Building a new generation of financial freedom seekers
[Music]
all right
stories are what connect us people love
stories especially stories about
other people so why is it
that in some of the most important areas
we retreat away from stories we start
talking about numbers and facts and
research
all of which is really important don’t
get me wrong
but sometimes in those most important
areas
we’re scared to talk about what all of
that really means
how it makes a difference for real
people
and how people use those numbers facts
and research
in their lives so here’s a story i want
to tell you
imagine if you didn’t need your job
anymore if it was
a quirky hobby and you went because you
found it interesting
and fulfilling and the money was just a
nice side effect
imagine how differently you would live
your life
if the money was taken out of the
equation
now this sounds like something that a
millionaire or a billionaire would do
but actually a lot of really wealthy
people
fail at this meanwhile regular people
can make it happen
and you get it through financial freedom
there is a whole new generation of
financial freedom
seekers they are changing their lives
because they see money as a tool and
they’ve learned
how to use it
now in my job i am all about personal
finance
i write about it for a newspaper column
i talk about it on a podcast i wrote
about it for a book
you might think i’m someone who’s pretty
focused on money right pretty interested
in it
but i actually don’t care about money
i don’t i care about what money
can do for me currently when you go to
work you exchange your time
for money every dollar that you earn is
a percentage of your life
that you gave to a company so
what if you could use your money to buy
back your time
you can you just have to change the way
you live your life
change the way you handle your finances
decide what matters
to you and laser focus on that
so one of the stories i want to tell you
about is the fire movement
which stands for financial independence
retire early
and we’re going to start with the big
version of this but there are also
easier versions cheat versions to help
you get there faster
and it’s based on a couple of pieces of
maths that you will need to learn
and i know maths i hate it too
which is ironic because my mum was a
maths teacher
she used to try to tutor me in high
school
and i do not recommend that for a
healthy teenage parent relationship
however this mess is so simple
even i can do it so you’re going to be
okay i’ve got you
so the first piece of maths is the 25
times rule and this is your goal you
need a nest egg of 25 times what you
spend
in a year and the standard plan is to
invest it
into low fee index funds which is just a
simple way
of investing in shares now
when you buy shares you are buying a
little piece of a business
those businesses then go to work make
money
and you as a partial owner get a little
piece of that profit
and then it compounds now compound
interest means you invest money that
money goes to work
it makes profit you reinvest that profit
and then you’ve got profit making profit
all you need is time think of it like a
rolling money snowball
where the longer it has to roll the
bigger it will get with
more picking up more and very little
effort from you
or think about what happens when you put
two rabbits together
how quickly you’ll get more rabbits and
then more rabbits from those rabbits
now whether you’re thinking snowballs or
rabbits
what’s important is that you’re sending
your money to
work so that it can make money for you
while you get to sleep in
and the invention of low fee index funds
has made this accessible
to just about everyone you do not need a
business degree
or to hire someone with a business
degree anymore
you just follow a few simple rules and
you’re an investor
and you can see again how your money and
your time are so closely linked
you can use your money to buy back your
time
and the more time you have the easier
you can make money
thanks to compound interest when you are
young
and broke is the perfect time to start
investing because you have
so much time so you need so much less
money
in order to get that snowball rolling or
your rabbits
cuddling now the second piece of maths
is
four percent once you hit that 25 times
goal
you can theoretically withdraw four
percent of that money forever
without running out now this includes
the good years where your investments
might make far more than four percent
but you are controlled and you only take
out four percent
and it includes the bad years like this
year
where your money might even go backwards
or at the very least feel like it’s
going backwards
but because you were controlled in those
good years
and you stacked it aside you can still
take out four percent
again it’s all about the story because
this is a big goal
but what can you get from it well there
are ordinary people on
ordinary salaries who have used this
method to build whatever type of life
they want
quitting their job going travelling
changing to a different job that they
always wanted but
it didn’t pay as much or
there are some people who never get
there
but create the type of stability and
security that they would never have had
otherwise
even getting only part way to financial
independence
creates the ability to survive a crash
like what just
happened with covert 19 where we were
all thrown into lockdown and nobody knew
if we would have jobs at the end of it
i’m not financially independent yet
and it was worrying but even though i’m
not
fully independent now i knew
i had enough of a cushion that i could
survive at least
several months and it was peace of mind
and a worrying time and that’s suddenly
real isn’t it
now i thought about this when i was
writing my book because to be honest
with you
there are a lot of really good personal
finance books out there and
a lot of money management is pretty
simple
so why don’t more of us read them
why would we grab a fiction book and
read it to relax but if someone handed
you a personal finance book you might
say
that sounds a bit full on no thank you
well a lot of those books dive straight
into mortgage structure
debt management interest rates savings
rates
data numbers
and suddenly we’re right back into those
high school math lessons that we
hated it’s a lack of stories
it’s a lack of making it real what’s
more powerful
is talking about how people are using
those lessons
you might have a general idea of what
you should be doing with your money but
how
are other people making that work around
real life
that’s the secret source so as i was
writing my book
i was writing how you can feel more
comfortable with your money
and how you can make it work harder for
you i also wrote
how at each step these techniques had
changed my life
and i wrote how the experts that i
interviewed had changed their lives
because it is life-changing you start
with less stress and you gradually take
back
more and more control of your life
do you best believe that when i am
organizing my finances now
i have those fire numbers in the back of
my head
freedom and independence to do what i
choose
without money dictating to me it needs
25 times
what i spend in a year now
you might be hearing this and thinking
that’s very nice francis
you do make a good pitch but i just
quickly did some maths in my head
and 25 times what i earn in a year is
well over a million dollars to which i
say
first of all well done for doing maths
in your head
now secondly that’s why i say 25 times
what you
spend in a year not what you earn now
i’m not about living a life of
deprivation and that is
not what budgeting is about it is about
deciding
what is meaningful to you and what’s
just
meaningless nonsense that runs the risk
of crowding that out
what do you want in the story of your
life
and what’s just a scribble in the margin
so here’s how you write a budget you do
not start with a budget
you start with a money diary write down
everything that you spend for a week
no cheating now next to it
write down how much you needed to spend
that and i am talking here
true need so shelter food getting to
work that sort of stuff
now also write down how happy it made
you
because i do not want you to cut the
things that make you happy
but at the end of that week there will
be some things there that you don’t need
and
don’t make you happy and that’s easy cut
them
now the needs and the things that make
you happy
how can you keep them in your life in a
smarter way
let’s start with the needs we spend most
of our money on housing transport and
food it’s about 60
of every dollar we spend for the average
new zealander although i would point out
that is an average figure
so what can you change there
do you need a big house or could you
downsize
knock 10 years off the mortgage is a
spare room
that you never go in with extra years of
your life
spent at work it’s up to you
i chose to move to a lower cost of
living area
where i live in a relatively small house
now i’m not saying that was easy
and it did take literally a couple of
years of negotiating remote work options
but it was worth it
what creative ways could you use to
change your core living costs
a five dollar coffee doesn’t matter
if you just save two hundred dollars on
rent
now what about what makes you happy i
know what makes me happy
i am slightly vain and i like nice
clothes
so at the beginning of this year i set
myself a challenge
and i decided i was only going to buy
second-hand clothes
all year and i set myself this challenge
and i put something up on my instagram
as almost an afterthought
and i was blown away by the response
i got requests for media interviews
about my big sacrifice
and i was asked how i do it
i do this because it doesn’t feel like a
big sacrifice
this feels like i’m having my cake and
eating it too it feels like i broke the
system
i get to have all the nice clothes that
i want without worrying about the price
tag
and without feeling like i’m getting in
the way of my own
long-term goals
now when you live like this you’re doing
two things that are really important one
your life now costs less
so you need less to get to that 25 times
goal
and two you are saving and investing
more with what’s left over
so you’re making progress faster
and here’s where i want to address the
retire early side
because personally if i hit financial
independence tomorrow
i would not do the second half and
retire early
i find my job fulfilling and interesting
i feel like i make a valuable
contribution and honestly
how much would you pay for that feeling
i like my job i just don’t want to be
dependent on it
or beholden to it
so the fire movement has been going for
a while now and while
some people have hit that big 25 times
goal and quit their jobs
gone on to do amazing things others
haven’t
but you can change the job you always
wanted to try but that pays less
you can change your hours work different
times of the day or go part-time
you can go remote you can take a break
of several years
spend more time at home with your kids
you have the freedom to
leave at any time and i’m sure you can
imagine
how that changes negotiations with the
boss
so if you don’t want to quit your job
you just want the stability and freedom
to make different choices well
that 25 times number shrinks again
and the work you’ll need to put in to
get there
is so worth it when you think about what
your life would look like
once you have financial freedom
do you want a big petrol-gasoline car
and then to spend your life in the
office working overtime to pay for that
car loan
would you want something smaller maybe
to get rid of it entirely
and spend time at home with your family
or maybe
lock up and leave go traveling for weeks
at a time
when those borders reopen
[Music]
sometimes we need a hand to remember our
goals
we are marinating in a culture that
wants you to spend
on things you don’t need so that other
people can be rich
and it is hard to deprogram that need
to mindlessly spend
well the new generation of financial
freedom seekers have got that sorted
communities of people are springing up
online and they are sharing tips for
saving money making money investing
money
they share knowledge which is great but
more importantly they share how they use
that knowledge
they share their stories research
and data becomes real when you see how
people are
using it this is why my own approach as
a personal finance journalist is
a little different from the generation
that went before me
i want to meet people where they are
i want to share all the best ways to
manage your money definitely
but i also want to share how people are
putting that into practice
the stories and i will share those
stories with you
wherever you like in a newspaper
on a podcast on social media in a book
when you talk to people about your money
you are vulnerable
sure but you also take the opportunity
to each lift each other up now i spend
all day every day talking to financial
experts
one of the best tips i ever got was from
a friend
who i went to university with and who
doesn’t work in finance
now she told me to rotate what you cut
back on each month
so that you never feel deprived overall
so
one month no social life the next month
no new clothes but
you can go back to the pub i quite liked
that
so i shamelessly stole it i put it in my
book as a budgeting tip
and it is the number one thing that
people contact me about
to say it was a tip that they
appreciated
from a regular conversation with a
regular person
because when i started having open
vulnerable conversations with my friends
about money
i gave them permission to do the same
and so we both shared stories and we
both
learned something
when i’m losing focus the people i’ve
surrounded myself with
and the conversations that we have pull
me back
so i want you to think about what your
life would look like
if you didn’t have to care about money
if it was no longer a factor a barrier
a worry what would you
do i want you to care about anything
but money but use money as the tool
that gets you there thank you