Money School

1. Financial Independence, Time Rich (FITR): The Ultimate Freedom

"You end up working your bum off, squeezing family and leisure time into the evenings, weekends and a few weeks each year of paid leave."

FITR defined. Financial Independence, Time Rich (FITR) means having enough passive income from your assets to cover your living expenses, freeing you from the need to work for money. This state offers the ultimate freedom: control over how you spend your time. Unlike traditional retirement, FITR can be achieved at any age and doesn't require permanent withdrawal from work.

Benefits of FITR:

• Choose when and if you work
• Pursue passions and interests without financial constraints
• Spend more time with family and loved ones
• Contribute to causes you care about
• Reduce stress and improve overall well-being

The FITR journey involves saving aggressively, investing wisely, and managing risks. It's not about accumulating vast wealth, but rather achieving a balance between financial security and lifestyle satisfaction. The goal is to optimize your life for happiness and fulfillment, not just monetary gain.

2. Save Ambitiously: Pay Yourself First

"Saving is not done last. It's paying yourself first. You do it first, every time."

Automate savings. Set up automatic transfers to your savings account as soon as you receive income. This "pay yourself first" strategy ensures you prioritize saving before spending on other expenses. Aim for an ambitious savings rate, even if it feels challenging at first.

Buffer fund importance:

• Provides financial security for unexpected expenses
• Reduces stress during financial emergencies
• Acts as a foundation for your FITR journey

Tips for successful saving:

• Start with a small, achievable goal and increase gradually
• Use a separate, high-interest savings account for your buffer fund
• Review and adjust your savings rate regularly
• Celebrate milestones to stay motivated

Remember, it's not about how much you earn, but how much you keep. Even those with modest incomes can achieve FITR through consistent, disciplined saving.

3. Invest Wisely: Understand and Choose the Right Assets

"An asset puts money in your pocket."

Define assets correctly. True assets generate passive income, while liabilities cost you money. Understanding this distinction is crucial for building wealth and achieving FITR. Common asset types include cash, bonds, shares, and property.

Key considerations for each asset type:

• Cash: Provides liquidity and stability, but low returns
• Bonds: Offer regular income with moderate risk
• Shares: Potential for high returns and dividends, but more volatile
• Property: Can provide rental income and capital growth, but requires more active management

Investment strategy tips:

• Diversify your portfolio to spread risk
• Understand the risks and potential returns of each asset
• Consider your personal risk tolerance and time horizon
• Regularly review and rebalance your investments
• Be wary of get-rich-quick schemes and high-fee investment products

Remember, the best investment strategy is one you can stick to consistently over the long term.

4. Accelerate Your Journey: Earn More, Spend Less, Build Equity Faster

"There are no guaranteed recipes that you can be certain will work forever, so I'm agnostic on how to compose your asset portfolio."

Boost income. Look for ways to increase your earning potential:

• Negotiate a higher salary or raise
• Develop new skills to enhance your value
• Consider side hustles or freelance work
• Optimize your business structure for tax efficiency

Cut expenses strategically:

• Identify and eliminate wasteful spending
• Challenge "comfort creep" and unnecessary lifestyle inflation
• Negotiate better deals on regular expenses
• Practice mindful consumption and focus on experiences over possessions

Build equity faster:

• Consider using good debt to leverage investments
• Explore strategies like property development or share options trading
• Actively manage your portfolio to maximize returns
• Continuously educate yourself on investment strategies and market trends

Remember, the combination of earning more, spending less, and investing wisely can dramatically accelerate your path to FITR.

5. Protect Your Progress: Manage Risks and Prepare for Setbacks

"Don't let pride get in your way. Apply for welfare and job readiness programs, and take free appointments you can get with not-for-profits to help you work out your options."

Identify potential risks. Recognize threats to your FITR journey, such as job loss, unexpected expenses, market downturns, or health issues. Develop strategies to mitigate these risks and protect your progress.

Risk management strategies:

• Maintain an adequate emergency fund
• Diversify your income sources
• Invest in appropriate insurance coverage (health, income protection, property)
• Regularly review and update your financial plan
• Stay informed about economic trends and market conditions

Prepare for setbacks:

• Develop a plan for potential income loss or unexpected expenses
• Know your options for accessing government assistance or community resources
• Be willing to adjust your lifestyle temporarily if needed
• Maintain a long-term perspective and avoid panic-driven decisions

Remember, setbacks are a normal part of any financial journey. The key is to be prepared and resilient in the face of challenges.

6. Retirement Funds: Optimize Your Superannuation

"The money in your government-controlled retirement fund (superannuation) is your money. Treat it that way."

Understand superannuation. Recognize that your superannuation is an important part of your overall FITR strategy, even if you plan to achieve independence before the official retirement age.

Key superannuation optimization strategies:

• Minimize fees by comparing funds and consolidating accounts
• Choose an appropriate investment mix based on your risk tolerance and time horizon
• Consider making additional contributions to take advantage of tax benefits
• Stay informed about changes to superannuation laws and regulations

Balancing superannuation and other investments:

• Weigh the tax advantages of super against the flexibility of outside investments
• Consider your expected timeline to FITR when deciding on contribution levels
• Regularly review and adjust your strategy as your circumstances change

Remember, while superannuation is important, it shouldn't be your only focus. Balance it with other investments that provide more flexibility and earlier access to funds.

7. Design Your Time-Rich Life: Work Less, Pursue Passions, and Make an Impact

"Being FITR means you can design your life. Do so deliberately and consciously to get what you want, including a fabulous STG ratio. You won't regret it."

Redefine work and leisure. Once you achieve FITR, you have the freedom to redesign your life around what truly matters to you. This might mean continuing to work, but on your own terms, or exploring entirely new pursuits.

Options for a time-rich life:

• Reduce work hours or transition to part-time employment
• Take regular "mini-retirements" for extended breaks and travel
• Pursue education or develop new skills
• Volunteer for causes you care about
• Start a business or social enterprise
• Focus on personal relationships and family time

Tips for designing your FITR life:

• Reflect on your values and what brings you true fulfillment
• Experiment with different lifestyles and pursuits
• Be open to evolving your plans as you discover new interests
• Consider how you can use your freedom to make a positive impact on others

Remember, the ultimate goal of FITR is not just financial security, but the freedom to live a life aligned with your values and passions. Take time to design a life that truly fulfills you.

Last updated: August 9, 2024