FI Australia: What the Movement Has to Offer

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What is FI Australia?

“Financial independence” is defined as having enough investment/ passive income to pay for all your living expenses.  After this is achieved, the FI Australia crowd argue, you have complete control over your time, the most precious resource of all.

Financial independence chasers work hard, save 50+% of their take home pay and invest aggressively in the stock market.  Young adults are the typical FIRE chasers, although the has inspired older Aussies that it’s not too late.  If a 20-year old can reach financial independence in 10-15 years, so can a 50-year old!

That’s great news!  It should be everyone’s aspiration to do work they love.  It’s really what FIRE chasers are aiming for.  Most continue to “work” after reaching financial independence.  But they don’t drag themselves to a job they can’t stand for good pay.  They do work they find meaningful and enjoyable, regardless of any payment. 

But situations, employers, and work place cultures sometimes change for the worse.  Burn out is common, predictable in many professions.  Your health is not guaranteed, we never know what challenges lie ahead for us.

The journey from financial dependence to independence is a continuum.  With each step away from spending every dollar you earn comes more financial security and flexibility.  Doctors’ income is traditionally rock solid.  COVID-19 has changed that, with many doctors being underemployed

Kevin MD, a US Dr and finance blogger points out even high-income earners can perpetually put off saving until “next year”.  He describes Dr Timex and Dr Rolex.  Which are you?                                                                                                                  
FI blogs and podcasts include a lot of tips on how to make the most of your income.   Everyone should pick the low hanging fruit (tax, salary sacrifice) to save money without lifestyle sacrifice.  It’s up to you how far you wish to go after that.

FI australia

FI Australia: A Way to Minimise Your Carbon Foot print

Many passionately believe in doing what they can for the environment. 

Others would choose to reduce their environmental impact if the actions involved are accessible. 

Purchasing trendy “Eco” products whilst continuing to consume so much more than necessary doesn’t make a lot of sense. 

Reducing your spending often results in lower environmental costs too. 

Do you buy a new car every few years or keep the same vehicle for a decade+?  Are you driving to work alone, car pooling, using public transport or biking?  Do you buy clothes every month and order products online or make do with what you already have?   

Becoming smarter with your money inevitably leads to a lower carbon footprint. 

Protect Yourself From Financial Scammers and Unscrupulous Advisors

Many professionals outsource managing their investments.

There are a lot of financial professionals wanting to get rich.  Sometimes that desire conflicts with serving the clients best interests. 

There are great advisors out there, but they are difficult, if not impossible to find without a bit of financial literacy. 

You really can’t trust anyone with your hard-earned money completely.  That’s a guaranteed way to get ripped off.

fi australia

FI Australia vs FI Overseas

Much of the financial independence information has been US centred until 5 years ago.  I still listen and read a lot of US blogs and podcasts, and find them useful for broad ideas and motivation. 

But the lack of local information has been frustrating, being unable to utilise the US tax hacks and investing vehicle recommendations. 

I discovered Aussiefirebug around 2015 as the first Australian financial independence blog. I started this site after not finding anything relevant to high earners (and higher spenders) in Australia. 

In the last few years, several other great Aussie blogs and podcasts have started.  With these come growing information about the Australian tax system, and superannuation.  You would be mad not to use your savings as efficiently as possible!

Phases of FI Australia

- Emergency fund

It has become increasing clear that everyone needs an emergency fund. 

It is commonly recommended that 3-6 months of living expenses should be saved in case of an emergency. As a public hospital employee with months of accrued sick leave and income protection, this may be excessive. 

So this is all very individual.  Work out how much you need to keep as accessible cash in case of emergency.   

- Fun Savings

The next step up is to have enough spare cash to be able to take extra (unpaid or half pay) leave from work for…whatever you like. 

I prioritize maximizing holiday time with my young children.  Therefore, having cash saved to cover a few weeks expenses on half pay annually provides a lot of happiness “Bang for Buck”. 

Others may choose to take a few weeks off between jobs to travel and catch up with friends and family.

- “FU” money /Financial Freedom

Cheekily branded “FU” money, this sum provides a lot of financial freedom.  The idea that if your work situation gets nasty, you are able to walk away knowing you have savings to sustain you for a few months whilst finding a better job.  This kind of sum can also be used to fund extended travel. 

-Coast FI

This milestone means you have reached a point with your investments, that if you add no more savings you can expect to be financially independent by your desired retirement age.

Over a decade, investments will double if earning 7.5% annually post tax. 

The idea of “Coast FI” is that you can stop investing, and earn only what you need to fund your day to day life.  It seems ironic this is where most people start (spending all they earn), but in this situation you know your retirement savings are on track and you may choose to work less hours.

- Financial Independence

Your investment income fully funds your living expenses.  You no longer need to work, but can choose to do whatever you wish.  High income earners should aim to be financially independent by their desired retirement age. 

fi australia

“How To” FI Australia

The goal of saving 50+% of your income can seem overwhelming at first.  Focus on achievable small wins to begin with.

The most powerful levers for increasing savings rate are

1. Earn more than average income (~$80,000)

Many doctors will achieve this quickly.  How much do Doctors earn in Australia?

2. Reduce housing costs

Buy less house than you can afford. Particularly if you are buying in an area not likely to experience strong capital growth.  Consider renting instead of buying, especially if you’re not staying put for 10 years

3. Keep transportation costs low.

Cars will make you poor” was the best financial advice I was given as a child. Car ownership is expensive.  Paying interest on a depreciating asset is madness, although extremely common.  Buy less car than you need, and pay cash.  Look after it and don’t change your vehicle more than once a decade.

4. Grocery costs

How much do you spend on groceries? How do you compare to the average?

Costs can be fairly painlessly reduced by meal planning.  Focus on buying items based on price per unit (INSTEAD of being seduced for special offers), unless of course you prefer a particular brand. 

Cooking in bulk produces less waste, in the long run saving money. 

Try and minimise packaged food and junk!  We all know it’s not good for the environment or our health. 

5. Insurance costs

They must be the most annoying expense in your budget! 

We usually receive ZERO benefit from insurance policies.    Pay only for insurance policies you need, as the consequences of not being insured would be disastrous. 

Get quotes for each policy every year, the insurance companies will only charge you their lazy tax otherwise! 

6. Optimise taxation.

  1. As your income increases, tax will become your biggest expense (by far).

The awesome part about all this, is that it is surprisingly easy to start saving more.  There are many ways to use being a little smarter managing money to your advantage.  It’s easy to ease into increasing savings without big slashes to your lifestyle. 

If you’re convinced of the benefits of increasing your savings rate, you will probably want to start tracking your spending.  It’s almost impossible to change what you don’t know. Work out where your money is going?  Does it align with your values?  Find and eliminate those sneaky subscriptions you have forgotten about and don’t use.  Work out what areas you could reduce spending to bring your money behaviour more in alignment with your values.  Being a bit smarter with your money

Very much like losing weight, going extreme all of a sudden is usually painful and unsustainable.  But if you start gentle, and listen to the most important message over and over from the FI crowd – Consciously align spending with your values.  Stop unconscious spending.  Stop the silly waste and leaks because you didn’t get round to working out a better way.  Soon, you may even find your savings rate increasing accidentally, as your choices and savings start to snowball. 

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  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.

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This article may contain affiliate links. If there are any in this article they are marked *. An affiliate link means if you click on the link and purchase a product, at no extra cost to yourself, I will receive a small commission.

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