Achieving financial independence30 Sep 2019 4 min read
We all know that physical fitness requires time, energy and commitment, but pays off now and for the long term. The same goes for financial fitness - starting a financial fitness program now can deliver real benefits, all the way from the present to your distant retirement. In this ‘Fierce Females’ series, we show you some of the positive moves you can make to become financially fit enough to enjoy the ultimate goal of financial independence.
When we talk about financial independence, we mean reaching a stage in your life where you no longer have to work to pay for the essential expenses of life — bills, food, housing costs, healthcare, etc. The money you use to pay those expenses instead comes from sources such as savings, investments and superannuation. Sounds like an impossible dream, right?
It doesn’t have to be, if you start now.
Why financial fitness matters
According to the Association of Super Funds of Australia (ASFA), only 18% of Australian women aged between 55 and 59 will have saved more than $200,000 for their retirement. This compares to 37% of men. Given life expectancy is now well into the 80s, these translate to grim annual income figures for our retirement.
Data prepared by the Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) for ASFA found that in 2014 close to 50% of women aged 55 to 59 had very low super balances ($0 to $50,000) compared to 33% of men. For women in that age group who were also divorced or widowed, the percentage with low balances was even higher1.
The reality is also that women are still most likely to be the primary caregivers for children and elderly relatives. We are more likely to take time off work and less likely to return to full-time work than our male counterparts.
That’s what makes it even more important for us, as women, to take control of our financial futures while we’re young.
The thing is, it doesn’t have to be complicated or difficult.
Financial Planner at NGS Super, Deline Jacovides2 says, “To set yourself up for a positive retirement and greater financial freedom, you need to live within your means, you need to learn how to save, take an interest in your finances and educate yourself.” Of course that doesn’t mean you can’t ever treat yourself, but it does mean building those ‘treats’ into your budget and taking responsibility for how you spend your money.
“Just cutting out one unnecessary expense can make a big difference,” says Deline. “Let’s say you give up a fortnightly shellac that costs $40 and put that money into a bank account earning interest at approximately 2% p.a. In 10 years, that translates to an extra $11,500, or even more if you had a higher return investment.”
FIRE up your financial goals
Seen the pics on social media? The FIRE movement (Financial Independence, Retire Early) has received plenty of attention – and why wouldn’t you want to enjoy financial freedom earlier than standard retirement age?
Deline says she’s seen increasing interest in FIRE.
“It’s all about making smart decisions as a younger person so you have the choice to stop work earlier or to have the financial freedom to provide for your lifestyle without having to wait until your super kicks in,” she explains. “In essence FIRE is about choice and not being forced to work beyond when you want to.”
Take the first step today
It’s not just about retiring early. Maybe you want to study again, or pursue a passion that doesn’t pay much. Having the kind of financial fitness that allows you to make decisions about how much and where you work is within reach if you set goals and work towards them. Even if you love your career and are happy to work as long as you can, you want to know that you’ll be able to support a comfortable retirement when that day comes.
With planning, education and advice, your big picture idea can be broken down into everyday steps that make it genuinely attainable – and this series will take you through those steps.
The big message on financial independence? The time to start is now. Think of your financial fitness in the same way as you do your physical fitness: make a commitment, learn the right moves and do it today.