We bang on about financial independence a lot at Money School.

It's at the heart of our courses, workshops and blog. It even appears in our education for kids.

But what does it actually mean, and why should you care?

What does financial independence mean?

Financial independence (FI) means different things to different people.

We take it as being able to fund your lifestyle without having to work.

In money terms: you don’t need a wage to meet your costs. The income from your assets covers what it takes to feed, clothe and house yourself in the style to which you have become accustomed.

These are technical definitions and can seem a bit nebulous.

Here’s what FI translates to:

• Not having to panic about unexpected bills,

• Not having to return to work after having kids until you’re ready,

• Being excited about a redundancy instead of worrying about losing your home,

• Being picky about when and where you work, what role you do, and who you work with and for,

• Having time to volunteer for causes you care about,

• Knowing your children will have money to rely on if you die,

• Not having to panic about a slow month – or quarter, or year – in your own business,

• Treating your superannuation as cream rather than essential means of survival,

• Being blasé about changes to tax and retirement fund legislation as they won't affect you much,

• Sleeping soundly at night because you’re not worried about your financial situation, and

• Being able to take some risks – like quitting your job, moving country, launching a start-up – without losing quality of life.

Most of all, FI means more choices and more options are available to you.

Why should I care?

Plenty of people tell me they don’t care about FI because:

• They’re quite happy working.

• Money isn’t important to them.

• They get a great cash-flow from their business so they don’t need to worry about assets.

• They’re not good with money so it will never happen.

If you relate to any of those, this next part is especially for you. Here are five reasons to start caring now:

1. Sh!t happens

The Five D's can be the financial wake-up call you didn’t want.

(That's death, divorce, disease, disaster and reDundancy for the uninitiated.)

We don’t often see the warning signs for these events – if in fact there are any at all. We all think we’re invincible and we’ll somehow work it out. But there’s no time to squirrel away more cash when these things actually happen.

They arrive, and you have to deal.

Right here, right now, with what you have.

This is why many people end up in debt. One of the Five D’s arrived and they weren’t ready. They have no choice but to trash their immediate and medium-term financial future to survive. Some find that future is still trashed decades down the track.

I am not immune.

You are not immune.

Your family is not immune.

When the proverbial hits the rotating blade, FI is protection. It means you at least don’t have to worry about supporting your basic lifestyle costs while you deal with it.

For example, when my mother and Money School co-founder Fran fell ill, we could effectively shut down the business while I cared for her. I kept it closed for six more months while I grieved after she died.

FI gives you some space. It also gives you assets to draw on instead of debt if the proverbial is beyond your income levels.

2. The future of work is uncertain

There may come a day in the next decade when you’re given the DCM (Don’t Come Monday).

We tend to think of this happening to factory workers dressed in dirt-covered overalls during depressions.

Guess what, white collar workers and professionals: the lay-offs are coming for you. If you do work that is repeatable – even if it’s in your head or on a computer – your career's days are numbered.

Even those professions that don’t see a major headcount reduction will change how they work. We may need a universal basic income as Rutger Bregman suggests in 'Utopia for Realists'.

You may love your work, but that does not make you immune to losing your job.

FI does not mean you have to give up working. It means your working income is not essential to sustain life.

3. Legislation

Picture this:

You’re 67 years old. You have very little superannuation and you don’t own a home. You are unable to work. Either you can’t find anyone who’ll employ you, or you are not able to do the job you used to anymore. You don’t have the capacity to retrain.

Our government will give you – at best – a pension within coo-ee of the Australian poverty line. With that, you’ll need to feed, clothe and house yourself. You better get good at making it stretch, because that’s all you’ll have for next 15-30 years.

Whether you’ve made a valuable contribution to society is irrelevant.

Whether you’ve raised healthy, happy, well-adjusted children matters not a jot.

The time you’ve given to the community groups and charities your support is ignored.

There are no medals for financial sacrifice. There is no benevolent group waiting to bestow a small fortune on you in recognition for your good works.

This rude shock often hits people approaching retirement. They spend their last working years scrambling for a way to buffer the shock. This can mean huge lifestyle sacrifices at an age when you should be enjoying yourself.

Your elected officials will not be doubling the pension any time soon. In fact, people of my generation (I’m on the X/Y borderline) may not have age pensions to fall back on. You'll need to self-fund through superannuation.

“Super - of course! I’ve got super, so I’ll be fine.”

Not so fast. Don’t forget the government controls the rules for superannuation. When you can access it, how it’s taxed and the like can change. These rules are not getting more favourable.

Fancy leaving the power to affect your quality of life for ~25% of its duration in the hands of the government? That’s what you’re doing if you’ve got a retirement on the pension in mind.

4. The vulva tax

Sorry ladies, it's expensive to be a woman.

And sorry gentlemen, it's bad news for you too if you have a woman in your life. Any shortfall a woman experiences puts pressure on you to cover the gap.

Women face a gender pay gap that widens as they rise through the ranks. Adding insult to injury, women's earnings diminish after giving birth. Now add in the unpaid caring load and low rates of pay for feminised workforces. No wonder we’ve got a whopping 40% gender retirement gap.

This is in part why women over 55 are the fastest rising demographic seeking homelessness support.

Women start behind the 8-ball in a big way. The power structures that caused this problem are not changing swiftly or decisively.

In the workplace in the past, we needed to be better than the best man in the same job just to get a chance to do a particular job. (It’d be nice to say those days are behind us, but I don’t think we’re there yet.) In the same way, we’ve now got to be that much better with our money than our male counterparts. We’ve got to make less go further. We’ve got to take this into our own hands.

The good news is: this is not like the workplace.

Money doesn’t care about your genitals. You won’t get a lower dividend because you’re a woman. There’s plenty of evidence to suggest women make excellent investors. There’s no reason you can’t work towards closing your own personal pay and retirement gap while we wait for systemic change.

5. Becoming time rich

For all the scary/sad/depressing stuff above, there’s a powerful motivation that can trump it all:

FI lets you decide how you spend your time.

That's why financial independence = time rich. FI=TR, if you will.

The freedom that comes with not being tied to your job is indescribable.

You can choose to:

• quit that awful job when you want to.

• make that sea-change or tree-change a reality today, not when you’re old and grey.

• spend more time with your kids when they’re little.

• launch a business without fear of losing your home.

• keep doing exactly what you're doing now - including the same job.

• whatever you want!

That’s the point.

We don’t realise how much we’re sacrificing by subscribing to the 'work till you're old' model until we’re not anymore.

I hope you get to experience it.

What about FIRE - Financially Independent, Retiring Early?

Same thing, different acronym.

Joe Dominguez and Vicki Robin coined the term FIRE in their 1992 book 'Your Money or Your Life'. But people tend to get hung up on the RE bit.

Frankly, people who get to FI before retirement age rarely retire early. Probably because sipping Aperol Spritzes on the beach eventually gets boring (and may you be fortunate enough to confirm this firsthand!)

That's why we prefer the FITR acronym.

Time Rich covers retiring early if that's your choice, but recognises retiring's not the point. The objective is to choose how you spend the most precious non-renewable resource you have: your time.

You can do it!

Financial independence is not the exclusive domain of rich people.

There are legions of average Australians working towards FI on moderate wages, and plenty of them get there. You'll find them all over the place, including on the Aussie FIRE Discussion Group on Facebook.

Money School founder Fran starting investing at 49 years old. She got to FI at 63.

I was investing during the same economic period as Fran, starting at 19. I reached FI at 31.

We took the slow and steady, sensible but not overly frugal, route. We followed a few simple rules that we now cover in our courses, workshops and book:

1. Save,

2. Buy assets.

3. Avoid bad debt.

The rules are simple. The hard part is putting them into practise consistently.

…but there’s no time like the present to get started 😁

About Money School

If you’re new here, welcome! Delighted to have you 😁

This is the blog for Money School, an Australian financial education company.

The main site is at https://www.moneyschool.org.au, but I keep our articles over here on beehiiv.

Everything on the main site and this blog is for educational purposes only. I’m not a financial adviser, nor do I play one on Netflix. I aim to help you learn about money so you can ‘choose your own adventure’.

Money School was co-founded in 2010 by me (Lacey Filipich) and my mother, Fran White. Money School offers workshops, online courses and have an international award-winning book, published with Penguin Life in 2020.

I’m also a regular media commentator on all things personal finance. If you’ve got 16 minutes to spare, you might like to check out my TEDx talk(over 1m views!) on financial independence and mini-retirements.