Jun 20, 2017
I’ve named this podcast Financial Autonomy. So what is Financial
Autonomy? What does it mean? Well that’s what we’re going to
explore in today’s podcast I’ll give you a big hint – Financial
Autonomy is about gaining choices in life. Buckle up – let’s dive
in! 
Financial autonomy or financial
independence if you prefer, is about being in a financial position
to have CHOICE. In my role as a financial planner, every day I talk
to people about their financial plans. In almost all cases,
amongst their financial goals will be retirement plans. For
the past 50+ years, most people in developed countries such as
Australia have lived on an expectation that they will enter the
work force in their late teens or early 20’s, and work through
until somewhere in their 60’s, whereupon they will cease work
entirely and live out their remaining days in “retirement”. This
scenario is perhaps a bit male centric, as for many women, paid
employment is often put on pause when children arrive. But
none the less, in more recent times this is a rough sketch
increasingly applicable to both the sexes. [caption
id="attachment_13" align="aligncenter" width="919"]
Financial independence[/caption]
Whilst this trajectory remains applicable for many people,
increasingly the feedback that I’m getting is that this is not how
many people wish for their life to unfold. Instead they seek
a path perhaps looking more like this: 
Financial
autonomy, is about getting yourself in a position where you can
move to yellow section above. Where you have CHOICES. Where you
don’t have to work in a job you hate, or with a boss who is a
moron, simply because that’s your lot in life until you reach 65.
Financial autonomy might mean reducing your normal paid employment
from 5 days per week to 3 or 4. And in those now freed up
days, you might chose to study, do a different job, care for your
kids or grandkids, or get involved in the local community.
Financial autonomy might mean a career change. Initially the
pay might be less, maybe even permanently so. But you spend a
lot of your life at work. Do you really want to waste so much
of the limited time you have on this earth in a job you hate?
Financial autonomy might mean starting your own business.
There will be many challenges and certainly risks. But you
will have the flexibility to work when and how hard it suits you.
Do something you are passionate about. Take holidays when it
suits you. And if your son or daughter is getting presented
with a student of the week certificate at assembly, you can go
without having to ask the boss for a favour. Whilst financial
independence in the extreme might mean not having to work again,
for most people this is not what they want. Financial
independence is about having choices in life. So where to start? First you
need to clearly identify your goal or
objective, and then you need to quantify
it. Vague “one day I’d like to …” won’t get you
anywhere. Let’s say that your goal is for a career change.
You currently work as a company accountant but have lost the
passion for this profession and are finding the stress too
great. You would really like to re-train to become a primary
school teacher, something you feel you were born to do. So
what are the financial challenges associated with this change?
- To retrain you would need to take 2 years out of the paid workforce to attend uni and complete the on-the job training required.
- The pay for a teacher will be lower than you are currently on – approximately $30,000 per year less initially you estimate, though this will narrow a bit as you gain experience.
You and your husband own a house with a mortgage of
$300,000. Your husband works full time, enjoys his job, and
believes it is quite secure. As a household therefore you
have confidence that during your training period, some money will
be coming in from your husbands earnings. But what if any, is the
shortfall? , ie. what is the difference between your
husband’s take home pay and what it costs to keep your household
afloat? You need to know what you are spending. We have a budgeting
tool in the Resources page of our web site. I know household
budgeting is no fun, but there is just no way you can gain choices
in life through financial autonomy without knowing how much it
costs you to live. So let’s say mortgage repayments are $2,100 per
month, and from the budget tool you have determined that your
living expenses average $2,600 per month, and bills average another
$1,200 per month. So your household expenditure is $5,900 or
$70,800 per year. You should allow some money for the unexpecteds,
so let’s assume $75,000 is the current need. Note that we have not
allowed for lavish holiday’s here, or a new car. This is just
what the household needs to function. 
Your husband’s bring home income
is $53,000. This is after tax and lease payments on a car.
This is net income. So you have a shortfall of
$22,000. To achieve your goal, this shortfall needs to be
plugged, both during the initial 2 year training period, and then
longer term. In our next post we’ll look at some potential
strategies you might be able to deploy to plug this gap.
Congratulations. You have taken the first definitive step
towards achieving financial independence and being able to choose
the life you want to lead. So let’s summarise. To
begin your journey towards financial autonomy and gaining choices
in your life, you need to: 1 – determine your goal or objective 2 –
quantify - how much money do you need to make this a reality?
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.