A few searches on the internet will show you that there is not only one or two definitions for financial freedom. In fact, there are a lot of people who define financial freedom as being linked to an expensive investment they’re selling, being a multi-millionaire in your 30s, or having a passive stream of income so you don’t need to work. And some people don’t define it all.

Obviously the term financial freedom is not something that is the same for everyone, and for me it’s not about having a lot of money.

Personally I see financial freedom as being a number of things. It’s about not ever having to worry about the bank knocking on our front door and demanding we leave. It’s about choices that make life more comfortable and special family memories. Recently Claudia and I have made a few choices that fit with our definition.

We replaced all of the windows and a glass sliding door in our house with double glazing. It was a big job, but the results have been quite dramatic. Not only do we have a house so well insulated by noise that the neighbour’s parties don’t disturb us, but it’s warm. In winter. In Canberra!

It was pretty cool to leave for work early one morning, look back at the house to see frost on the roof and be shocked it was that cold outside. We have woken a couple of times over the last month to subzero temperatures and not needed to turn the heating on. Even when we do have it on, it stays on for an hour at 21°C, which warms the house for about 12 hours.

Back in 1999 I fell in love. With a 70-200mm zoom lens. Oh, how I longed to hold one in my arms again. Until I finally bought one the other day. Yes it costs about three times as much as the average person would spend on all the camera equipment they would buy in a lifetime, but the quality of the image it captures is second to none. I will use it to spoil our little chicken, filling her bedroom walls with photos of her over the years to come.

Another way Claudia and I plan to spoil our family is with another trip to Germany. All Claudia’s side live in Germany and travelling there doesn’t come cheap (or easy as we discovered last time when our chicken was only ten weeks old and I couldn’t help with the bags after just having had my appendix out). We are planning our next trip over Christmas this year, which will be our fifth since Christmas 2006.

I guess if I had to boil it down to one thing, financial freedom to me is about family. It’s about providing them with a secure home, keeping them warm in winter and cool in summer, capturing their happy faces the best I can and travelling with them to see our overseas relatives.

How would you define financial freedom?

Australia has the best developed economy in the world, and the sixth lowest level of taxation in the OECD, but you wouldn’t know it by listening to the absolute shit that comes out of the mouths of the naysayers.

On Monday the share market dropped 2% and it was one of the first items on the news. To believe the reports, our superannuation was doomed and we were all destined to eat cold cat food in our old age. On Tuesday it bounced back by 1.5% but only got a mention in the finance reports just before sport. Then on Wednesday it was up by 0.3% again, largely on response to the GDP figures showing economic growth in Australia is at an amazingly high 4.3%. This is despite Tony Abbott saying on Tuesday, after interest rates dropped again, that Australia’s economy is weak.

If you believed the crap that is fed your way you could be forgiven for thinking that superannuation is a massive waste of money and that it is, in fact, just some conspiracy to make fat cats richer and provide taxation revenue for the government. It’s not. Super is one of the things that sets Australia apart from the rest of the world. When the system hits maturity it will set us up for life, despite short term movements in the share market.

If you have more than five or six years ‘til you retire, you should not give a rat’s about what the share market does from one day to the next. You only need to be concerned with what happens over the long term. Although it’s no guarantee as to what will happen in the future, the past has shown us that shares outperform all other assets over the long term. I guarantee that you won’t even remember Monday’s stock market events in a year, let alone in 10, 20 or 30 years when you learn to play bridge. That is, if you ignored the hype and hysteria of the crap media reports and didn’t touch your super or any shares you may hold.

If you don’t know anything about GDP figures, here’s a quick lesson. Negative numbers are bad, positive numbers between zero and about 1.5% are not great. 1.6% to 2.5% is ok, and anything above 3% is better than what Australia has averaged over the last 20 years of golden economic activity. Wednesday’s 4.3% result is incredible. Even when you take off 0.5% that economists predict will be the impact of introducing a carbon price, it is still way above trend.

I know that those figures of economic growth are largely because of the two speed economy with mining companies dragging the country along, however the economies of seven of our eight states and territories are growing, and there’s not a lot of mining in Tassie, the ACT, NSW, Victoria and SA.

Yes, there are a large number of individuals in Australia doing it tough. Kind of. Take a visit to a developing country for a bit of perspective as to how tough someone has it living in a country with access to free healthcare, education and social security as well as the right to vote. And just think – if you are reading this, you have access to the internet, something that billions of people around the world don’t know anything about.

We have a very strong economy, albeit with short term movements in our share market. We enjoy very low inflation, very low unemployment, low taxation, high average wages, and a standard of living that is the envy of the world. And all this despite the federal opposition’s dog whistling that we’ve never been worse off.

I was ripped off once. Claudia and I were on holiday in Mexico just after the swine flu hit and there were absolutely bugger all tourists. We were on a tour (with one other person) to the Teotihuacan Pyramids when we stopped at a shop selling local crafts. I was conned into buying a small statue of the sun god for a measly $300, which, as it is the fertility god, I thought it would make a nice wedding gift for Claudia.

When we arrived at the pyramids there were a bunch of locals selling similar statues for the equivalent of about $20, and I felt like a real knobhead. I justified it by saying to myself that it was only $300 (although it was about 30 billion pesos) and that the locals were really struggling with the tourism industry in tatters. And when Claudia became pregnant with our little chicken, I figured ol’ sun god had done his job.

Getting ripped off is possible without travelling to a developing country. There are plenty of people ripping others off here in Australia and lots of Americans and Brits who are selling crap to us as well. A few of them advertise their wares on Facebook.

I saw an ad on FB the other day and was intrigued what the “strange trick” was used by the 54 year old man to slash his “electric bill by 75%”. Clicking on the ad directs you to a video that spruiks a system of making your own solar panels and wind turbines for only a couple of hundred dollars. “Hmm, connecting my home to the power grid myself might be a little bit dangerous for a guy who swears changing light bulbs,” I thought.

Turns out I’m right, or at least that’s what the insurance companies think. Perform your own electrical work that should only be done by a licensed sparky in the ACT and you void your home insurance policy. I imagine it’s similar in the other states.

The product being sold by the FB advertiser – Power4Home.com is a pack of DVDs showing how to build and install your own power system. But wait, there’s more! If you sign up faster than you can google ‘power4home scam’ they’ll throw in 3 free books. At least, they say they will.

Before you click on the Add To Cart button and blow your $50, even if you’re convinced that the product you are looking at is genuine, google the name of the company and watch what the auto-complete spits out. In Power4Home’s case, the second auto-complete is ‘Power4Home scam’. Among the many sites where people have complained about not receiving what they had paid for are a couple that back the system. Power4HomeScam.net and a couple of top YouTube hits reek of the company itself setting up pages that say the system is not a scam to divert suspicious customers back to their product.

There would be few people who would complain to the authorities if the rip off that has caught them out has only cost them a couple of hundred bucks or less. But people will definitely vent their rage on internet forums. So before you take on face value statements like power4home’s “I’m going to spit in the face of all the thieves, crooks and liars who have been sucking cash out of your pocket” do the tiniest bit of research to see for yourself if you are at risk of being ripped off.

Ps Claudia still thinks the story of the sun god statue is funny.

Last Saturday, Claudia and I took our little chicken to a local baby market (note for the fellas – baby markets are not where you buy babies, although after her third tantrum I was considering putting a $5 sticker on our chicken). There are so many pregnant women at these things if you want to make a buck, set up a table selling epidurals.

It was really busy but we managed to run into an old school friend of mine, Angie. We hadn’t seen her since the last baby market we had attended and she looked a great deal less frazzled than we felt. Angie’s a real pro at these things, leaving her boy in the care of dad at home while she goes bargain hunting. She says she arrived half an hour before it opened to avoid the crowds but I’m sure she pitched a tent the day before and braved the Canberra winter (Canberra’s winter starts in April and ends in September). I talked to her for too long because as I said goodbye I looked around to suddenly realise Claudia had walked off. Without her mobile phone. “No worries,” I thought, remembering what Claudia was wearing, “I’ll just look for the woman in the stripey top.

Apparently stripes are in this season, ‘cause every woman there was wearing bloody stripes. Now I know how a tiger feels when he’s hunting zebra. Fair dinkum, if anyone had a barcode scanner there, it would’ve shut itself down.

After I eventually found her (or more accurately she saw me and yelled out), I ended up in a line in front of a man with what seemed like two female friends, and couldn’t help but overhear their conversation. After all, they were talking about money and that always makes my ears prick.

One of the women was talking about loans and the guy was telling her about rates of tax. He was talking with a degree of confidence that would undoubtedly have made the two women confident he knew his stuff. Problem was, he didn’t. Every single figure he was telling them was wrong.

I realised that these women were financially savvy enough to be at a market that sells secondhand baby and children’s clothing, toys and books, but naïve because they were lapping up what their friend was saying. One thing was very obvious to me – this guy was no professional. This is a very important thing to take note of – unless the friend or family member who gives you money advice is an expert in the area of finance, talk to someone who is.

Don’t take advice from family and friends about money. Guidance is one thing, like “don’t take my word for it, speak to my accountant” or “read what Paul Clitheroe says about this stuff in his book”. Advice like “you should get an interest only loan on your property” is something altogether different.

Family or friends who have been successful in a certain area are likely to steer you towards those same places to try to help you – and it does come from the best intentions. But their situation is different to yours, therefore the best financial tools for you will be different from the tools for the person giving you unqualified advice. Of course I am assuming that the person giving the advice is not your identical twin who is married to the identical twin of your spouse, who you live with and who shares the same job as you. I know, big assumption, and if you are actually in precisely the same situation as the advice giver it will probably work really well. If not, seek out an expert.

With three more Australian fashion designers hitting the headlines this week paying their workers half the minimum wage for making designer clothing, my mind has been turned to fashion, and in particular how bloody expensive it can be. It’s not gonna shock you to know that the label on many products costs more than the article itself, but it might shock you how much more it costs, particularly if you’re like me and don’t generally go anywhere near brand names.

My $15 Target sunnies snapped the other day. Up until the point where they went wonky on my head they actually looked pretty good and, more importantly, they protected my eyes from UV rays and harsh sunlight. When you think about it, that’s all your sunglasses need to do – stop you from squinting, cut out the UV and not make you look like a knob. Australian standards mean that you get UV protection and the mirror on the sunnies stand is there to protect you against looking like an idiot. In theory.

Because it had been about 2 decades since I’d entered a Sunglass Hut shop, I had a look at their collection yesterday and noticed that their entire range was behind glass, you know, like all the gold stuff at a jewelers. At first I thought this was the case so that you had to ask a staff member to give you the ones you wanted to try on, then they had to stand next to you and lie about how good they look on your face. Similar to that fibbing experience when I try on clothing and there is no mirror in the change rooms – “Oh that shirt looks great on you!” is what I hear from the female shop attendant when I’m thinking “Yeah, this shirt, designed for the clubbing teenager, really matches my bald spot.”

But as I got closer to the locked display cabinets I realized that the number 430 on the tag stuck to the arm of the sunnies was not the first three numbers of the barcode. It was at that point I remembered our superglue and left the store to apply some to my 15 buck specials.

When I got home I needed to sit down in the smallest room in the house, and picked up my wife’s baby magazine (normally I read the money section of the newspaper at such times, but I’d finished it at a previous visit). In it there was a picture of Victoria Beckham carrying her baby daughter, both of them dressed for the Logies. Surrounding the photo were a bunch of lookalike products you could buy so that you too could look just like Posh and her kid (minus the ski jump nose – I reckon that’d be extra). The price for the dress and boots came to $205. For the toddler.

Lucky I was sitting where I was, ‘cause I was somewhat shocked. It’s pretty sad that that this particular magazine is targeting new mums who are probably not looking the same as they did pre-kids. Add to that the fact that having kids tightens the purse strings and you have the perfect storm for insecurity.

Something the fashion industry thrives on I guess.

For many years financial planning has been seen as an industry with professional and ethical standards right up there with used car salespeople and Today Tonight journalists. Many surveys and shadow shopping exercises done on financial planners over the years have reinforced this negative image and the industry itself has been unable to clean up its act.

Lawmakers have also struggled to pass legislation to enable consumers to be given advice that puts their interests ahead of the interests of the planner, or the wealth management team who get their hands on the consumers’ money. There have been many changes over many years aimed at cleaning up the industry and thus far all have fallen short.

The federal government is just about to introduce laws that will see the biggest changes to financial planning to date. Yet, even as the financial planning world screams murder over the changes that they reckon are doomed to have such a negative impact that the sky will fall in, the new laws again fall short.

Firstly, the good news: The laws mean that the planner will have a duty to put the clients’ interests ahead of their own. They will no longer be able to charge commissions on the money of new clients in managed funds or superannuation.

Now, the bad news: Existing clients who pay commissions from their funds will continue to pay them. The new legislation, which was to take effect from 1 July 2012 will only start from July 2013. Planners will still be able to charge clients asset based fees, which are similar to commissions. Commissions will still be allowed on life insurance products (commissions make up to 30% of the premium on some insurance products, meaning a ban on them would’ve seen life insurance significantly more affordable).

The most recent ASIC survey of financial plans found only 3% of them were good. The rest were adequate (58%) or poor (39%). It’s a trend on par with every similar survey I’ve seen done on planners over the past 10+ years. The worrying thing is that when the clients of those planners were asked to rate the advice, 86% of them reckoned they’d received good advice and 81% said they trusted it “a lot”. Clearly what people think is good and what the regulator thinks is good are very different. What it boils down to is people being ripped off, and not realising it. And when the rip off concerns your life savings, it’s serious stuff.

That leaves only one line of defence – legislation. These new laws are an improvement on the old ones but they leave a gaping hole between crap laws and good ones. In the end, the federal government has shown great courage to go against the wishes of an industry to introduce this legislation which will be better for consumers, but there is the very real possibility that the new laws will be in effect for the months between July 2013 and next year’s federal election. Because if the opposition gets the thumbs up from the electorate, they have promised to throw the new laws out the window.

Then consumers are back to square one.

*From July 2013. For new clients only. Not when you pay asset based fees. Possibly for a limited time only.

There are bucket loads of places to get information on money. Websites and books galore, newspapers, magazines, finance professionals and, of course, family and friends. But how do you know where to find the right information for you?

With apologies to anyone reading this from overseas, the best information for us Aussies is homegrown. Admittedly, there is plenty of good stuff in books and websites written overseas, but it will inevitably be surrounded by info specific to the country the author is based in. I haven’t got a clue what Britain’s tax system is like, how the yank’s 401K plans operate or what the go is with NZ’s student loans. Read sources from overseas and you’ll be reading a lot of irrelevant stuff that will just confuse you.

That’s not to say that all stuff sourced overseas is gonna turn your head to mush, or that everything written by Aussie authors is good. There are a number of good books that look at the generalities of money without going into things specifically for readers in the country it was written in, and plenty of homegrown crap.

With any source, be it website, magazine of face-to-face advice, you need to know if there are any conflicts of interest or biases. Anything that comes from someone with something to sell, be it shares from a stockbroker, property from a real estate agent or loans from a bank, is not going to be conflict free. And if the source receives their income from advertising revenue you have to be assured that the advertisers are not tainting them.

Turning to family and friends for advice means you must remember that they will be swayed by their own experiences, good and bad. Unless the person giving you that guidance is knowledgeable across all areas of money, they will steer you towards the places that made them successful and away from things that burnt them. And when it comes to going halves with a friend on an investment property, for the thing to work you want to ensure that you are both the same age, earn the same income, have the same number of kids who are the same age, share the same tolerance to investment risk, have the same health and life expectancy and the share the same timeframe you want to hold the property for. Yeah, right. Once you throw a few differences into the mix you risk ending up in the situation where one person is needing to sell to access their money and the other person is not wanting to or not in a position to be able to.

So, where to go for the right info. Any federal government websites (.gov.au) will be free of bias and generally contain really good stuff. Books written by guys like Paul Clitheroe, Noel Whittaker and Scott Pape are great – Pape’s Barefoot Investor is a ripper, I’m not a big a fan of his website though. And, of course, I reckon my website ticks all the right boxes, but then I would say that, wouldn’t I!

I lost a mate this week, not someone I was really close to, but a 27 year old man I had a great deal of respect for. He spent his last days in a hospice and died with his Homer Simpson slippers on.

Coincidentally, I also saw something doing the rounds of Facebook written by a nurse who worked in palliative care about the top five regrets of the patients the nurse had cared for over the years.

The nurse wrote:

“When questioned about any regrets they had or anything they would do differently, common themes surfaced again and again. Here are the most common five:

1. I wish I’d had the courage to live a life true to myself, not the life others expected of me. This was the most common regret of all.
2. I wish I didn’t work so hard. This came from every male patient that I nursed.
3. I wish I’d had the courage to express my feelings.
4. I wish I had stayed in touch with my friends.
5. I wish that I had let myself be happier.”

It’s at times like when you lose a friend that you tend to reflect on your own life and mortality. You ask yourself if you would have the courage to stare death in the face. Would you try to go out with a bang? Would you regret anything?

My favourite quote, from a source I do not know, is – Nobody ever said on their deathbed “I wish I’d spent more time at the office.” It is a mantra I try to live by (and, yes, I am on leave from my full time job spending time with family as I write this). Of the five points above, it fits perfectly with number 2, and it also fits with how I define financial freedom for myself.

You may decide that financial freedom for you is different. Perhaps it involves owning rental properties, shares and expensive goods, maybe it’s about having enough to go on holiday every year, but it’s likely that most people would include an element of not having to work too hard within their personal definition.

There are many ways to achieve financial freedom, like marrying into money, receiving a large inheritance, or running a successful business. But these ways are not options for us all. What is an option for just about everyone is to have your finances sorted, and I’ve never met anyone who regretted doing that.

RIP Pete Veness

They’re so easily made (particularly when it’s the champagne that’s doing the talking late on new year’s eve) so quickly broken (especially when you drank so much champagne you spent the first hour or two of 2012 hailing at the great porcelain alter). New year’s resolutions are probably best made sober and with a bit of thought if they are things you actually wish to achieve in the new year, rather than something that becomes a resolution again in 12 months time.

Quite often these self-promises relate to weight loss, fitness gain or telling that prick of a boss where he can shove his unpaid overtime. And a lot of new year’s resolutions are about money. Save up for a home deposit, pay off the car loan, get credit card spending under control, sort out that pile of paperwork that represents 10 years worth of superannuation – your new year’s resolutions may read something like these.

It’s all about goal setting, and like any goal you set for yourself, the more realistic it is, the greater the chance it will become reality. After all, a goal to lose 30kg before June is about as achievable as saving half your income in the same time frame. Aim for something closer to losing a kilo a month, or saving $500 every four weeks, and you will have a greater chance of getting there. The weight is more likely to stay off and the bank balance is more likely to be rising.

Then you have to work out how to actually do it. For the weight loss it can be a matter of replacing the chocolate eaten on the lounge in front of the laptop with eating a piece of fruit instead. Make a commitment to walk to the local shops for that loaf of bread or milk that’s run out once or twice a week rather than taking the car and you get the increase in exercise to help with the weight loss goal as well. For saving more, look to replace the chocolate with a piece of fruit and cut down on your fuel bill by walking a bit more. Hey, hang on, I’m messing with you, right? Funny thing is that lots of people who aim to shed a kilo or two have healthier bank balances as a side effect, and people who start saving money end up losing weight as well. Two birds, one stone.

The last thing to do before you lose your enthusiasm is to write down your goal to remind yourself of it and/or share it with someone who will encourage you to get there.

Everyone knows that so many diets or exercise regimes fail because they were too difficult to sustain over the long term. Many goals to save money can fail for the same reason. Make your new year’s resolutions realistic from the outset and you will get to where you want to be, albeit a little later than you might like.

Happy new year.

I’m not a motivational, go get ‘em, punch the air, you-can-do-it-bloke. I’m an average guy, and unlike Tony Robbins, I’m not a knob. I don’t believe that everyone can achieve fortune by running their own business, inventing the next big thing or standing in a room surrounded by 200 other people all doing Zumba. But I do believe that the vast majority of people can attain financial freedom, and faster than you would think is possible.

I paid off my first mortgage by the age of 27, and recently there has been some interest shown in how I did it. I’m not going to give you a full blow-by-blow description here, just a plug for my website where I give you the tools you need to pay off your own mortgage or get yourself on the right financial track. But what I will tell you is a bit of detail that I don’t include in my site.

I bought my first place, a 3 bedroom townhouse in an outer Canberra suburb when I was 22. I was single and lived without a flatmate. I earned about $32,000 a year, give or take a bit of overtime, and over those years I saved my arse off. I’ve never smoked, never been a big drinker and drove my first car, a second hand Ford Laser for 9 years. It has meant some sacrifices over the years, all of which were worth it to live a life free from financial burden.

In the year I paid that first mortgage off I got married and spent 3 months unemployed. Like so many others, my first marriage didn’t work and the divorce was a big hit to both my confidence and finances.

Since then I have remarried, become a dad, travelled overseas a number of times for holidays and moved from the first townhouse to another, then more recently into a house. Our house is reasonably sparsely furnished and the telly is so old it won’t work without a set top box by mid next year. My wife balances study with being a stay at home mum.

I’ve changed jobs a number of times, but I don’t work in finance and still earn an average to slightly above average wage.

I’m an average bloke.

There will always be some people who will not have enough money as they rely on a government pension. And there will be others who struggle due to their own or a family member’s disablement, illness or problem like a litigation loss. But I reckon upwards of 80% of people could do what I’ve done, and by that I mean attaining financial freedom. You only need 2 things; the know-how and the discipline.

I can help with the know-how, you have to provide your own discipline. If it’s motivation you’re after go watch a bunch of Tony Robbins DVDs.