Click to listen to Ted Richards in conversation with Financial Autonomy author and podcaster Paul Benson about how to build a life you love through better finances.
Paul Benson is a financial adviser, a fellow podcaster, and the author of Financial Autonomy. I’m interested in all three ‘hats’ that Paul wears so we cover a lot of different topics in this episode.
We begin the conversation by talking about Paul’s new book, Financial Autonomy. The book provides readers with a pathway of options to help them get financially on track to live a life they love.
The financial autonomy process begins with setting some goals that you want to achieve. Paul says the goal setting process becomes more valuable the deeper you dig. You need to ask yourself why each goal is important to you, and potentially ask yourself ‘why’ again multiple times.
Often a goal may be to pay down debt, but not all debts are the same. Debts like credit card debt will incur a significantly higher interest rate than your mortgage.
The most popular strategy is to pay down the highest interest rate first, but Paul mentions a ‘debt snowball’ approach that can work for people too. This involves paying down the smallest debt first (in size), and getting momentum this way. This could be a suitable way to manage debt if people have debt on multiple credit cards too.
Once you have identified your goal you need to put together some sort of budget that will help you achieve this goal. Paul acknowledges that the word ‘budget’ usually has negative connotations so he often uses the term ‘cash flow’.
Paul mentions that the key to a budget is all about balancing spending less than you earn and at the same time maximising your lifestyle.
Over 20 years of working in the industry Paul has found many different ways to achieve financial success. There’s no single right budget that works for everyone. This is not to overwhelm people, but just acknowledging that some strategies work better for some, and it’s not uncommon for people to change their budget strategy. Here are six budget strategies we talk about that are discussed in the book:
The 50/20/30 method
This involves breaking up your income into predetermined portions and is similar to a budget that the Barefoot Investor suggests. It’s one of the most popular strategies and uses mental accounting to break up accounts for different ‘buckets’ of money; 50% on needs, 20% to savings and 30% on wants.
The reverse budget
Possibly the easiest of all of these options. As soon as you’re paid, you put aside and save a certain amount. This way, rather than saving what’s left over at the end of the month, you save first and spend what’s left over.
The big cut strategy
This is simply about cutting back one big expense (including cutting it out all together). Paul outlines that this strategy can be especially suitable where your expenses are over your income.
The track your spending approach
Just like a business does it examines how you spent your income and if you’re happy with how it’s being spent. Then identify spending patterns or behaviour that can be changed going forward.
This is where you really break your spending down and is possibly the most detailed of all six strategies. It’s similar to how a business accounts for every dollar. Due to this Paul states that it can be hard to sustain, but it can help get people on track.
Stocks versus property
In the podcast we discuss investing and the frequently asked question: should you invest in stocks or property?
This could be a whole episode in itself. Australians are very passionate about property, to the extent many think that many view these two asset classes as different sides and you need to pick a team. Paul mentions that whatever your preferences it doesn’t have to be one or the other. People who prefer property can still invest in stocks and vice versa.
If you’re interested in stocks we discuss how exchange traded funds (ETFs) can provide diversification and cost effective ways to get exposure to markets with low management costs.
Guidance Financial Services
We also discuss how Paul has partnered with Six Park to be able to help those people looking for a level of investment help, but may not be ready for holistic financial advice.
If you would like to find out more about Paul and some of the items we discussed here are some relevant links:
Get started with Six Park
As Paul mentions, often the hardest step in someone’s financial journey is simply getting started. Click ‘Get Started’ at the bottom of this page to take Six Park’s online risk assessment and see the investment recommendation Six Park recommends for you.
Topics discussed are general in nature and for informational purposes only. This information and the information discussed in the podcast does not qualify as personal financial advice.