, and the parent could be confident everything that was needed was there, and there were instructions for carers if required.

She gets these manufactured in China and ships them to the Amazon warehouse in the UK.  She can then market the product throughout Europe on Amazon, over 300 million potential customers, and anytime someone orders, Amazon takes care of the process from that point forward – picking the item, packaging it, and getting it delivered.  And she can manage the entire thing from her study at home in Melbourne.  What an incredible age we live in!

So what else to consider when exploring the side hustle route?  It might be wise to consider whether what you are planning to do could conflict with your current employment.  Many employment contracts will have conflict-of-interest polices, so be sure to have a read of that and get expert advice if you’re in any doubt.  Even if you don’t work under a contract with any restrictions, things like poaching clients from your day job, or being involved in something that could cause reputational damage, are not likely to be a wise moves.

It may be a good idea to simply ask your employer “do you see any problems with what I’m planning to do?”  Who knows, they may even be able to flick some opportunities your way.

If your side shuttle starts generating some consistent earnings it would be worth also having a chat with your accountant.  Once turnover reaches $75,000, you are required to register for GST, and in some circumstances there can be value in registering even before you reach this threshold.  Software like Xero can make your book-keeping really pretty simple, so don’t let those sort of things get out of control.

Well, that’s it for this episode, don’t forget to grab the toolkit for this episode that has a list of 50 side hustles you could try.  Let’s get you another step closer to reaching your Financial Autonomy goals.

Also, we’ll have an interview episode out next week which will feature someone who has built a side hustle business in the past year.  We’ll find out how she’s gone about it, and how she’s had to change and adapt as things have progressed.  It’s a really energetic interview that I’m sure you’ll enjoy, so look out for that one.

Adam Murray of Subtle Disruptors – taking control of his life – Episode 20

In my next interview episode on the Financial Autonomy Podcast we chat to Adam Murray from the Subtle Disruptors Podcast.

In this interview we cover:

  • How a difficult personal time highlighted the need for Adam to take some leave from his career and reevaluate his life
  • How the Good Life Project gave him a framework to take a gap year
  • How identifying four key priorities during that gap year has now impacted his life
  • The power of being present in the moment
  • The focus on his health and how it impacted on his four key priorities
  • How he managed financially to take a gap year
  • How living frugally changed him and how it helped to develop a better understanding of what makes him happy
  • How structuring his work around 4 days a week has allowed him to retain focus on his priorities after going back to work
  • His journey towards self employment and his desire to make an impact
  • The importance of designing a life on your own terms and creating a true work life balance
  • Why you can only sacrifice part of your life only for a period of limited time
  • The guests that have made the biggest impact on him as a host of the Subtle Disruptors podcast

Links mentioned in the podcast