Episode Details

The goal when working towards Financial Autonomy is to gain choice. Choice in how you support yourself and perhaps your family financially, be that the type of work you do, the hours you spend doing that work, or whether you earn that income as an employee, or as a self-employed person.

In developing an actionable plan to get you from where you are now, to your Financial Autonomy position, there are several foundational elements that you need to decide upon. Perhaps the most fundamental of these is how much income do you need to generate to support your lifestyle? What is your number?

In today's episode, we'll be exploring how you might go about determining what your number is. And with this nailed down, consider what's next in your Financial Autonomy planning.

So you've recognised that the standard working life treadmill is not for you and you've decided to gain choice via a Financial Autonomy strategy.

You've probably got some ides as to how you could earn income once in Financial Autonomy, and perhaps some thoughts as to what steps you might take to get their – things like extra education or career development (check out episode 29 – the 5 most impactful ways to invest in yourself).

But to set time frames and make genuine progress, you will need to quantify your Financial Autonomy goal, and that means determining how much income you will need to make this a reality.

A good starting point is to determine how much you spend now.

If you're someone with a detailed budget, that's fantastic. But having worked with people on these goals for over 17 years now, my observation is that such people are as common as a sports person who retires at their peak – it happens occasionally, but it's a long way from the norm.

So if you're like the majority and can't easily answer the question of how much you currently spend, one quick method I use a lot is just to work backwards.

Start with your gross yearly income. Subtract the tax. Then subtract any savings that you made over the past year – this may include extra repayments to your home loan if that's the space that you're in.

Whatever's left must be what you spent.

Now it will come as no surprise to you that the lower your spending, the easier it is for you to achieve Financial Autonomy. Much of your expenses depend on your lifestyle, so you have plenty of levers that you can pull here.

Choices need to be made. Speaking for myself, I don't want to live like a monk. I enjoy travel and want to be able to afford that. I also want to ensure my kids can participate in all sorts of sports and activities that interest them, and provide them with a good education.

So setting a spending goal of say $30,000 per year, isn't where I want to be. That doesn't deliver the life that I and my family want. Sure Financial Autonomy might be far more easily obtainable, but that's a level of sacrifice that I'm not prepared to make.

But on the flip side, if you need $150,000 or $200,000 per year to live your life, then depending on your occupation, Financial Autonomy is likely to be some way off. Now maybe that's okay – that's your goal and we are all unique. But for many people, if the desire for Financial Autonomy is strong, they will consider how they might be able to reduce their expenditure, so that they can gain the choices that they seek sooner.

How might you get your expenses down? The cost to put a roof over your head is likely to be a significant element of your expenses. So maybe a key milestone in you achieving your Financial Autonomy goal is paying off your mortgage. If that's not realistic in the time frame that you seek, perhaps you need to move to a cheaper area. I've worked with people who have moved out of town, often down along the coast somewhere. They've traded a large city mortgage to either become debt free with a lovely home, or if they still need a mortgage, it's at least far smalle