Episode Details

Episode 56 – Are you playing offence or defence?

Today in the episode, we talk to Tim Lavrey's career change story from being a bank manager to a preschool teacher.

All sports have elements of offensive and defensive play. And whether you play Netball, soccer, cricket or basketball, your team must constantly strike a balance between the two.

In pursuing your Financial Autonomy goal, you too must find a balance that will see your goals achieved in an acceptable time frame, whilst also enabling you to sleep at night, and not put you and your family at risk of living on the street.

But whilst in sport the distinction between offence and defence if fairly clear, in the financial world, it may be less so. So in today's episode where going to explore your options, so that as you develop your Financial Autonomy strategy, you're considering both offence and defence, and finding a balance that makes sense for you.

Offensive moves are typically attacking type moves. They're trying to make something happen in your favour. They're pro-active decisions or tactics that you are employing to make progress towards your goal.

Defensive moves are concerned with protecting what you've got, not going backwards or giving up ground.

Playing offence is often more glamorous, and for sporting spectators, more spectacular. But any coach will know that a solid defence is essential if your team is to experience sustained success.

Your strategy to achieve Financial Autonomy will require both offensive and defensive tactics. You need to take pro-active steps – offence – if your goals are to be met. But that doesn't mean it's wise to ignore the important defensive measures to protect on the downside. Without defence, all that you gain in offence could be given up.

Let's start by considering what playing offence might look like in a financial sense.

A good starting point would be to have an emergency fund set-up to cover unexpected expenses like the fridge deciding it's had enough, or unplanned medical expenses. For most people, having something like $5,000 stashed away would tick this box. The alternative, that leads all too many people towards financial peril, is that when these type of events crop up, they hit the credit card, with no plan on how this will be quickly cleared.

Your next offensive play is to educate yourself on investment and money. Now given you're consuming this post right now, I appreciate I'm preaching to the converted here. You don't need to become an expert, but having a basic understanding of investment options, from term deposits to shares, property and funds, and a sense of the risk in each, will arm you well when developing your strategy.

It sounds obvious and is perhaps a bit of a cliché, but a foundational offensive play in a financial autonomy context is to spend less than you earn. This requires management of your cash flow and knowledge of what is affordable. I've come across several instances in recent years where people have signed up to rent a home, without appreciating that once they pay that rent, they simply won't have enough money left to live off. They just don't seem to have done the numbers and realised that the rent is perhaps 50% of their take home pay, a level that would be unsustainable for pretty much anybody.

Let's start to stretch the legs a bit now – it's time to start building some wealth. We all need a roof over our head and food to eat. And since the days of living in a cave and hunting for your dinner are well behind us, you're going to need money.

You're currently earning money through your skills and knowledge, and whilst your ability to generate income is unquestionably of enormous value, it has its vulnerabilities and limitations – for one you have to get the work done in order to earn the income, but also there is the risk of your skills becoming obsolete or just less valued, you suffer an injury, or