Welcome to Finance and Fury. What does your future have in store for you? It is hard to say exactly – so instead, what does your ideal future look like? You might be thinking about next year, the year after that, or 20 to 40 years in the future – Let’s say that in regards to this question – think about once you have achieved financial independence – i.e. finished your working life and are retired – where are you, how are you living, what are you doing and how are your funding this? Have you become a grey nomad, are you living by the beach, spending your time playing golf?   

  1. This is a big question – if you have never really thought about this before then you probably can’t form a good mental image of this without taking the time to think about it – In this case, it may be worthwhile to stop listening now and spend some time to figure this out – if you need help, or some templates, we have some at the website – financeandfury.com.au – register to the members section for free and get all the handouts and tools
  2. But if you do have your ideal picture of what your financial independence looks like – Everyone listening to this will be different in what they are picturing – having a different idea about what they want to do in retirement, how much this will cost them, and how they are going to fund this – some people will want $300k p.a. and other will want $50k p.a – I see this in my daily life in advising clients – everyone has different wants and capacities to achieve this
    1. This difference is great – everyone has different desires, dreams, things that make them happy – as well as financial recourses to turn their goals into a reality – as an individual, you have the right to choose how you live your life, both now and in retirement
  3. But as an individual, your ability to achieve your desired outcome really comes down to your freedom of choice – which comes from the freedom that society allows the individual to have – where the laws of a society are dictated to us by Governmental powers
    1. Your freedom to choose what you want to do – your ability to choose where you live, how you travel, what you do with your money are all incredibly important when it comes to determining your own financial freedom
    2. You also have the freedom to choose how you will fund this – though business, personal investments, superannuation, property – but all of these are subject to legislative risks – if the government that you live under doesn’t allow property rights, or you to own anything, like North Korea, then you are out of luck – you will never have a retirement as the state isn’t going to fund your retirement, and you have no capacity to accumulate wealth towards your retirement – as private ownership is outlawed – you work until you die, scraping by every single day in an effort just to feed yourself
  4. This is where Freedom is important – if you had no freedom of choice and had to rely on a centralised entity deciding for you, where if the state has the power to give you everything, they also have the power to take everything away from you
    1. But this is why we are lucky to live in this country – we have one of the most generous social security schemes in the world – but on top of this we still do have incredibly high levels of investment and financial independence freedoms – this makes me very appreciative when looking around at what is happening in other countries around the world – look around at most other nations in the world –
      1. Cubans are protesting in the streets for their freedom – they have been living under communism for decades and want their own self-liberty
      2. South Africa turning inwards on itself through rioting which is destroying economic infrastructure which will further exacerbate their economic decline with supply issues of the basics, like food, medicines and energy
  • Or North Korea as previously mentioned, or Venezuela – where 90% of the population lives under severe food shortages – the average population lost around 11kg in 2017 alone – but those at the top live very well – not like an economically free nation, it is purely the politically connected and politicians themselves that live well – due to the centralised nature of the state  
  1. What is happening in these countries is a stark reminder that no matter how free or economically powerful a nation once was – there is always the ability for it to slide into decline with governmental central planning – but also how lucky we are to not be living under a completely centrally planned economy
    1. There is one simple test to determine where the best countries to live are – look at where people want to move – nobody is trying to emigrate to nations with highly centralised governments – people are trying to flee these nations
    2. There has been a common trend through history – the only walls communist/socialist nations have ever had to build are those that are stopping people from leaving – which again limits freedom of movements
    3. Freedom to choose is the most important thing for you to be able to achieve your financial independence – But the more power the state is given, the less your freedom of choice inevitably becomes
  2. I love freedom – but I have to work within reality – there is no free society – that is basically anarchy where there is no government and no centralised laws – in which case society would fall back onto the non-aggression principle
    1. There has never really been a society with no government system – even small tribes acted as mini-monarchy’s – with a tribal leader –
    2. Based around the current government systems of democracies in most of the developed world – There is a score of the Economic freedom index – done by Heritage.org
    3. Australia is one of the highest-ranking countries on this list
    4. Property rights are cornerstone of any economic freedom in my POV – i.e. you legal right to own assets
      1. This comes down to having a strong legal framework that protect property rights, and a robust rule of law mitigates corruption – When the enforcement of your rights is high, expropriation is highly unusual, and enforcement of contracts is reliable
      2. Compared to other third world nations – The judicial system needs to operates independently and impartially and can enforces laws against bribery and corruption effectively when they are discovered
    5. Sadly – Australia has been declining in property rights since 2015 – we were at 90 out of 100, but we have dropped down to 81 out of 100 – still very good when compared to many other countries – but this declining trend if it continues means that in 30-40 years, we may be no better off than many other nations currently experiencing economic worries
  3. Under a democracy – Your freedom isn’t normally reduced significantly overnight – it is done through one piece of legislation by another over years – every new law introduced technically mitigates the individuals’ rights – remember there are around 180 new laws and amendments to laws in Australia that occur every year
    1. Negative rights, or as the US constitution states, God Given rights – actually date back to the natural rights based around the Greek philosophers works – in the US constitution it is stated as “Life, Liberty and the pursuit of Happiness” – which are seen as inalienable rights which all humans are born with, and which governments are created to protect
    2. Instead – the thing that many people are worried about is that it is the governments that are infringing on these rights as opposed to protecting our rights
  4. When it comes to your own inalienable rights – I believe that anyone who works and puts the resources needed into themselves should have the right to retire exactly how they wish – if they work towards this then you should be able to achieve your desired goals, but based on your own economic reality
    1. This isn’t to say that someone who has never work or never invested has the right to retire to a multi-million dollar property on the coast and get $250k p.a. in passive income at the tax payers expenses – but based on my experience, more people have pretty achievable retirement goals –
    2. But if someone has done everything right, through planning for this and directing the necessary financial resources to this goal then they should have every right in aching this
    3. This boils down to the real issue – getting off the system is almost impossible unless you work at it – if you never worry about where you will be financially in 20-30 years then you may have a problem – where the state determines what you are entitled to
    4. But using the system that is in place to better your life through using our economic freedoms shouldn’t be taken for granted – it should be something that is taken advantage of and used on a daily basis –

My only concern for people being able to achieve that goals over the long term is that property rights are taken away – such as a communist system

  1. for anyone to achieve their desired outcome in relation to retirement – they need to own something – otherwise they are living off the state and hence living the lifestyle subscribed to them by the powers that be
    1. The issue is that under any state where people aren’t allowed to own anything, there is no funding mechanisms for social security – i.e. taxation or a government that can print money without hyperinflation the economy – in other words, not living in a centrally planned economy
  2. However – where we currently sit – As long as property rights are retained – there is still a lot of freedom that you can take advantage of –
  3. When comparing Australia to countries like Cuba or South Africa, Venezuela, North Korea – is much better off – better take advantage of it and not take it for granted – not taking this for granted is one of the most important points of this whole episode –
  4. When people think that they are hard done by, or deserve more – they turn to the entity that can provide them with what they want – in private employment – this is your boss – you ask them for a raise and if you are producing more than your output then you deserve this – however, in a democracy then for those who are not working or willing to allocate a portion of their income towards their futures can turn to the government as the solution to their problems
  5. The issue is that the more people rely on the government – the more they give away their own individual freedoms and ability of choice – the more this happens the less freedom the population is given when it comes to achieving their desired goals

This episode isn’t meant to be as pessimistic as it sounds – because there is a way out of this at the individual levels

  1. At the societal level – I have no idea if there is a way around the slow reduction of economic freedoms – democracy is always going to shift towards a system of having greater government controls – the more a government control the more they can promise – governments have something that people want, so they vote them more authority to provide this – it is a cycle of all nations/empires through history – they rise and they fall – this is something that is outside of our individual control
  2. But as individuals – we need to come up with our own gameplan – we cannot rely on the government to determine what we need in our daily lives – they have never met us, and as we opened the episode on, everyone’s needs are different – hence no one policy or level of social welfare can provide what is needed for the population at large – as this is made up of millions of individuals
    1. One of the greatest quotes which hammers home this fact is by Thomas Sowell – “No one will really understand politics until they understand that politicians are not trying to solve our problems.  They are trying to solve their own problems – of which getting elected and re-elected are No. 1 and No. 2.  Whatever is No. 3 is far behind”
  3. This is where everything comes back to Creating your own freedom – within the legal framework provided to you by the government – This comes in many forms depending on how you go about this – your ability to gain financial independence, do what you want, is reliant on you –
  4. The first step is to Find out how you wish to spend your time – and how much this will cost – if your current lifestyle is what you are comfortable living with, then great – if not, what would it cost you to do what you want?
  5. The rest of the planning is centralised around this point of reference – the end target to achieve your retirement goal
    1. Then – Focus on what you have property rights over and Get into the game –

To break this down further – Look at your goals – lifestyle requirements and passive income requirements

  1. Lifestyle – Everyone needs somewhere to live – which comes back to owning a property –
    1. This is a big one – property prices are high – the only thing that can bring these down if you don’t own property is a major increase in interest rates, but central banks/Governments don’t want this to occur – so getting into property has priced many people out of the market – but getting in is still important – if you don’t currently own property, set goals to achieve this –
    2. Mainly for Self-sufficiency –
  2. Passive income – investments and retirement assets – this helps to build your own self-sufficiency to become independent from needing to work or requiring government assistance
    1. Financial independence is great – but there are two major issues with this – price inflation and shortages – These go hand in hand in a way – shortages create price inflation, but price inflation creates shortages in what you can afford – which means your passive income and investments don’t provide the same level of consumption as they would in today’s dollars – normal inflation of 2.5% p.a. should be accounted for anyway – there are tools on the website to help with this – but if inflation is 5% p.a. instead, or there are a few years where inflation reaches 10%+, this can reduce your purchasing power
    2. I aim to keep my expenses down to a minimum through becoming food, water and energy independent over the next 5-10 years – this means that we can be less reliant on my financial resources in the worse case event that we suffer a severe economic downturn

The end game – what to do in your own life –

  1. Focus on high-value priorities and goals – then work out how to get there
  2. But the most important part is don’t take for granted the freedoms we currently have to build wealth – there is no financial freedom without having freedom in a society
    1. Seeing people currently trying to escape nations where there are no economic freedoms is a reminder that we have things pretty good – and that they have a view that they are entitled to the basic freedoms we take for granted – as opposed to thinking that we are entitled to other people’s money – which over 50 years could lead to a system where governments are given the power to strip all economic freedoms away from people

Thank you for listening to today’s episode. If you want to get in contact you can do so here: http://financeandfury.com.au/contact/ 

 

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