What is financial independence and why is it so important?

We bang on about financial independence a lot at Money School. It features heavily in our blogs, and it appears in our education for kids.

But what does it actually mean, and why should you care?

What does financial independence mean?

We define financial independence as being able to support your lifestyle without having to work.

In money terms: you don’t need a wage to meet your costs. You’ve got enough income (rent, dividends, interest etc) coming in from your assets (cash, shares, bonds, property etc) that you can feed, clothe and house yourself in the style to which you have become accustomed.

These are technical definitions and can seem a bit nebulous. Here’s what financial independence really means (in my personal experience): Read more

Which comes first: giving as a business strategy, or giving as a way of life?

It’s a chicken-and-egg type of conundrum.

Do the people who found businesses that ‘do good’ as a key purpose of that business – rather than simply to comply with a perceived Corporate Social Responsibility (CSR) image – start with people who learned about giving through the example of their families and community? Or, does having a business that gives back once it reaches a sustainable level of profit turn someone into a philanthropist?

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Why is school banking risky?

Parents and educators:

  • Would you let McDonald’s teach your children about nutrition?
  • Would you let Monsanto teach your kids about farming?
  • Would you let Rolf Harris teach your children about consent?

Of course you wouldn’t. You may even be aghast that I suggest such a thing.

…but what if McDonald’s paid you a commission on each item sold in the school canteen?

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Money won’t fix your problems

It’s a common misconception that money will fix all problems. If only it were that simple.

If you’re comfortable (i.e. earning around $50k a year or more) and you’ve been waiting for a windfall thinking it will be the answer to your worries, it might be time to think again.

What I’d like you to take away from this article is:

  1. Money will not solve much by itself.
  2. If you have any of the following problems, stop waiting for money to do something about them.

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Should I pay down my mortgage or use an offset account?

Once every six months or so, my husband brings up paying off a chunk of our mortgage in a lump sum and I argue in favour of the offset account. The discussion that ensues is a well-rehearsed dance:

Me: “But if we pay off a lump sum, if we need that cash we’ll have to redraw, and maybe the bank won’t let us.”

Hubby: “But if we pay it down, we can drop our mortgage repayments.”

Me: “What’s the point in that? You’ll be charged the same amount of interest either way.”

Hubby: “How can that be? Surely I’ll be charged less interest if I pay it off?”

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The gender pay gap: is your Lisa Wilkinson moment here?

Lisa Wilkinson’s refusal to accept a pay packet half the size of her male co-host’s was a laudable moment. I hope I will describe it to my daughter as the point at which the tide turned and the gender pay gap began to close.

Right now, it raises several questions:

Why hasn’t Karl – a man who wore the same suit for a year to demonstrate how much abuse his co-host got for her appearance – resigned in solidarity? Does he condone Channel 9 paying Lisa less? Or does he think he’s worth twice as much as she is, or does twice as much work? Does he just really, really need that pay packet after his divorce settlement? Read more

Bitcoin, Blockchain and Banking

David Yermack is a Professor of Finance at NYU Stern. He teaches Bitcoin and Cryptocurrencies. When the opportunity arose to hear him speak at UWA recently, I leapt at it. Now, after years of saying ‘it’s just another currency’ and ignoring it, I understand what all the fuss is about
 
The main takeaways were:
  • Cryptocurrency is coming for you, regardless of whether you want it to. Possibly sooner than you think. Seems unlikely there will be an ‘opt out’ available. You’ll have an online cryptocurrency account or you won’t have money.
  • Encourage those considering careers in law, accounting and banking to look elsewhere. Employment prospects for those professions look dim.
So, what did I learn to draw these conclusions? Read on…
(PS. If I’ve gotten any of this wrong, it’s my fault, not the Professor’s. Apologies for Professor Yermack in advance if I’ve butchered his eloquent explanations).

What I learned in prison

Before you start worrying about the validity of my ‘Working with Children’ card… I’m part of the ‘Women in Leadership Driving Change’ group that visits women in prison. We deliver training on re-entering the workforce. The program is called ‘Tall Poppies’. It’s a name the residents (the preferred term for prisoners) selected. We cover all sorts: social media, interview prep, what to wear, mindset and, of course, personal finance. Which is where I come in.

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