Are You Investing to Achieve Financial Autonomy?

What are you investing for? Your investment decisions give you the choice to pursue your passions and live your life in alignment with your values.

This is the basis of financial autonomy. We interviewed Financial Advisor Paul Benson about his new book, Financial Autonomy, that aims to empower you to choose your pathway to financial independence.

Q. How do you define financial autonomy?

A. Financial Autonomy is closely aligned to financial independence. But whereas financial independence means having enough assets throwing off income that all of your needs can be met without you having to get out of bed, financial autonomy considers the financial decisions you can make to gain the choices in life that you seek. So for instance, if your goal is retirement, then financial independence and financial autonomy might look pretty similar. But if your goal is cutting back to 3 days paid employment per week so you can better juggle family commitments, then a financial autonomy solution might focus more on cash flow, and perhaps exploring things like slowing down the rate of repayment on your home – running the numbers to see what the impact of that is over the long term and checking that it’s a cost you’re willing to take on.

Q. You’ve been helping people on their journey towards financial autonomy for more than 20 years. What is the most common thing you see amongst those that succeed?

A. They’re not showy. They don’t feel the need to drive a Ferrari or telegraph to the world that they’re in a great position.

They’re clear on what they’re trying to achieve. I worked with a client who for a long time was clear that he wanted to have the option of retiring at 50. We worked towards that goal for a decade, and just before his 50th birthday he sold his business and was free to choose to do whatever he would like with the next chapter of his life.

Q. You mention in your book that you started your pathway to gain choice through investing. Could you share that journey with us?

A. Sure. I was a teenager in the 80’s. That was an era of Gordon Gekko and the Wall Street movie. There was the 1987 crash. Locally you had Alan Bond, Robert Holmes a Court, and Christopher Skase. The share market seemed interesting and exciting.

My grandfather had retired, and the superannuation system wasn’t what it was today, so he put his retirement savings into the share market. Whenever he’d come over for dinner he’d share what was going on with his portfolio. I found it fascinating. In fact, I applied and was accepted to do my high school work experience at a stockbroking firm in Collins St.

My grandfather generously gave all his grandkids some shares from his old employer. It wasn’t a huge amount, but I was rapt. So that got me started. I added to that holding from a part-time job I had, and then when I got into the workforce full time, I bought more stocks, learning plenty as I went along. Ultimately my share portfolio became the deposit for my first home, and this was the stepping stone that placed me on the trajectory I’m on today.

Q. What’s the biggest lesson you’ve learned when it comes to investing?

A. If you’re investing for excitement, you’re doing it wrong. Investing should be boring. Also, the fact an investment goes down in value, perhaps as an example, inner-city property right now due to COVID, that doesn’t mean your strategy is wrong. The reason stocks and property provide higher returns than leaving your cash in the bank is because you are getting compensated for risk. Be calm and stick to your strategy. Over time you’ll highly likely achieve a great outcome. But panic and feel the need to make changes whenever you hit a road bump, and you’re on a path to disappointment.

Q. Is there anything you would have done differently throughout your own pathway to financial autonomy?

A. No. Life’s a journey. You learn through your experiences. I’m very happy with my life today, and I’m looking forward to the future. No point looking backward with regret.

Q. Why do you think investing in shares, property, or your own business are the pathways that lead to financial autonomy? 

A. I identified these pathways when reflecting on what I had seen through all the clients I’ve worked with over the years. Everyone I looked at who had achieved financial autonomy had used at least one of these pathways. Most commonly they had used 2 of them. And sometimes even all 3. So these pathways aren’t theoretical. I can tell you from experience that these pathways work and people are using them every day to gain the choices in life that they’re chasing.

As to why they work, it’s about investing in assets that grow in value over time. It’s also about having the discipline to not spend every cent that you earn, and instead buy assets that will produce for you from that point forwards.

Q. How do you know which pathway is right for you? 

A. In the book, I have a self-assessment tool to help people find the right pathway for them. Factors include the stability of employment and income, entrepreneurial inclinations, and of course the goals you are trying to achieve.

Time frame is an essential starting point. If your goal is to occur in 2 years time – perhaps an overseas trip, then shares and property are highly unlikely to be the strategy for you. For share investments ideally, you need 5 years plus. For property investment, 10 years plus (due to the higher transaction costs, especially stamp duty). For a business, it’s a bit more variable and depends on what you’re trying to achieve – more income/wealth, or greater flexibility.

Q. What advice do you have for someone getting started in investing? 

A. The main thing is to actually make a start! There are plenty of low-cost ways that you can start on the share pathway in particular. There will never be a perfect time to invest. Just start.

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Financial Autonomy

 

You can find Financial Autonomy from Major Street Publishing, $29.95.

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