A New Concept: Die with Zero Review

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Die with Zero by Bill Perkins

Bill Perkins is an American engineer, hedge fund creator and poker player. He published Die with Zero in 2020.

Who Should Read this Book?

Die with Zero, despite the controversial title, is about squeezing every drop of joy out of life. It turns around traditional financial advice and instead urges readers to loosen the purse strings and make hay while the sun shines.

If you are struggling to get out of consumer debt, or haven’t yet set up a money management system, savings routine and investment plan I would suggest writing this book suggestion down for a few years. The timing of reading this book is very important.


It was actually perfect timing when I pressed “Buy” on my kindle last month.

We have just finished reviewing our progress after 5 years of getting serious about saving, investing and paying down our mortgage. We’ve made significant progress, and more importantly, have a money management system with saving and investing automated. We are now Coast FI for traditional retirement at age 60, and ahead of schedule for me to be able to retire (if I want to) at 55.

We’re not close to full financial independence yet, but I don’t think we need to be.

I have always only had one foot in the financial independence philosophy. I only plan to retire a little early and may continue with voluntary or other work I love, regardless of pay.

The Financial Advice Gap

But the huge explosion in information, opinions and philosophies produced by the financial independence community in the US and now in Australia, is incredible.

Financial advice is unaffordable for those without many assets to start with. By the time investors have worked out to accumulate a good asset portfolio, most don’t need professional advice. Advice is often biased by hidden incentives and too narrow in its scope. Most financial advisors can only advise on “investment products” not property. Property advisors are largely unregulated.

It is extremely expensive to get good, independent unbiased holistic advice on the whole picture.

Finance bloggers have been helping to bridge the financial advice gap. Blogs also provide a forum for people interested in finance and investing to chat and share ideas. People tend to feel more comfortable without the judgment that can result from showing interest in a taboo topic like money in our “real lives”.

Financial Independence & Die with Zero

Financial independence means something different to everyone. For me, it is as much about getting value for money, squeezing every drop you can from your finite resources. And that’s where Die with Zero and Financial independence meet.

I feel like we have now done most of the heavy lifting with 5 years of focus on finances. We will continue paying down mortgages, investing in ETFs outside super, and into superannuation each year.

But the hustle of saving up for investment property deposits is done. We are on track (or ahead) and everything is automated. I feel like we can lift our eyes to the horizons and focus on other priorities whilst our investments continue to compound in the background.

This is why it was a perfect time to read “Die with Zero”.

Why Read Die with Zero?

It is common, particularly amongst the financial independence community to get rather single-minded, one might even say obsessive about saving and investing. It can start to take over, even damage relationships.

It is important to stop regularly and reflect on whether we can squeeze a little more joy from life, along the way. I’m looking at you (and me) type A personality!

Death Bed Regrets

The book spends some time exploring common deathbed regrets. After all, if we could look into our own futures and work out what we would regret in the end, it would surely change our behaviour in the present.

Bill Perkins quotes the work of a palliative care nurse Bronnie Ware who has published her own book about the 5 most common death bed regrets:

  1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.
  2. I wish I hadn’t worked so hard.
  3. I wish I’d had the courage to express my feelings.
  4. I wish I had stayed in touch with my friends.
  5. I wish I had let myself be happier.

The author also points out that we too often feel there is all the time in the world to get round to those “one-day” aspirations. By considering one’s own mortality, and acknowledging our time is finite, we tend to pursue those dreams more aggressively and even enjoy everyday experiences more.

What would you do differently if this was your last week, year, or decade of health?

You can Have Time, Health, and Money, But Not All at the Same Time

Bill points out that most of us start out with plenty of time, hopefully, healthy but very little money. As the decades pass, responsibilities increase, our time disappears and our health falters.

He urges us to maximize these assets at the time. In my 20s I slept in the front seat of a small car backpacking. We had 3 weeks to get up the East coast of Australia, and very little money.

My travel companion and I still giggle about our ridiculous adventure. We had an awesome time, and the absence of luxury didn’t seem to bother us.

I can’t imagine enjoying this same mode of travel/accommodation in my 40s! Unfortunately, I have collected some musculoskeletal injuries that would make the trip very uncomfortable. The good news is, I could afford to stay in hotels and enjoy that little extra luxury nowadays. But I am so glad we took that crazy trip!

The author of Die with Zero prompts us to prioritize the active experiences whilst we are well enough to do it.

Memory Dividends

Bill Perkins points out that spending money on some of these experiences is, in a funny way, a kind of investment. These experiences pay “Memory dividends” for years to come. The earlier we have those experiences in life, the longer we have to enjoy the memory dividends. And things don’t need to be expensive to produce amazing memory dividends.

Contrast my crazy trip driving up the East coast and sleeping rough for 3 weeks in my 20s with the equivalent, in comfortable hotels in my 40s. Which do you think would pay better memory dividends? I have no doubt my travel companion and I would have a great time doing it again in a bit more luxury. But it would never feel as adventurous as the original trip. We wouldn’t have the same experiences as we did in our 20s, or I suspect meet as many people.


The author rejects the traditional advice to play it safe when leaving school. He points out, that if there is a time to take risks, it is when you are young, have few responsibilities, and have time to rebuild.

He gives the example of someone with a dream of becoming a professional actor. The young person’s parents may well advise them that the chances of success are slim, and encourage them to follow a more predictable and stable guarantee. But will that young person always live with the regret, and “what ifs” of not pursuing the dream? The author points out that a few years of trying to achieve their acting dream is a small sacrifice to have given it a try, even if they fail.

Prioritize Healthcare

Bill Perkins points out that without health, you have nothing. Money and time spent on health are very wise investments that you will never regret making.

I am 100% on board with this one. Look after yourself, get your teeth checked, eat healthily (most of the time), and exercise regularly. Be proactive with injuries or health symptoms.

As a doctor, I have had the privilege of working in areas with wealthy and poor communities. Money makes a huge, visible difference to health and ability to perform and enjoy activities in your 70s and beyond. The profound differences between the two populations are a result of better diet, leisure time, and exercise as well as proactive healthcare.

Bill Perkins points out that money is best spent on preventative health. He points out that spending large amounts of money on healthcare at the end of life (when he implies you are drooling in a nursing home) provides far less bang for your buck.

Planning Your Life

Die with Zero encourages us to take a long-term outlook when planning our lives. Instead of just planning the next 1-5 years, the author suggests we should plan our whole lives. His point is that it is easy to miss out on the optimal time for some of those “one-day” experiences you never quite get round to.

He suggests thinking about your life in 5 years “buckets”. Make a list of everything you want to do (and of course, this can change over time). Then work out when the best 5-year time bucket is to do each activity.

I particularly like this idea when planning experiences with kids, partially because I desperately don’t want to miss out on anything with my little ones. We had to time our trip to Lapland (I know, self-indulgent!) before they were too old to believe in Santa.

Small kids love camping. It’s amazing how entertained they can be finding sticks for the fire and exploring beaches for the perfect shells. Apart from our expensive trip to Lapland, most of our holidays while the kids are under 10 have been camping or visiting family.

As they get older, I imagine it will get harder to get them excited about a family holiday! Over the next few years, the perfect time to take our 1st family skiing holiday and to experience theme parks.

Spending during Retirement

The book describes data demonstrating that retirees spend most in the early years of retirement, even despite the challenging cost of healthcare in the US. The author asserts that dying with a full investment account represents wasted opportunities to enjoy oneself.

Bill Perkins encourages us to spend our money optimally, with the aim of running down our retirement accounts before death.

What about the Kids?

Instead of leaving an inheritance after death for the kids (usually in their 60s), he suggests giving that cash to them in their 20s and 30s when it can have maximal impact. If your kids have learned to manage money and invest well, they will not need that inheritance in their 60s. Almost everyone would appreciate a hand up in their 20s or 30s as there are so many competing expenses.

Charitable Giving

The author also sees a terrible waste in waiting to donate large amounts of cash to charities with your will. He suggests the charities could have put the money to good use far earlier.

Running out of Money

Bill Perkins suggests a solution to the obvious issue with the book – the risk of running out of money before death. This solution is to purchase an annuity so that you have guaranteed income to cover essential expenses as long as you live. With this increased certainty, retirees are more likely to live it up and spend their retirement savings without fear.

The Take-Home Message

There are so many uncertainties in life and investing. How could you possibly die with zero? Even the author admits it is impossible to get it perfect. But he does suggest that by aiming for zero we will all come a lot close to optimal use of our resources within our lifetime.

The obvious issue is the amount of uncertainty. You could die next year (in which case maybe you would quit work now and travel the world in luxury, using up all your funds). Investment returns could be 5% or 15% over the next 20 years. That makes a big difference to how much you should be spending.

I don’t think the book is supposed to be taken literally though. He challenges our thinking to remind us that life is finite, and we have to make the most of our resources (time, health, and money).

Die with Zero is definitely worth a read once you are well on your investment journey, to remind you that life is not all about money. Die with Zero regrets.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

My 5 Year Plan Complete: Financial Progress since 2017

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

At the end of 2016, our family returned from 6 months travel with our then-toddler and baby. We had extended parental leave to allow us to travel Australia in a camper trailer, on the (dirt) cheap!

Background Before the Five Year Plan was Set

I am a doctor living in a regional town, married with 2 young kids. My financial five year plan began as I achieved my career goal of completing specialist qualifications and getting my 1st consultant post.

Until 2016 we had been pretty responsible with money. We brought far less home than we could afford in 2008 (on a combined income of $110K).

My income was unaffected by the GFC and increased annually. Interest rates also dropped steadily since home purchase until today!

The extra income earned through pay rises went directly into increased mortgage repayments. We never reduced our payments when rates dropped.

Eventually, we were paying double minimum repayments. Increasing them further didn’t seem to provide as much advantage in time to pay off the loan, so we paused further increases.

Here we entered a bit of a drift state. We were doing well with the mortgage and had no idea how to work out if we needed to put extra into superannuation. I liked the idea of investing but didn’t know where to start and didn’t have a lump of cash to start with.

We could generally pay for our reasonably modest lives (for a doctor household) without having to worry. I didn’t always pay off the full credit card every month, but would often use it to smooth spending over the year. For example, paying for a holiday on a credit card, and then paying it off over 2-3 months. Not ideal I know!

We saved cash for both our cars when we needed to replace them. His was second-hand (and a complete lemon, costing the same again in repairs). Mine was an ex-demo but only $20,000 and paid out of savings.

As my income jumped with the step up to consultant, we also became parents and I reduced my hours to part-time.

Time to See a Financial Advisor?

With a very good income, and now very grown-up responsibilities, we decided it was time to see a financial advisor.

I made every mistake in the book. I didn’t do any checks and booked in to see one that offered advice without charge.

The advisor-sold us lots of insurance, which as a single high-income household with small kids we definitely needed. But he also convinced me to move my super over to a wrap account with (in retrospect) extortionate fees and pain in the ass paperwork that they needed me to sign every few months.

I was aware I should avoid fees but advisors are excellent salespeople. He was using a lot of finance lingo I sort of understood, and I think I fell foul of the Dunning-Kruger effect. A little knowledge can be very dangerous! He convinced me “you get what you pay for”.

Between work, having and looking after babies, and our trip around Australia, I didn’t have a lot of free time to review the situation.


We had long planned to renovate the house, which was poorly laid out and a bit small for our liking.

After years of delaying gratification, I had a huge YOLO moment and suggested to my partner that we should travel around Australia and renovate the house at the same time.

The Return to Reality before the Five Year Plan was Set

We returned in December 2016 for our first Christmas in our shiny, renovated at MUCH expense home. As a result of the huge reno, we were now 90% leveraged. We had no savings. The credit card was maxed out.

At the time it didn’t feel as bad as it sounds, I knew it was temporary and there was still regular income, which was about to increase significantly. In retrospect, it was irresponsible pushing this close to the edge!

Financial Situation @start of 2017 (Beginning of 5 Year Plan)

Super ~ Just over a year’s gross salary accumulated between both our accounts

House – 90% leveraged, low-interest rate though

Savings – 0

Investments outside super– 0

Credit card debt ~$5000

Getting Back on Track

Even at the time though, I knew we had to get back on track fast.

With returning to work, my income would receive a massive boost. I wanted to swing back to my financially responsible self and maximize this to get back on track.

I picked up the Barefoot Investor, read it cover to cover, and made notes. That night I started reorganizing bank accounts, opened a micro-investment account and worked out a fortnightly direct debit we could afford.

I have had an interest in finance, but finance became a new hobby for me over the next few years. I read blogs, and books and listened to podcasts.

Long-term Goals – Smart Goals

  • Retirement age 55 financially independent with $2.5M in assets between us
  • Kids education savings – Decided to put enough aside to cover worst case (most expensive) of medical school fees for both kids. If they don’t take part in tertiary education, they can use the money for a house deposit or business start-up.
  • Never work full-time again
  • Increase options/freedom to travel
  • Replace the cars when they need replacing

Five Year Plan – Financial Goals

Long-term goals need to be broken down.

I started with a 5-year plan, before breaking them down and identifying annual goals.

5-year goals:

  • Save money in offset to fund an investment property deposit for ~$600,000 property
  • Purchase investment property before my 40th birthday in 2020
  • Invest $125 per month towards the children’s tertiary education
  • Get the kids to Lapland!

Plan to Achieve the 5 Year Plan Financial Goals

  1. Increase income whilst improving control over income
  2. Reduce Spending
  3. Save a deposit for an investment property
  4. Research how to invest in property successfully whilst saving
  5. Research Lapland and find out how to do it without going bankrupt!

Five Year Plan: Increasing Income

Although I was returning to a wage well above average household contact, we had a lot of catching up to do! To find out why I decided to invest in property 1st, review my property vs shares article. To meet my goal of purchasing an investment property before 2020, I had to hustle.

Options to Increase Income

-Extra Shifts

Extra shifts are available from time to time at my regular work, but this was unpredictable. I worked overtime shifts when they came up and we didn’t have plans.

-Locum Work

Locum work was the obvious way to increase income dramatically, quickly, and reliably. There are loads of rural hospitals all over Australia that are desperate for staff, I happen to really enjoy working in them. By working in different hospitals, I got to experience different patient populations and perform a lot more clinical work than I do in my day job. I find it renews my enjoyment of practicing medicine.

Locum doctors also get control over when and where they work. In the future, increasing control and flexibility appeals to me.

Being paid in pre-tax dollars for my locum work also meant I could park those dollars in our offset account for up to 21 months, significantly reducing the interest incurred by the mortgage each month. The interest saved could then be used to pay the offset down further.

-Start a Blog

I was considering starting to write a blog to document my transformation from 90% leveraged broke doctor, to a financially responsible wonder woman fully in control of life. Again, the location flexibility of blogging appealed. If I could produce an income blogging (and that was a big if) I could maintain a modest income whilst we traveled further as a family.

But at the time, my 1st priority was getting cash flow in fast. There was no guarantee of producing any income with a blog, and if I did get to produce income it would grow very slowly. The idea of blogging was put on the backbench until 2019.

Five Year Plan: Reduce Spending

We had a chaotic banking system before I read Barefoot, even incurring overdrawn and dishonour fees occasionally.

Barefoot to the rescue. I opened multiple offsets, reorganized my accounts, and stopped paying bank fees. Most importantly, my partner and I agreed to separate a set amount each pay to go to our own splurge or fun account.

Next, it was time to look at cutting costs.

The biggest costs for many are housing, transport, and groceries. Cuts in these areas can often be the most significant moves. I wasn’t wanting to cut spending on housing, our vehicles are 10 and 20 years old, so already pretty cheap. Grocery spending was reduced by buying things cost-effectively (in bulk and on sale).

I started listening to the Choose FI podcast. It is an American pod, so not all the content is completely relevant to Aussies. But their philosophy resonated with me, and Brad and Jonathon’s enthusiasm has a way of catching on.

One by one I worked through our expenditures, identifying wastage and eliminating as much as I could find. Every time costs were cut (No matter how small), savings were increased by a corresponding amount.

I did find repeating this process twice a year helpful, as I became more comfortable with cutting expenses as my mindset gradually shifted.

Five Year Plan: Save a Deposit for an Investment Property

It may seem a little strange that instead of saving for a house deposit I opened a micro-investment account and set up a direct debit to invest in the stock market.

We are generally advised not to invest in the stock market for less than 7-10 years, and not before saving an emergency fund.

I had a bad case of impatience, and couldn’t wait to get started!

I reasoned that the date for property investing wasn’t set in stone. If it had to be delayed because of a market crash it wasn’t the end of the world to me. But in the meantime, I could take advantage of market growth (hopefully) and save that property deposit faster.

It was a risky move, and it could (and probably should) have bitten me on the arse. But it didn’t, I got away with it. In fact, I’m such a jammy git I withdrew the whole lot (~40K) days before the COVID crash. Beginners luck! I am definitely becoming more risk-averse as time goes on!

At the same time, we aggressively paid down that pesky credit card debt in our mortgage offset account.

We have been credit card debt free since early 2017, and at the start of 2022 so damn close to fully offsetting our mortgage, I can almost taste that (PPOR) mortgage-free lifestyle (2023?)!

As regular readers are aware, I brought our first investment property in July 2019, 6 months before my self-imposed deadline. There was a lot of media doom and gloom at the time, and I was pretty scared I could be making a mistake. Knowing there were no further steps I could take to reduce the risk, I took the plunge.

The property has performed well so far, even before the COVID boom. It has been constantly tenanted (touch wood) and we ended up purchasing a second investment property in 2021.

Five Year Plan: Research how to invest in property successfully whilst saving

I always liked the idea of being a property investor. After learning about stock market volatility, I liked the idea of diversifying retirement income.

I had never taken the plunge before because

  1. Didn’t think we could afford it
  2. I didn’t know where to start and didn’t want to get ripped off.

I read every book on property and investing that I could find and was overwhelmed by all the different approaches.

Thankfully, I was pointed to the Property couch sometime in 2017. I devoured the episodes and felt confident I had found my guide to buying property for investment. Initially, we planned to do it all ourselves to save some money.

But the more I learned, the less I knew! Eventually, I had to admit to myself that I needed professional help.

5 Year Plan: Take the Kids to Lapland

This was my Carpe Diem goal. I’m a bit obsessed with my kids and a pretty cheesy mum.

Once it occurred to me I could take them to Lapland, a quick google search later I was hooked on planning. We have family in the UK and had planned to go back to visit, and decided our Lapland adventure could be a great side trip.

Personal goals should be planned around major life changes and events. Kids are small for a limited time frame, and it won’t be too long before they’re too old for certain experiences.

But these are very expensive trips. Holiday companies offer 1-day excursions to Lapland (Rovaniemi, Finland) to reduce the cost as accommodation can be pricey.

We booked bargain flights to Helsinki, where we caught the Santa Claus express overnight train (Oh, yes). I found a charming Airbnb log cottage that belonged in a fairy tale. I hired a car (with snow tires!)

We saw all the sites, met Santa, took an exhilarating sled dog ride, saw reindeer, and had so much fun just playing in the snow. We even caught a brief glimpse of the Aurora in the 5 nights we stayed.

It was still expensive, and some parts were absolutely a rip-off (like the ice restaurant). But this was an experience of a lifetime and I am absolutely thrilled we did it.

Looking back, the pandemic was beginning in China as we were playing in the snow. I could not have imagined how life could change, and the ability to travel has been lost for so long. I am so glad we did not delay this trip in order to save more money!

Financial Situation @start of 2022 (End of 5 Year Plan)

Super ~ Just under two year’s gross salary accumulated between both our accounts (nearly doubled)

House – 90% offset, even lower interest rate

Savings – equivalent to 18 months spending in offset

Investments outside super– $85,000 between Pearler & kids education funds

Credit card debt ~0 of course

Summary of 5 Year Plan Achievements

It really is impressive how far a strong salary when you stay focused can get you in 5 years. It’s gone pretty quick! We have 90% offset our mortgage from being 90% leveraged. We have invested inside and outside super and purchased two investment properties. Limited ability to spend our money as a result of COVID travel restrictions and intermittent lockdowns have accelerated the progress as well.

What achievements have you got planned over the next five years? Five years is a long enough period to make huge progress towards your financial goals. Have you written down a five-year plan? What is your Carpe Diem goal? What will be your situation in 5 years – and will you look back at how far you have come with wonder?

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Money Self Sabotage: How to Get out of Your Own Way

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Are you struggling to make any positive financial progress?

Reading finance blogs with good intentions, but never actually making the behaviour change? Self-sabotaging behaviour is a common problem with money and in other areas of life.

Identifying your self-sabotaging behaviours, and understanding them can help you overcome financial self-sabotage. Get over that plateau and reboot progress towards your money goals.

What does Self Sabotage Mean?

Self-sabotage is when a person acts in a way that damages their own well being. It is a common problem people encounter when working towards financial, fitness or academic goals. Some aren’t even aware that they are self-sabotaging.

Have you ever found yourself:

  • Turning on an addictive Netflix series when you have an important assignment due the next day?
  • Indulged in a six-pack of beer despite vowing to start losing weight just hours earlier?
  • Deciding you need to get your finances under control, then binge shopped for non-essential items online?

Most of us have self-sabotaged by behaving in a way that takes us further from our own important goals.

But why?

Why do People Self Sabotage?

There is a multitude of reasons for these destructive behaviours. Sometimes it is simply that the self-sabotaging behaviour produces short term pleasure, which trumps the threat of associated but delayed harm. Delayed gratification is hard.

  • The doughnut will taste really good for the next 5 minutes. You won’t notice an improvement by not eating the doughnut (and it will take quite a while to reap the benefits of resisting the doughnut daily).
  • You know you need to save more money for a house deposit. But all your friends are going out for dinner. It will be really fun, and you don’t want to miss out. You will eventually enjoy owning your own home more. But the goal seems too far away to compete.

There are also deeper, more subconscious reasons for self-sabotage.

Imposter syndrome

Everyone has heard of imposter syndrome now. Many of us have suffered from crippling self-doubt that undermines confidence.

Being successful in knowledge-based work is commonly associated with imposter syndrome. Have you ever thought that your success in life was just due to good luck? Felt like a fraud and tried to keep this hidden?

This is imposter syndrome, and it tends to affect high achievers, and women more than men.

Imposter syndrome can occur with money too. Perhaps you grew up in a family of modest means. Financial success doesn’t feel real. It is easy to feel that we somehow got lucky with money and don’t deserve to have more.

Incredibly intelligent professionals often bury their heads in the sand, because they don’t feel they have the knowledge or ability to make financial decisions such as investing. If you can reach the peak of your chosen career, you can certainly set financial goals, and make a simple plan to reach them!

Self Sabotage due to Fear

Fear is a big factor in self-sabotage of all sorts. Fear of failure can lead to money self-sabotage. A certain amount of this is helpful, as it will hopefully help you avoid giving your money to a conman (and there are plenty around). But those consumed with fear of failure will never invest.

Stockpiling cash in a bank account earning 1% is insufficient to provide for retirement. Over time, the value of savings is eroded by inflation. Minimizing risk needs to be balanced with taking some investment risk in order to achieve your financial goals.

Fear of investing being too hard, or that you will fail because you are “no good with money” is also a common issue. Some people fear not being able to reach all their goals as they may be unrealistic. Choosing to stick their heads in the sands, they risk not reaching even their most important goals by not taking charge of their finances.

Fear of financial success can also lead to self-sabotaging behaviours. If your background is humble, the thought of “becoming rich” can be uncomfortable.

Wealth is often associated with evil in society, although of course money is neither bad nor good (but can be used for either). Savers can fear other people judging them for saving money or showing an interest in personal finance. They can also fear social rejection due to a change in financial circumstances.

Fear of change can also put people off taking the first step. We love to form a little rut. It’s comfortable, safe and familiar. Any change in habits needed to save more money and follow a financial plan tends to, at least initially, be uncomfortable. Suddenly needing to budget spending instead of continuing to spend each paycheck with abandon, can lead to fear of deprivation.


As Australians, we already live incredibly fortunate lives. As higher-earning Australians, we have won the life lotto from a global perspective. Inequality is increasing throughout the world. Over 700 million people live in extreme poverty worldwide.

You may feel guilty about the lucky hand you were given, even though you took that good luck and worked hard to make the most of it. You and I know we were born with advantages that gave us a huge head start.

This can lead to great things, including paying it forward in charitable donations and creating a fairer, kinder world. But where this guilt can be really unhelpful is when it is subconscious and leads to self-sabotaging behaviours. If you feel guilty for accumulating wealth, but don’t spend the time examining your feelings, you may waste savings with silly choices. Spending savings on choices that don’t provide you value, and don’t make the world a better place is a terrible waste.

Guilt also commonly works in the opposite direction. It is easy to get obsessed with saving money, to the point where your good habits become destructive. After you are on track to meet your financial goals, don’t let spending guilt stop you from living your dream life. Whilst still in the accumulation phase, a “fun money” account is really helpful here, in providing permission to live a little on your journey to financial freedom.

Self Soothing Behaviours

Life can be stressful. Shit happens, regularly to some people. It is natural to want to “treat yourself,”, particularly after a bad run of events.

Take care to note the difference between self-care and self-soothing. Self-care is important. It is looking after your body, mind, finances and relationships to gift yourself the best life possible, under your circumstances. Self-soothing activities distract you from whatever is troubling you and provide short-lived relaxation.

You may drink a bottle of wine to feel better after a terrible day at work. You know that amount of alcohol in one night is bad for you. This is self-soothing and not self-care.

Obviously used repeatedly as a mental crutch to deal with life is a slippery slope into alcoholism and complete life destruction. But long before that, smaller negative consequences occur such as a hangover, weight gain and lost productivity.

There is absolutely nothing wrong with treating yourself to a massage after a stressful week. If it is in your fun money budget, you should go ahead and enjoy it. But it is not likely to have a long-term effect on your health, wealth or mental wellbeing.

Self-care is taking steps to take better care of yourself. These activities often don’t provide immediate rewards, but over the long term provide a far better return than self-soothing activities. Going for a run often doesn’t feel like self-care. To begin with, it can feel like torture! But over time, weight loss and improved fitness often translate to higher energy levels and feeling better. Eventually, you even start to get a natural kick from those endorphins when you actually exercise.

The answer to financial stress is clearly not spending money on something that makes you feel better in the short term. That new car smell may boost your happiness for a few weeks during your commute. But if you can’t really afford it, the car loan will leave a longer-lasting financial and well-being hangover.

How to Tell if you are Performing Self Sabotage?

Slow down. So many people spend little to no time thinking about the big things. I think this is a big cause of self-sabotage. If you don’t spend any time working out what your real priorities are, you will never start working towards them.

It is not unusual to hear people stating that spending time with their children is their number 1 priority. Yet they often seem to be striving away from their stated goal by working excessive hours to pay for never-ending consumer purchases and status symbols.

If your children are your top priority, what do they really want and need? Spend some time working it out.

Many others state that money is not a priority, as an explanation for disinterest in financial literacy and investing. It’s great that these individuals don’t worship money.

But often those that claim that money is not important are experiencing cognitive dissonance.

By not looking after their money, they are indefinitely dependent on a wage, trading time for money, whether they like the work or not.

If money is not important to you, what is? Spend more time reflecting on your goals, and how your actions will move you towards, or away from your goals.

Be honest with yourself and try to identify soothing self-soothing behaviours that are sabotaging your finances.

Watch out for Social Sabotage

Even those that love us can sabotage our financial plans. Your friends and family love things the way they are and suffer the same fear of change.

They may also feel challenged, or defensive if you choose to make smarter financial decisions.

Those close to us may try and convince us that bad debt is normal, and you only live once. If struggling to make the minimum repayment on your credit card and working to indefinitely meet minimum repayments is living!

Let these loved ones know you have your own goals, and you are working towards goals that are meaningful to you. You may inspire them to make a positive change too.

How to Stop Self Sabotaging Money Behaviour

Identify how you are self-sabotaging.

Spend some time thinking about what your goals should be your priority. Work out exactly how you are going to get there. Consider the sacrifices that will need to be made, and make a conscious decision whether they will be worthwhile in the long run.

Form a plan. Schedule a regular appointment with yourself (+/- partner) to review your progress, monthly, quarterly or bi-annually. Put it in your calendar with reminders. Make it a priority.

Find a way to remind yourself of your “Why”. Something that inspires you related to your largest goal. It may be a picture of your kids in your wallet, or some words stuck on your credit card (fully paid off home?).

Then it’s time to take your brain out of the picture.

Remove as many temptations as possible. Cut up the credit card you don’t need. Automate everything you can. Pay off credit cards, in full, by auto-sweep every month. You can generally set this up with the credit card company.

Direct debit your planned investments every month (fortnight, or quarter) so you will be less tempted to redirect this money to a self-soothing activity.

Examine negative thoughts that come up. Write them down or talk about them with a friend. Is it classic imposter syndrome or fear of failure?

Confront any guilt you feel about becoming financially successful. If this is an issue for you, plan some ways you could make the world a better place.

Spend some time choosing a charity that you really believe in. Here’s mine. The good news is, that a small regular donation is all you need at this present moment. As your finances improve, you can increase donations as you wish.

Make sure you have some “fun money” put aside to spend regularly, and guilt-free. As long as this is budgeted for, you can spend it on whatever you desire. You will naturally start to prioritise the spending that brings you more joy when as you run short of “fun money”. Get the most fun for your buck!

Set some mini-milestones along the way to your undoubtedly huge goals. It’s a long journey. Like most things, it’s a lot easier to break it up. Take the time to celebrate and treat yourself in some way when you meet these milestones.

For inspiration, here are mine (asterisked are still a work in progress):

  • Out of credit card debt!
  • Positive net worth
  • $1000 emergency fund saved
  • Student loans paid off
  • Home deposit saved
  • 1st investment outside super
  • Hitting double mortgage repayments
  • Paid for a car in cash
  • 1st investment property
  • 1 year of living expenses in offset
  • $1 million net worth
  • Coast FI (for retirement age 60)
  • Home loan fully offset*
  • Lean FI*
  • $1 million invested*
  • Kids education fees saved/invested*
  • Flamingo FI (retirement age 55)*
  • Self-insured for life and income protection (and free of those awful premiums!)*
  • $2 million invested*
  • Financial independence*

Are you self sabotaging? What’s your worst habit and how are you going to break it! Comment below and share your ideas to help others.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

M&M – Saving not Investing – Dev Raga

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Everyone makes some money mistakes. But learning from others is a lot less painful than making your own! I have benefitted from listening to tales from family and friends investing disasters and have confessed my own financial errors for readers, in turn, to learn from.

It is rare people are brave enough to share their financial horror stories. The shame and embarrassment of a huge financial mistake often prevent people from reporting or warning others.  But learning from others mistakes is sometimes more valuable than stories of success.

In the M&M series, I have asked financial content producers to bravely confess their worst financial mistakes. Read these warnings carefully and learn as much as you can from them to avoid making money mistakes of your own.

Introducing Dev Raga.

My name is Dev Raga, and I am a medical doctor still in clinical practice. I am also a podcaster, and my main aim with my podcast episodes to discuss financial concepts/principles. My principal listeners are health care workers, who are often time poor to focus on their finances. I try and simplify concepts as much as possible.

Anyone can listen to my podcasts from the beginner to the advanced investor.

I like the FI part of FIRE, and not the RE. I don’t plan to retire early, but will reduce my work hours. This is because I like my job, and also to leave clinical practice is a big decision.

Dev Raga Personal Finance

Podcast is called: Dev Raga Personal Finance

Worst Financial Error: Saving not Investing

Probably the fact that I saved 40K during my medical school days – when I graduated, and didn’t invest it as I saved it.

I calculated –> thats a $1million mistake.

More recently 4 years ago – bought a custom built pool table. Not sure why, I don’t even play pool. I have used it less than 10 times in 4 years.

Biggest waste of consumer spending ever.

I just didn’t know enough about investing. I was an excellent saver in Medical School. I did not any of the financial principles/concepts I talk about. All I knew was how to save, up to 50-70% of my income – as a med student, which wasn’t much.

But time in the market is more powerful than timing the market. Had I know that, I would have been a better position today.

Could Saving Not Investing have been avoided:

Yes. More education, more awareness. Med school is not easy, and I had a lot on my plate back then. So investing didn’t even cross my mind.

When did I realise I made the saving not investing mistake?
In 2013 when the market shot up significantly.

Thats when I realised all the units I had bought between 2009 onwards would be worth much more. Then I realised had I done this from 2001 – since med school, it would be worth more.

Bounce back:

Since 2009 – I have saved, and invested at least 20% of my after tax income.

I have just kept investing simple, and easy, and long term focussed.

I don’t think I will ever recover the opportunity cost of $1million dollars, but at least now I have a much clearer understanding of investing, and why its much better if the market crashes rather than rises for me.

Thanks Dev Raga! Not many managed to save money during med school! Dev Raga’s previous article outlined his investing strategy.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Why Is Money Conversation a Taboo?

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Why is money conversation taboo?

Money conversation is still considered taboo in Australia.

Money should be a pretty objective topic. It’s all maths! But money gets weighed down with a lot of psychological baggage. Money means different things to different people, including social status, self-worth and security.

– Social Status

Being wealthy has always improved a households social standing. Thorstein Veblen first coined the term “Conspicuous consumption.” The term describes the very visible display of non-essential, extravagant purchases to improve one’s social standing.

And there are social benefits associated with appearing rich. A series of fascinating social experiments, found people more compliant and generous to those wearing luxury brand clothing. Researchers even calculated that the Dutch Heart foundation could fund an extra 133 heart transplants per year by getting charitable donation collectors to wear a designer label shirt!  

Conspicuous consumption has become commonplace, with the wide availability of credit. And it seems to be most popular amongst those with lower incomes. Conspicuous consumption drops 13% drop when household income increases by $10,000. Disadvantaged households sacrifice spending on health, education and savings to prioritise visible purchases when compared with higher-income households.

The relationship between actual wealth and portrayed wealth is skewed in order to avoid the stigma of poverty.

With so much effort put into maintaining illusionary appearances, honest money conversation that might expose a vulnerable financial position is unwelcome.

– Self Worth

Closely linked to the above is the link between money and self-worth. People are insecure and tend to compare themselves with others. Society has taught us to think of money as a scoreboard in life. Those that have it are winners, those that don’t are lower in the pecking order.

This is likely why conspicuous consumption occurs to raise our perceived rank in society amongst peers.

But many people also internalise the relationship between money and self-worth. No matter how much they try and compensate for a poor financial situation by social signalling with consumer goods, they know the truth. And if you judge yourself to be worse off than your peers (whether that’s true or not) your self-esteem can suffer.

A study of consumption and mindset found women with a fixed mindset felt more beautiful after using a Victoria’s Secret brand name shopping bag. Fixed mindset students considered themselves more intelligent and better leaders after using a pen branded the “Massachusetts Institute of Technology”.

Of course,everybody has their own set of strengths, skills and virtues that should be the basis of self-esteem, far more than money. Particularly as we all get a different financial headstart (or not).

But this link between finances and self-esteem makes money conversation a touchy, sensitive subject. People can be defensive, angry, resentful, ashamed or boastful about their financial situation. Not an ideal mix of emotions for a calm and helpful conversation.


Money represents security to a lot of people. Having a paid-off home has huge emotional benefits for many, who feel no matter what happens, they will keep a roof over their heads.

If you’re struggling to scrape enough to pay bills each month, money becomes a major source of insecurity and stress. Broaching a financial conversation whilst this kind of stress is in the background can lead to heated arguments fast.

Inconspicuous Consumption & Discreet Wealth

Some people who value money as a major source of self-esteem and appreciate the social benefits of appearing wealthy will brag about financial success. Very few people want to listen to this bragging!

But most in a good financial situation will avoid talking about money, to avoid the appearance of bragging or being insensitive. Showing off wealth, through conversation or conspicuous consumption can be seen as crass and classless.

A study into inconspicuous consumption found 94% of Tokyo women in their twenties owned at least one Louis Vuitton item. When these luxury consumer items are so commonplace, they are no longer a signal of superior wealth. Experiences, services and other inconspicuous spending in line with values and beliefs are becoming more desirable ways to consume for the financially elite.

The Problem with the Money Taboo

The financially successful often have the knowledge and experience to give those wanting to improve their finances a hand. But because of the money taboo, those with money keep it discreet and those wanting to learn feel uncomfortable asking a would be role model finance questions.

Cue the spruikers. Thousands of youtube videos exist, usually by young men claiming they made their wealth quickly and effortlessly. They may be sat in a sports car to signal their extreme wealth. It may well be rented for the purpose of creating perceived authority.

If these guys are truly wealthy, is it through their “secret method”? Or from the courses and products they are spruiking? I suspect they are growing wealth by fooling those they claim to be helping.

Why are Money Conversations Helpful?

We stand a lot to gain by sharing money conversations more often. Almost everyone has limited resources, so should be using them efficiently and getting as much bang for their buck as possible. From a good deal on mobile phones to remuneration at work, particularly in areas where there is potential for discrimination in pay leading to pay gaps for women and minority groups.

Our other precious, limited resource is time. No one has the time to research every single decision they make in detail. Pooling research efforts on sites such as this one means the effort put into researching a decision, like whether solar panels are financially worthwhile, is shared with many.

The other advantage with sites like this is that it seems to overcome the social taboo around talking about money. I speak to you as if you are the best mate, someone I have known for years and trust with all my secrets. Many finance blogs are anonymous to allow this kind of sharing without fear of judgement or negative consequences in offline lives.

Important Money Conversation Milestones

Marriage or Cohabiting Relationship

Your biggest financial risk in life is your chosen partner. For better or worse, you’re both stuck with the consequences of each others financial behaviour through the marriage. Divorce leaves no-one better off financially.

Marriage can destroy you financially if your partner is a gambler or compulsive conspicuous consumer. But if you are both on the same page, you can achieve incredible things as a team.

Most relationships are somewhere in between the two extremes, including my own. There is a relative “spender” and a “saver”. By focusing on shared goals and dreams, we have compromised a solution. We save a fair bit, but still splash out on good food, kids activities and holidays.

Get on the Same Page on Goals, and Work Out How to Use Money to Get you There

Discussions and plans about goals and dreams is important before taking the big decision to cohabit. This reasonably painlessly leads onto how the couple will achieve their goals, creating a helpful money conversation. Discussion around how the household will manage money, and if either partner plans to stay home with children can follow.

I am a big fan of the “fun money” accounts. This strategy limits spending but also allows both partners to spend guilt (and criticism) free.

I have assumed you will combine finances, but am aware that some keep separate finances and pay a share of joint expenses. If that suits you both that is fine, but you should be combining efforts saving and investing towards joint goals. Without joint goals, and a combined effort to get there, where is this relationship going?

In the event of a breakup, and financial separation, all couple resources generally go into the pot to be divided. So if you have diligently saved and invested during the relationship whilst your partner has blown their cash every month, you are at risk of losing a significant portion of savings in the separation. And if they have racked up thousands of dollars in credit card debt, there is a risk you could end up liable for that too.


A child’s financial habits are supposed to be mostly formed by the age of 7! This means they are absorbing information from a young age by observing your behaviour around money. Do you demonstrate a healthy, balanced attitude towards money?

The good news is, your kids don’t know money conversation is taboo. Financial literacy is one of the many skills children should learn as much as possible before leaving home.

Many of us will be in a similar situation, attempting to walk the fine line between making kids lives that bit easier financially, and avoiding spoilt, entitled kids who are relying on handouts from mum and dad well into adulthood.

Financial Education is a Better Gift than Cash Handouts

I am pretty shocked by how many adults receive regular handouts from their ageing parents. The fascinating Millionaire Next Door series makes it quite clear that this “economic outpatient care” actually hinders, rather than helps, the recipients financial success.

Of course, preparing your kids for managing their money as young adults doesn’t come as one big “Money conversation” before they leave home. It’s learned through thousands of micro-discussions, games and role modelling over the years.

  • Explaining the ATM machine or credit card payment at the checkout involves taking money you have earned from your bank account. It’s not unlimited!
  • Verbalising your money decisions. Weighing up pros and cons, delaying gratification, getting good value.
  • Providing children with some money so they can learn by doing
  • Role modelling intentional spending
  • Conversations when school friends display consumerist behaviour
  • Linking real world examples – explaining you are doing some extra shifts to pay for an exciting holiday
  • Learning delayed gratification -Encouraging them to save for something they really want
  • Giving to a charity that they can understand (we like Childfund for the personal connection with our sponsored child)
  • Playing games – plenty of games that teach skills eg monopoly, game of life, cash flow for kids
  • Explaining the difference between an asset and liability and the benefit of buying the assets first
  • Helping them set up a good superannuation account with their first job, and helping them understand super


If your parents are good with money, they may have been a source of education and discussion over the years around saving, investments and getting a good deal. If your parents are pretty open with money, they are likely happy to discuss things like what they want as they get older.

How do they want their healthcare provided once they need more help? Have they organised a will and the right time to allocate an Enduring Power of Attorney for if they can no longer make their own decisions?

Many of our parents will find discussion about money unacceptable. They may even be concerned you don’t have the right motivations. Which makes the above conversations difficult to impossible to have.


Your peers are most likely to be in a similar money position to yourselves and so are most likely to be able to share information relevant to your needs, and vice versa.

But again, self-esteem, social status and security issues pop up so it’s best not to barge into conversations asking about your friends’ salary or savings rate.

The best way to approach money conversations with a peer is to offer information you have found. Perhaps you found a great deal on a mobile phone. Share this with your friend to open the door to them sharing similar information with you.

How to Have a Conversation about Money

Money conversation is still taboo. Yet we could all benefit from a little more sharing of financial information to get a good deal and avoid paying too much. Sharing our saving and investing habits can encourage those around to up their savings game.

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.Aussie Doc Freedom is not a financial adviser and does not offer any advice. 

Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes

The Secret to Finding your money luck

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.

The infamous Money Tree your parents claimed not to have

Do you have friends or family who just seem blessed with “Money luck”?

They earn an awesome income, or have a great house and go on incredible holidays. In a few years time, they may retire at an age you couldn’t even consider giving up paid work.

It’s as if these people have a money tree in their backyard. Do you want to know their money luck secret?

Meanwhile, are you struggling to catch a break? Want to get ahead but unexpected expenses keep coming up and destroying your best intentions. Perhaps instead of money luck, you feel you have a money curse that destines you to perpetual financial stress.

The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.

Winston Churchill

Money Luck: The World is Not Fair.

A discussion about money luck would be inadequate without an acknowledgement that money is distributed unevenly. Some get handed more than others, and there’s not much you can do about it.

But those born, or who have managed to come to Australia are amongst the luckiest in the world. There is still much inequity within this country, but having access to safe water, access to the internet and electricity is a good start.

Those of us reading this blog each have their own dose of privilege, some larger than others. But I reckon we’re all starting at a reasonable place.

When considering how we are doing financially, it is human nature to only compare with those in a similar situation to us. We all need a reminder sometimes that we are amongst the wealthiest individuals in the world.

Your mindset is incredibly important. Appreciating the headstart you’ve been given in life will help you make the best of it.

The Green-Eyed Monster

Envying those with more than you are a complete waste of energy. There are extremely wealthy individuals that made their way despite starting out with less than you.

There will always be someone wealthier than you. I hear even Warren Buffet’s incredible wealth has recently been surpassed by Elon Musk’s net worth. Mr Buffet isn’t losing any sleep, in fact, he is giving the majority of his wealth to charity.

Unless you are actually comparing bank and investment accounts, it’s impossible to tell how someone is doing financially anyway. Those parking sports cars in their waterfront home driveways may be leveraged to the eyeballs, stressed out each month about how to cover all those bills after an unexpected dental emergency.
The millionaires may be driving shit cars, to average neighbourhoods, dressed a la Targét.

We should all spend in line with our values, and some are far more visible than others.

So avoid wasting your mental energy envying those with more resources, and start working out how to find your own money luck.

How to Find Your Money Luck

It’s easy to assume that you have no opportunities to build wealth. But the ability to see opportunities may be the major limiting factor in taking advantage of them.

A Great Idea

J.K. Rowling has described her poor financial situation as an unemployed single mother when she started writing the Harry Potter series. The plot idea was formed in 1990 (during a long train delay), 1st manuscript was completed in 1995 and published in 1996.

How many people have had incredible ideas but never followed through to make them a reality?

J.K Rowling somehow identified this idea as an opportunity and with a lot of hard work (and a little luck) became one of the highest-earning authors in the world.

Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

 Warren Buffett 

Many opportunities won’t be as romantic as a fantastic novel idea, catapulting the author to unimaginable wealth. It is a technique with a low success rate. Less than 2% of books published sell 5000 copies.

It is easy to miss an opportunity and let it goes to waste.

Notice Small Opportunities

Perhaps it wouldn’t have been a “Harry Potter” kind of opportunity. But small realised opportunities can lead to bigger and better opportunities arising as a result. These opportunities don’t come up and slap you in the face. You need to be on the lookout to see the potential and then assess the risk, time, effort and likelihood of success.

Take an opportunity you get to take on some extra work. You could see this and just weigh it up based on whether you need any more cash for your next holiday.

But if you reframe the opportunity to earn that extra money to build a deposit for a home a few years earlier than expected, its potential becomes far greater. Your home purchase could result in leveraged capital growth which could provide larger opportunities in purchasing another home or investments that would otherwise have been out of your reach. Short-term hustling early on in your career can accelerate financial progress.


Many millionaires are made by starting a business solving everyday problems. Are there problems that annoy you daily that you could find a solution for? Spending some time working out a solution for an annoying problem could pay off. The inventor of the WIFI Ring doorbell kept missing package deliveries and worked out this product as a solution, before launching it as a commercial product.

Get your Deposit or Starter Fund Before You Know What it’s for

Even seizing the opportunity to save, then invest 20% of your net income is making your own money luck. Similarly to purchasing your home, having some savings and investments behind you provides wealth building opportunities that would otherwise not exist.

Be a Good Steward of Money Gifts & Windfalls

If you were lucky enough to have a surprise windfall come along, would you know what to do with it? Unfortunately, many windfalls come from an inheritance when you lose a loved one. The average Australian beneficiary receives $79,000, a little more than the median annual salary in Australia. This is a significant amount of money, with emotional obligations to be a good Stewart. With careful investing, this inheritance could grow to provide not only, but also your kids, more financial security.

But the months after a death of a loved one are not a good time to be making huge financial decisions. It is very possible to spend through this amount unintentionally, with nothing to show for it after a year or two. Beneficiaries are also easy targets for scammers looking to make their own money luck through unscrupulous methods.

If the worst happens, and a loved one dies, you will want to be a good steward of their hard-earned money. Having invested a little in financial education and making a financial plan will mean if an unexpected windfall arrives you won’t need to worry about what to do with it. You don’t want to be the sucker advertising on some Facebook group that you have come into money and don’t know what to do with it. Poor advice to throw your money into the latest fad is the best outcome, clever scammers stealing your inheritance is the worst.

Prepare Yourself to Receive Money Luck

“I believe luck is preparation meeting opportunity. If you hadn’t been prepared when the opportunity came along, you wouldn’t have been lucky.”

Oprah Winfrey

Have a Positive Mental Attitude.

If you think your financial situation is hopeless, it will be. Get your mind working for you. Build your confidence that you can follow your financial plan and get to a great outcome. Watch out for https://aussiedocfreedom.com/money-self-sabotage-how-to-get-out-of-your-own-way/self sabotage.

Build financial literacy

You need to recognise a financial opportunity and know-how to take advantage of good money luck when it comes. Build financial literacy through books, blog, magazine or podcast subscription

Make a Financial Plan

Set goals and make a financial plan. If no money luck surprises come along, you are moving towards your goals anyway. Any bonus money luck means you can just accelerate your plan. Small, repeated positive money habits are powerful over the long-term. Treat your personal finances as a form of self care.

Pay Attention

Pay attention to life. Try and spot those opportunities coming along. Instead of filling all your free time with filler activities such as tv, actively preserve “thinking time”. For me, this is hiking. Despite working on a financial plan, new perspectives or ideas will come to me out of the blue when I’m hiking. Carry a notebook or note application on your phone for great ideas that appear, and can disappear from memory just as fast.

Make your own luck by planning ahead, being observant and assessing opportunities carefully. When you find a great one, grab it by both hands!

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

How to become a Millionaire

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Thomas Stanley’s studies of the everyday lives and habits of millionaires found that most have a particular set of attitudes. They are disciplined, live below their means, believe in long-term investments, and know how to manage their money.

Stanley’s books* are a result of decades of data collection on the wealthy. Stanley focused his research on those who had been raised poor but eventually achieved millionaire status.

The first book was published in 1998 when a million dollars was worth considerably more. But most of the subjects in Stanley’s latest book were multi- millionaires, and the lessons are timeless.

The first study asked people who claimed to be millionaires how they made their money. The second study compared those responses with how others’ actually became, or did not become, millionaires. His recent book Millionaire Women Next Book* examined the habits and behaviours of women millionaires and compared them with the males studied previously.

There were striking differences between what the financially successful believed about wealth building and how their peers responded to questions on the topic.

How to Become a Millionaire: Upbringing

Stanley found that the majority of millionaires are not raised in wealthy households. These individuals did not inherit large sums of money nor were they born into wealth and privilege either. Instead many came from very average backgrounds where financial deprivation was commonplace. In a 2018 study, only 2% of millionaires came from wealthy families!

Furthermore, these same individuals often worked odd jobs while attending school to support themselves or even worked full-time while still enrolled at university. Over 61% of women millionaires fully funded their own tertiary education. The majority of millionaires grew up in supportive families, but were not spoilt, coddled kids.

Some even achieved early financial independence through this work ethic. Mark Zuckerberg achieved millionaire status by age 27 years. He was busy creating Facebook whilst attending Harvard University, until dropping out to work on it full time.

How to Become a Millionaire: Grit over Intellect

Most millionaires surveyed indicated they were not exceptional performers at school. They did not consider themselves unusually intelligent but considered grit to be the primary factor in their success.

Stanley’s work points out that while some people are born to privilege, most millionaires had to work hard for everything they have achieved. Anyone, therefore, has a chance at achieving financial success even if you weren’t raised with it yourself! Consequently, no one is guaranteed wealth without good money management and /or work to achieve it.

Even if you are a “trust fund baby” you need to manage money well and invest wisely to avoid death by inflation. There seems to be no limit to the size of an inheritance that can be lost or squandered.

Similarly, a large income does not equate to wealth if none of it is captured and invested. Thankfully the Australian employees get a helping hand with their discipline through compulsory super contributions.

It would, however, take over 50 years in the workforce to retire with a 10% savings rate. Whilst the aged pension helps shorten this for lower-income earners, higher-income earners will be ineligible for the aged pension for a long time due to the asset test.

What’s more, if higher-income earners have never learnt to save more than 10% of their income, they are going to struggle to reduce spending in retirement. Most high-income earners also had a delayed entry into the workforce due to tertiary education, making a 50-year career a bit of a push!

Despite doctors usually having been top performers at school, they have a reputation for a low financial IQ. Don’t fall into the trap of thinking you have money sorted because you have a good salary!

How to Become a Millionaire: Take Carefully Calculated Risk

People who become millionaires also tend not to take big risks with their earnings. Instead of chasing the next big thing, they invest over time.

Women millionaires were found to be particularly good at researching their investments and minimising transaction fees – factors most strongly associated with the best returns.

How to become a Millionaire: Practice Frugality

Millionaires who live below their means also believe that financial success is defined differently than how most people view it. Self-made millionaires were generally not driving around in Bentleys and living in mansions, as many would expect.

A millionaire doesn’t see being rich as how much they earn each year but rather how many years they can live solely off their investment income.

Millionaires see how little happiness materialistic purchases bring instead compared with relationships, meaningful careers and how much joy can come from simple activities. Shopping is an annoying necessity to these people, not a hobby.

Most millionaires interviewed did not drive expensive cars. A typical millionaire paid less than 2% of their net worth on a car. Most owned a car worth less than $75,000, the median maximum paid for a car in women surveyed was under $40,000.

Most millionaires had paid up to $400 for a suit, and the most popular watch was a Seiko, not a Rolex. Between just 3 (for women) and 4% (for men) was the median amount of income spent on holidays.

The frugal habits of these millionaires seem to be personality traits, and even after they had accumulated significant wealth.

“If you want to become wealthy to consume, you are unlikely to ever be rich.”

Thomas Stanley

Millionaires are Goal Directed

Men and women interviewed were highly goal-directed. Women tended to have multiple goals over different time scales. Men tended to be focused on a single goal. Some (usually over the age of 65) had accomplished all their goals.

Women interviewed for Stanley’s book averaged 49+ hours of work per week, woke up before 6 am and exercised frequently. Most continued to work despite financial independence, for personal fulfilment. 95% found work provided them with great satisfaction.

Many (but not all) Millionaires Owned Businesses

The book continues to expel millionaire myths and stereotypes. Millionaires in both books were generally business people. But not all self-made millionaires did it by building a business.

Among employees, teachers (particularly female teachers) have a high propensity to accumulate wealth. Extremely impressive given the reputation teaching has for poor pay (particularly in the US). A 2018 study confirmed that the 2nd most common career for millionaires was teaching! Here is the top 5:

  1. Managers
  2. Teachers
  3. Financiers
  4. Lawyers
  5. Doctors

Millionaires are Humble

The truly wealthy individuals Mr Stanley interviewed were not prone to showing off or bragging. These highly successful people were not insecure enough to social signal wealth to their peers.

On the contrary, most practised stealth wealth. Many of these millionaires made their wealth in blue-collar businesses and continued to blend in with neighbours and friends until their fortunes were revealed by large donations to charities after death.


Charitable donations were a consistent feature of male and female millionaires. Women on average donated more money (7% of income) than men and also were more likely to volunteer their time to worthy causes. Financial supporting family members was also common.

How to Become a Millionaire (or Multimillionaire)

Live below your means by avoiding lifestyle inflation or growing accustomed to an increasingly luxurious standard of living. Reject social signalling and “fitting in” for living life based on your own priorities. Practice gratitude for the simple pleasures in life.

Save and invest wisely over time. Understand your household budget. Take carefully calculated risk. Practice patience and avoid chasing the next big investing fad. Avoid false economies.

And for the next generation? Nurture individual, confident and self-sufficient children with good money management skills and a lack of entitlement. Avoid outpatient economic care!

If you haven’t read Thomas Stanley’s books* I would recommend them. For those wanting to grow wealth in order to show off, it includes a well-needed dose of realism. For those living a relatively frugal life in our world of excess, this book provides reassurance that it’s OK (even great) to be different from those around you.

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Progress to Financial Independence Australia: Coast

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

I came to a sudden and exciting realization this week that our household is “Coast financial independent”.

It won’t change my current plans, but does offer options should a change in circumstance come about.

What is Financial Independence?

Financial independence is defined as being able to fully support your cost of living with income from investments. We all need to reach financial independence by the time we reach our desired retirement age. Whether you want to retire at 30, 50, or 70, financial independence should be your goal as a high income professional.

The 4% rule of thumb is considered to be a safe withdrawal rate in the vast majority of scenarios. Therefore, to reach full financial independence a household needs ~ 25 times their annual living expenses invested.

FI Number $2.5 Million = $100,000 in passive income annually

What is Coast Financial Independence?

It’s a long road to financial independence. Some become obsessed with saving and investing for financial independence, at the expense of everything else.

Many more are looking for ways to find more balance. Yes, they want to get ahead financially, have emergency cash and options to take time off work. But they also want to travel and see the world, go out for dinner and not scrimp and save all the time. Others simply want a few mileposts along the way to encourage them to keep at it, and reassure them they are progressing towards becoming a self-sufficient millionaire.

There are many variations of financial independence that have been cooked up in the imaginations of those that want their financial cake and eat it too.

Coast financial independence takes advantage of the power of compounding interest over long periods of time by front-loading retirement savings.

No matter what age you are currently, money invested now is going to get you far better returns than those in 10 or more years time. With coast financial independence, the aim is to get as much money invested as early as possible.

Instead of continuing perpetually until the saver is financially independent 10-15 years later, they watch out for the time where their current investments are sufficient to to achieve full financial independence by the time the saver reaches traditional retirement age.

At 41, I would like the option to retire (or not) at 55. But our household have just reached the point where, if I invested no further funds in super, shares or property, we would be financially independent by the time I reach a “traditional” retirement age of 60.

How do you Calculate Coast Financial Independence?

The easiest way is to calculate coast FI is with this brilliant calculator at WalletBurst.

Of course, the trickiest part of this is the assumptions. With any financial planning, we have to make an assumption about returns and inflation. If the assumption ends up being way off, our planning is fairly meaningless. To combat this risk, extremely conservative assumptions are often made. This can result in over saving, but will often result in reaching goals sooner than you had anticipated!

In my example, I have assumed an inflation-adjusted return of 10% which is optimistic. However, it is also very unlikely I will never contribute another dollar to investments!

I don’t plan to quit medicine, no matter my financial situation. Unless you are self-employed, you will at least invest compulsory employer superannuation contributions of 10% of base salary annually.

If you are self-employed or plan to become so after reaching Coast FI, it is probably sensible to make more conservative assumptions, such as 4-5% inflation-adjusted returns. If you will receive compulsory super contributions despite being Coast FI I reckon you can be optimistic.

What are the Options Available after Reaching Coast Financial Independence?

This is the big positive above coast FI. Options. The freedom to choose even if you don’t actually change anything. It’s a huge psychological boost. But could also mean you finally have the confidence to make the big move you’ve been dying to move. Options include:

1. Reducing Hours Worked.

After reaching Coast FI, you no longer have to save for retirement.

If your assumptions are correct, your current investments will grow to provide a fully stocked retirement fund by the “traditional retirement age”. If you are making compulsory super contributions or your assumptions turn out to be too conservative, you may be able to retire earlier.

You now need to earn enough to support your current living expenses. This is so strange, as this is what many of your friends, family and colleagues do anyway. You can live pay cheque to pay cheque!

Except you have investments growing in the background. And hopefully an emergency fund. If you would love to reduce your hours worked to spend more time with kids or are obsessed with your new hobby, this is now an option. Those that have been saving aggressively will have plenty of time / income to spare once reaching coast Financial independence.

2. Make that Career Change.

Perhaps you have been keen on a career change, but discouraged by the associated pay drop.

When you go to being an expert in an area to a learner, there is inevitably a resulting decrease in compensation. Which makes a mid-career transition for those that feel they have achieved everything they wanted to in their area of expertise challenging.

Once you are Coast FI, you no longer need to save for retirement. If you have been saving 30-50% of your income towards retirement, this is a big buffer to absorb a drop in income . It is a great time to make the leap to your new dream job.

3. Keep Coast FI a “Get out of jail free card”.

Those without an urgent need to reduce hours or change jobs still get to benefit a lot from realising they have hit Coast financial independence.

Does anyone else likes to keep a couple of weeks of paid leave always available? The availability of the leave means if I really need a break, it’s an option. I find it more beneficial to have the leave available than to actually take the extra couple of weeks off!

With Coast FI, there is a lot more freedom on offer.

It’s generally your work environment and colleagues that make or break a job. These can change pretty quick. If your work environment becomes toxic, being coast FI means you can change jobs or reduce hours without worrying about a drop in income.

Earning more than you “need” (or get used to spending) provides so much freedom. If you continue investing the extra until you need it, you are less and less reliant on employment income. Financial freedom comes long before full financial independence

What Age Can you Reach Coast Financial Independence?

Coast FI can be reached surprisingly quickly. The longer you have before traditional retirement age (I’m counting this as 60 in Australia) the less you need saved. Because of the magic of compound interest.

At 7% post inflation return, a 20 year old needs $100,000 invested to be coast FI. Now obviously this is pretty hard for most 20-year-olds. At what age do you think you could hit coast FI?

What Are the Issues with Coast FI?

Nothing is guaranteed, inflation and investment return least of all. So you obviously can’t take your Coast FI date as set in stone. Most will continue to make a small contribution to investments (eg compulsory super) or accept their retirement age may change depending on actual investment returns.

As you continue to advance in your career, cost of living does tend to creep up. Our expected standard of living increases for most. For doctors and other high-income professionals, lifestyle inflation can be pretty extreme. Most seniors in these professions wouldn’t think it was possible to live on $60,000 per year.

It’s easy to see luxuries as essentials.

Even if you do a good job resisting lifestyle inflation, most will want to upgrade their lifestyles a bit. So if you hit Coast FI at 30, but then significantly increase your cost of living through house and car upgrades, having children and paying for private school you will not be Coast FI anymore.

Once coast FI, if you increase your cost of living, work out how much you need to contribute to investments to maintain this lifestyle after retirement.

Are You Nearing Coast FI?

Coast FI is a powerful step along the long to financial independence. Being aware of when you cross over into Coast financial independence can provide psychological and practical lifestyle benefits. Are you nearly there yet?

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Challenges Stopping Financial Progress?

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Photo by Jukan Tateisi on Unsplash

All high earners should be working towards financial independence. Some want to retire in the medium term and retire early. Others aim to be FI by age 65, or older. We all likely have more financial goals than money to allocate, particularly in our early careers.

You may have become enthusiastic about personal finance after discovering a blog or podcast that resonated. You may have read Barefoot* or Rich Dad Poor Dad*.

Any truly worthwhile goal feels insurmountable at the start

Aussie Doc Freedom

Initial responses to personal finance information are either:

  1. What a load of BS, I can’t afford anything or have any control over my destiny
  2. OMG! I can earn money even without working? Why didn’t anyone tell me about this? I have to read everything on Earth related to this.

Anyone in between? I am certainly a number 2. I have friends and relatives I’ve provided copies of books to help after they confess severe financial stress but often turn out to be number 1 responders, with no control over their situation. I’m not sure if there are in-betweeners.

I am going to assume that you, the reader, are a lot more like number 2 than 1.

This early enthusiasm often leads to a look of spending on books (guilty) and excel spreadsheet obsessing.

Sooner or later almost everyone will reach a point of disappointment or despair when they realise

  1. They are not on track to financial independence
  2. They are not sure it is possible to reach all their financial goals

Even for those that seem to have a viable financial plan at the start (I suspect it’s unusual), sooner or later, unexpected financial challenges arise.

Sometimes, each month brings unexpected bills and it feels like we are making no progress. It’s easy to lose heart. Many will give up.

But those that keep plodding along, tightening the belt (even more!) or taking on extra work to get through the tough months, are likely to reach our goals. Even if it feels almost impossible at the time.

Why Hardly Anyone is on Track to Hit Goals Initially

When you sit down to set your goals and make a financial plan, it may seem you have too many goals. Too many options for your savings, and never enough income to meet all your goals.

Some common goals include:

  • A new car
  • A house deposit
  • A special holiday (YOLO!)
  • Parental leave
  • Children’s education (secondary private, university?)
  • Retirement

What if you need to save for all of the above?!

And you have a few hundred dollars a month spare (which is a good start!).

It can feel hopeless and very demotivating.

Income and Expenditure over a Lifetime

Income and expenditure are not evenly distributed over your lifetime. Of course, everyone has an individual life journey. But here I examine a “typical” financial lifecycle to examine why your 20’s and 30’s are so tough!

In your 20’s, most have below-average incomes. Many will rent for a few years, trying to save that first home deposit and possibly purchase a car. You may need to move (several times) to further your career, producing more expense.

If you purchase your first home in your 20s or 30s, you are now responsible for repayments, property maintenance and rates. Those hoping to expand their family may want to renovate or upgrade to a home better suited to a young family.

The average Australian woman has her first child at 31 years of age. High-income earners tend to have children later than the average. If your household decides to start a family in their 30’s, household income decreases whilst expenses increase.

DINKs (double income no kids) naturally have a lot more disposable income.

Below is the 2017 ABS data on household income. It peaks (on average) between ages 35-54 years. The orange line represents “average” Australian household expenditure, which I couldn’t find broken down by age group. Obviously, households will try to reduce expenditure when income is lower (in their 20s and early 30s) and increase expenditure as income increases.

But with so many expenses to pay for in your 20s and 30s it’s no surprise it feels really tough to make much financial progress.

ABS data from 2016

Once income reaches close to peak (for doctors post-fellowship), it becomes much easier to catch up and get on track to all your goals.

Unexpected Life Events

Once you start working towards your financial plan, unexpected money challenges will inevitably occur. Your car breaks down and a wisdom tooth requires expensive surgery. The next month the council rates are due. And then your dog ruptures his ACL and needs vetinary surgery.

It can feel like the universe is trying to stop you from following your plan!

No one is immune to these unexpected life events. Having cash on hand as an emergency fund make these expenses an irritation rather than a full blown crisis.

Advice from the Other Side

After an unknown amount of time spending less than you earn, making unpopular car decisions, saving and investing you reach the “other side”.

So many times over these years, it feels like no progress is occurring. Bills seem to invent themselves each month just to turn your one step forwards into two steps backwards.

But eventually, you realise you are on the other side. You have accumulated significant wealth, and the bills don’t seem such a big deal anymore. Earnings from investments become more significant, eventually, earning more than you save. This comes long before financial independence, but means you are really on your way now.

Repeated small actions produce exponential if you stick with it. Unexpected opportunities come along and may result in significantly faster progress than expected. For us, it was lowered interest rates. For others it could be a property boom, an inheritance or something else.

Most will also build their financial plan based on conservative predictions of returns. It is only sensible to do so, as you want to make sure there is a good likelihood you will reach your goal by following the plan. Actual returns may exceed your conservative predictions, speeding your journey to your goals.

This wealth snowball starts to build when you start regularly contributing to investments. You just won’t notice it starting to roll.

Success Post Income Peak Depends on Self Control in the Early Hard Years

If you can afford to invest before those peak income years, go ahead. But if there are just too many demands for your savings in your 20s and 30s, it’s ok to wait.

But don’t assume that because you’re expecting a big income peak in your late 30s or early 40s you can spend recklessly and sort it out later.

If you enter your income peak with a load of consumer debts on credit cards and car loans, you will yet further delay your wealth accumulation. Time is the most powerful factor in wealth accumulation. If you have already waited to start accumulating, you have no more time to waste paying off expensive loans.

There are a few huge factors you can use to make sure you reach your income peak in reasonable shape

  1. Avoid bad debt – avoid car loans if at all possible and pay off your credit card every month without fail.
  2. Buy a reasonably priced car and keep it for 10-15 years
  3. Buy a house you can actually afford (ideally in an area with good capital growth potential)
  4. If you choose to rent, invest the extra you would have paid in mortgage payments, maintenance and rates
  5. Salary sacrifice into your superannuation and your rent or mortgage payments if eligible
  6. Start a microinvestment account. Invest tiny amounts to get used to market volatility and grow confidence and knowledge before investing with “real money”.

Once you Reach Peak Income

You want a plan before you receive your first peak income pay. You want to start catching up and building wealth immediately. Most of us high earners are behind our peers because of years spent in tertiary education and student loans.

Ideally, this is based on your goals and financial plan. A reasonable backup, if this is too overwhelming, is to save and invest 20%.

It is important you decide whether you will invest in property or shares (or both) and start putting that money aside before upgrading your lifestyle.

Easier options include putting extra into superannuation or direct debit into ETFs at Pearler.

Only buy that dream home once you have worked out what you can afford. Huge mortgage repayments can prevent any other financial goals from being achieved.

Still, you will find financial challenges come up and prevent you from progressing as you planned. Once you are on track to plans, your mind has a tendency of thinking up new goals. Remember to enjoy yourself along the way. Budget fun money and a holiday budget.

How to Overcome Money Challenges

When those irksome money challenges occur, take a deep breath and work out how bad it is. Can you fund it with your emergency fund? Do you need to pick up some extra work to refill the emergency fund?

Have a little faith, even if you are not currently on track to meet your financial goals, that an opportunity will come along. Keep plodding in the right direction as best you can, and keep your eyes open for those special opportunities. If you just keep making good financial decisions, it is likely you will hit those financial goals sooner than you thought possible.

Have you had frustrating money challenges? Comment below and share how you avoided getting too demoralised and stuck to your financial plan.

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Scared of Investing? How to Get Over the Fear

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

The fears we don’t face become our limits

Robin Sharma

Scared of Investing? But You Are Already Investing

If you have a superannuation account, you are already investing. Young people often don’t really think of super as their own money. But ignoring super will hurt your future self. Time passes quickly!

The graph below demonstrates compound growth of $50,000 at 6% vs 7% after fees over 40 years. The critical time to make sure you have your super working hard for you is in your 20s (when most of us ignore it!).

It’s time to invest a bit of time checking your super in the right place, invested in the right assets. By the time you have learned enough to sort this out, you have the knowledge to set up a simple portfolio outside super!

Scared of Investing? Don’t Forget Defence

A rule of thumb advice is not to invest money you will need in the next 5-7 years. You need cash available for emergencies. Being confident you do not need the invested cash in the short term will help early investors tolerate volatility.

What if an appliance or your car breaks down, or you need to take time off work for a health crisis? You don’t want to be withdrawing from investments, particularly during a bear market when prices are down. I wouldn’t be caught dead without an emergency fund, even though it’s frustrating to have to save this up once you’re itching to get started investing.

Scared of Investing? Educate Yourself

Learn enough to decide on a basic financial plan and asset allocation for your superannuation and stock market investments outside super. This is a reasonably small time commitment. Remember, reasonable and executed is almost always better than endless procrastination in the quest for perfection.

Knowledge tends to reduce fear a lot. Once you understand the benefit and ease of index investing using broad ETFs, you will have a better understanding of the actual risks and be able to assess this more effectively.

Think back to when you were early in your career. Was there a task that made you fearful that you are now confident and competent in?

What are the factors that help turn fear to competence and confidence? Can they applied to the fear of investing?

1. Practice in a low risk environment.

I’ve spoken before about micro-investing. Starting early, with tiny amounts of money lowers percieved risk and anxiety. Most microinvestment apps have a robo-advisor, making asset allocation simple (and as always, imperfect).

2. Mentorship

In an ideal world, we would all have a more experienced and knowledgeable mentor to share their experiences and coach us in real life.

An excellent professional financial advisor could fill this role, but they difficult to find. Selecting mentors (professional or otherwise) is probably the most challenging aspect though.

Even parents often give well meaning but bad advice based on no knowledge! A good rule of thumb is to use multiple sources of information and mentorship, so the inevitably biased information you recieve is hopefully balanced out by different views and approaches.

3. Familiarity

Repeated exposure to a situation inevitably reduces anxiety over time. The beginning of anything can be scary. If you can get started investing and get through your first few market corrections, fear should reduce (particulaly if you have performed all the steps above.)

If you don’t know where to start, Passive investing Australia is an excellent site, that can be worked through article by article over an (intense) weekend. Subscribe to this blog for ongoing education and (hopefully) inspiration. Subscribe to 1-3 podcasts or blogs with different investing approaches to get a more balanced education.

Scared of Investing? Assessment of Risk

People are terrible risk assessors. In investing you will come across most people at both extremes of risk tolerance. Many don’t have a good understanding of the risks involved.

At work, Colleague A may have a reputation as an investor, and brags about a crypto win. They are into a new fad each week and probably have little idea about any of it. They’re randomly throwing money at investments in the hope of catching a winner. There often seems to be very little strategy involved, and even when they do well, timing of their exit from the investment is often based on emotion. This is gambling, and is often the perception more risk averse people have of investing.

Colleague B when conversation turns to investing, states they are fearful of the stock market. These guys will probably make pretty good investors if they ever get round to learning enough. They’re not crazy risk-takers like colleague A. They don’t skip from one fad to another, racking up brokerage fees and tax bills all the time. They will likely research their options carefully and start by dipping a toe in. The biggest risk for colleague B is endless procrastination. Time is passing quickly!

Colleague C has been investing a while. They spent a weekend reading Passive Australia, and have signed up for a finance podcast and an investing blog to continue to grow their knowledge. They have made a basic financial plan, picked an asset allocation and found a low-cost online broker.

Their investment portfolio is growing year on year, and they don’t plan to enjoy the proceeds for a few decades. They don’t talk about investing much. There’s not a lot to talk about, and their style is nowhere near as entertaining as colleague A’s. They have chosen the easiest, lowest risk route in investing – dollar cost averaging into broad index funds forever.

Risk vs Volatility tolerance

Some of you may be wondering, if colleague C has chosen the lowest risk route, why are they not investing in property? Many people feel safer investing in property. It’s a physical asset they have far more experience with than shares. Property is less volatile, which often makes nervous investors more comfortable.

It’s a trap!

Volatility is often lumped in with risk but I see these two concepts as separate.

Volatility is short term risk and only relevant if you plan to withdraw your investments within the next 5-7 years, or you will panic if the price drops and sell when it happens.

Risk is the chance of actually losing your money. There is a common misconception that property always goes up. You can lose money with property as well as shares, but with property it’s more insidious. You may not even realise you are losing money for a few years.

I feel most people have a false sense of security around property. It feels more comfortable.

Most of my family and friends that have invested in property regretted it, despite statistics telling us property should have been a great investment over the same time period.

And yet I have chosen to become a property investor myself.

The big issues with property are

  1. Concentration risk – With hundreds of thousands of dollars invested in a single asset, choosing a dud property can be a disaster. You could invest this amount in a single share, but that wouldnt be very clever! A major advantage of the share market is the ability to diversify quickly and cheaply.
  2. Leverage – The vast majority of property investors will utilise leverage (ie a mortgage). This means a 10% gain or loss is increased by the amount of leverage taken on. Instead of investing $50,000 in shares and gaining or losing 10% ($5000), if that $50,000 is used as a 20% deposit on a property, a 10% change in property price would result in a $20,000 gain or loss. The magnified returns are attractive to property inevstors, but the magnified losses should be a warning to be absolutely sure the property selection is right.

Scared of Investing? Diversification

Not putting your eggs in one basket is an easy way to reduce risk.

No one can predict the future returns in any particular asset class. So the next 10 years could (and likely will) be completely different from the last decade. The shorter investment time horizon you have, the higher the risk a particular asset class will underperform.

When people are afraid of investing, it is often due to an idea they have to pick winning stocks, and may lose it all. But stock market investing has become far easier and more accessible over recent years.

Investors can now buy a simple index exchange traded fund (ETF) that exposes them to shares throughout Australia, or even the world. They can rely on a roboadvisor or make up their own asset allocation after some research.

The evidence is actually strong thaht this easy, lazy investing approach actually provides better performance than professionally managed funds most of the time. Some like the challenge of picking individual stocks, but most would start with a core portfolio of index ETFs.

Consider the Risk of Not Investing

Did you sit down and make that financial plan? You really need to give this a go, even if it’s not accurate and changes over time.

Are you on target to reach your goals? I would hazard a guess most people are not when they start out. I was always overwhelmed by the number of financial goals we needed to meet. We were never on target until this year, after a few years of investing to catch up.

What will you earn on your savings in your bank account? Check out how much your $70,000 balance will be worth in todays dollars over time. The graph below assumes inflation 2.5% interest on your $70,000 savings at 1%.

Inflation insidiously eats away at your savings. Taking small calculated risks to improve returns can help you meet your financial goals. Put the work in to make sure your super is working hard for you, and whether you need to invest extra.

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.