Elizabeth Kerr suggests that you behave differently to everyone by committing to financial independence with your everyday lifestyle choices

Elizabeth Kerr suggests that you behave differently to everyone by committing to financial independence with your everyday lifestyle choices

By Elizabeth Kerr

Setting up your own money machine to provide you with financial freedom is good but the truth is you have to be RADICALLY DIFFERENT from everyone else to achieve it.

What that means is the average path towards retirement is littered with over consumption and spending beyond one's means just to keep up with the herd, so eventually you have to be different and prove your financial independence with your everyday lifestyle choices.

Making this step sooner rather than later is easier than clawing your way back after decades of mindless spending.

When everyone else is upgrading their houses, taking out loans to buy cars and using credit cards to eat out and buy new gadgets, you need to be building your personal money machine instead.

If those close to you don’t know what you’re trying to do then chances are you not doing it as well as you could be because striving for financial independence is radically different, so it should be obvious by the spending choices you make.

Being radically different could be both challenging and enjoyable depending on where you are on your money machine journey.

At the very least a money machine will allow you to escape wage-slavery by keeping your non-negotiable needs met - a roof over your head and food in your belly; but it isn’t a sentence for worshipping frugality. In fact it can be the total opposite, as having your money machine cover your baseline expenses for you means that any money you do earn over and above that gives you the freedom to spend on anything you want with a clear conscience and security. That might involve the bigger house, the overseas travel, nicer cars or new boobs; but at that stage who cares – you can be really proud of how radically different you are!

Some of the world's wealthiest people stay that way by being radically different every day.

Instead of over-the-top spending on designer lifestyles they are figuring out how to save and invest and working hard to be the best version of themselves that they can. Warren Buffet still lives in the house he purchased for $31,500 in 1958 and Mark Zuckerberg held his wedding in his backyard and ate McDonalds on his honeymoon - even though he could have afforded to purchase his own island and a suite of chefs.

The point is that they are all still financially independent because they continue to make spending choices based on their values rather than what everyone else expects of them.

So, you need to embrace some of this behaviour in your lifestyle now.

It’s really easy to read my columns each week and make a mental note to spend less and see what’s left over before payday.

But I want you to take it further than that and really challenge yourself to be radically different.

"So what should I do?"

Firstly, I want you to disconnect how much you earn from how much you can buy. Just because you earn over $80k does not mean to need to buy and consume and look like $80k. What would your financial life be like if you pretended that you actually earned only $50k?

Secondly, go with what we know matters biologically. We are a species that thrives on companionship and cannot live in a glass vacuum by ourselves playing computer games all the time - or we will be miserable, lonely and die early; harsh but true!

...So, first up think of the relationships that are important to you and how you want to honour them.

Next, think of the values that you respect and want to be remembered for, then the things that you really enjoy doing with your time. By doing this you will naturally start to identify what sort of spender you are and purchases that do not support those values will naturally be dismissed before you open your wallet.

The last action requires more than just thinking.

Thinking alone and promising to be more financially resourceful have not made anyone retire early. Those that do get there are intimate with every dollar they own and spend - and you need to be too.

So go on, get a pen and paper ... NOW! Chop to it I don't have all day!!!

First up, write two columns., Non negotiable expenses and everything else ... GO!

Next, what costs can be reduced and funnelled into your money machine? ... GO!

And if you do that, what is your savings percentage? how long will it take you to take early retirement ?

Not good enough you say, can't wait that long? Well up the ante. What other costs are there you can shave off?

Good! And do you know what your true hourly rate is? No, okay get to it here!

See, not too hard now is it?

“Why would I do this?” you ask

The benefits for being radically different are three-fold. Firstly, you will experience freedom. Discarding unnecessary expenses that don’t serve your values or boost your money machine is actually quite liberating.

Secondly, being conscious and deliberate with spending will leave you more time to really enjoy what you do spend your money on and you can really comprehend the time that you are trading for that purchase.

And thirdly, you will have a lot more money in your life. You will earn the same money but you will get to keep more of it and life will become much less stressful knowing that you can financially withstand whatever is thrown at it.

(And, if you need any more convincing, being financially smart and secure makes you really, really, sexy!)

So, to conclude this week: We all deserve a comfortable (early) retirement instead of being shipped off by our kids to a third world country with nothing but a clean drinking straw.

But you can’t achieve that if you don’t become radically different from everyone else and release yourself from the perpetual cycle of over working to pay off increasing larger levels of consumer debt and failing to build your own money machine.

If you really want to get yourself in a great place financially you NEED TO DO THIS STUFF on real pieces of paper not just in your head, so you know where you are and how you are going to get there.

Email me at Elizabeth.kerr@interest.co.nz this week and let me know how radically different you are being.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Bike to work, brown bag it, cancel Sky, etc 
of course there is the small consideration of spouse & kids who may not buy into the Frugal Now, Retire Early philosophy. 

Don't forget that life is for living. Yes you should not  spend recklessly but you also shouldn't  live like a squirrel. Besides, hoarding too much cash is a disservice to our economy and quite frankly unpatriotic.

Elizabeth is not advocating hoarding. She is advocating saving now and spending it at a later date. ie Shifting the spending of money. And by retiring early, freeing up the job for someone else. I don't believe that any of that is unpatriotic.
It may not be what the govt wants though. The govt wants money to be freely sloshing around the economy. And wants people to delay retirement, not bring it forward. A future government probably will want people to have lots of unspent money when they finally do retire (later) so that it can be means tested in order to reduce the NZ super payout.
By following Elizabeths advice, you will have lived a modest life. You will not have done the extravagant things but if you have the right persective on life, you probably won't miss doing that either.
Priorities, its your choice: do the cruise or buy the sportscar? What's it going to be? It can't be both...

What makes you think the Government wants people to delay retirement, not bring it forward?

Should change your name to snarky questions that adds nothing to the conversation.   If you read his post you would see what makes him think the Government wants people to delay retirement.  
What makes you think the Government doesn't want people to delay reirement or in fact bring it forward?

It was a genuine question; I am sorry if it did not come across as such. 
I have not seen any evidence as to the Government having an opinion either way as to whether it does or does not want people to delay or to bring forward their retirement. 
As far as I can see the Government should be completely indifferent as to when people retire, so long as those people are able to finance it themselves.  Under present NZS policy - which the Government has repeatedly said it has no intention of changing - it makes no difference to the cost of NZS, which people receive at 65 whether they have retired from work or not, and therefore the Government has no financial interest in when people choose to retire.  That is one of the many benefits of NZS.

I think Peter Dunne mentioned it might be possible in the future that people could get their pension earlier but at a reduced rate. I assume then that reduction is for the rest of thier  pension years 9cant rememer if he said taht or not but I think so.
Which is non-sensical to me however,
a) as those needing the pension early are probably not going to have any private income.
b) if you are too ill to work you get signed off on the sickness benefit anyway?
c) if you cannot survive on the OAP you can apply to WINZ for top ups?
Ultimately in some years there will be double the OAPS there are today, just how we would afford even that and even if at 67 let alone earlier mystifies me.

He did suggest that, but the Government did not agree with him and his proposal has not been adopted as Government policy.



Certainly the Government would rather that people in general had more lifetime wealth than that they had less lifetime wealth.  
Wouldn't we all?  Who actually wants people in general to be poor?
Certainly one way of improving people's lifetime wealth is for people to work longer (which in many cases has other benefits as well, in terms of older people's health, mental wellbeing, social integration etc).  Other ways include people managing their money more intelligently over their lifetimes, as Elizabeth advocates here, and people improving their own skills and qualifications so that they can move into better paid jobs.
But again, I do not see any evidence that indicates to me that the Government favours later retirement over and above other ways of increasing wealth, or that it has any reason to do so.

One example of the govt not encouraging early retirement is to have the payout of Kiwisaver at the standard retirement age.
Some political parties are saying that NZS is unaffordable. At some point one of them may get into power. Those who have retired early will have a problem....

There is no standard retirement age in New Zealand.  There is the age at which you become eligible for NZS and can withdraw from your KiwiSaver, but there is no age after which you are forced to retire and no age before which you are not allowed to retire.  If you want to retire earlier than 65, don't put all of your savings into KiwiSaver - the Government's not forcing you to do so.
I agree it would be unwise for a youngish person to retire and spend their savings in such a way as to have run out by the time they reach 65, in the assumption that they'll then be able to live on their NZS.  Not only it might not be available by then, but also because NZS really is not at all generous.  All those old people that Bernard keeps telling us about, having a ball and living high on the hog in retirement - they are not living on NZS alone.  NZS is just enough to keep you out of penury, not enough to finance a life of cruise ships and cocktails.

What sort of advice is not upgrading your home,i pushed my property investments to the hilt making millions by doing so,if you want to live under a shell don't expect to go anywhere.
For instance i met a sales manager of a large Mercedes dealership in the pub when i was out having a good time,he went on to supply me with over a thousand cars ,that i made a killing on.
So live life hard and make everyday as if it was your last,money makes the world go around its the ones who don't spend that send economies into downward spirals , remember you might be dead tomorrow .

Property investments and upgrading your home are two very different things.  One is designed to make money and the other isnt until you sell (and even then you might not make it back).   

Unpatriotic  ??

Onwards and upwards
One of the most important things is don't go to work to make someone else rich, get self employed ,i did not work for anyone else past the age of 21 ,and retired at 51 ,but i would have stayed working as making heaps of money is quite addictive,just thought when will i spend all this money.
I never skimped on anything,had several overseas holidays a year,had nice cars,ate at  the best restaurants,owned a luxury villa in Spain aside of my 4 companies and various other property investments . Two of my properties made made a $100,000 capital gain every year for for 30 years,so keep plenty stacked in property,but no fun makes Jack a dull boy,so enjoy life as you go along or you end 60 years of age in ill health wondering why you lived such a miserable life when you had all that money.
Yep make sure you ski,spend kids inheritance .

Why didnt you just retire earlier so you had more time to "spend all this money"?  Thats what everyone reading your post is going to think....

When you are young and inexperienced or in a crap job with a crap lifestyle that is what a lot of people think,but if you enjoy what you are doing why give it up ,its then not about the money,i already did pretty much everything i wanted to ,but if you enjoy your job you need never work again anyway.
Although retired i still do some business for the fun of it,there is a certain buzz that comes with sucess,i had considered retiring at 40 thinking it was a good thing, just glad i didn't,we see things differently at various stages of our lives. I always went on the  theory of learning from the old buggers,as they have already done it,then you wouldn't make the same mistakes
As for what other people will think ,i am not other people so would not make such an assumption,i have heard other people say lots of things much of it i dismiss .lets say the financial advisor i would want is the one who is having a ball,perhaps on his yacht crewed by hot females . where as a lot of people giving others advice on finance don't have a pot to P into.

Hi Phil.... It's Elizabeth.

Elizabeth, a lot of people don't do the second half of life well. I'm enjoying this book, think you might too.

My business has a very simple low cost office.  We don't have all the frills, but we do have space and sunshine.
I picked up a young guy hitchiking.  He was a young lawyer with a major national law firm and he regaled me that they were a 'A' grade law firm, (actually they were) and how unfortunate it was he worked in a 'B' level office building.  That would change if it was anything to do with him.   A whole new building, more marble, saucy receptionsists etc etc.
The first thing I did not point out to him.  I knew more about his firm and it's customer base than he.   The second thing I did not point out was that I was driving and he was hitchiking. 
Mind you, he was a young man hitchiking.  I too did my share of that way back, and it worked for me.

Double post !

For the doubters that will come along, thinking this is unrealistic or too hard, here is a data point. I did all this for 35 years, still had a ball, did not suffer, owned the yacht, ski boat, nice car etc at various times along the way, but always within means and sensible choices, most were sold later for close to what they cost. The nice car was bought new (a one off treat) but 20 years later still own it. Most other toys chose muscle power over fossil fuel, cheaper to run, healthier and usually more fun. Never had Sky, quite capable of entertaining myself thanks. Always put a lot of effort into securing well paid jobs, sometimes more than one at a time. Also took a couple of year long stints out of the working world to recharge.
Anyway so what? It has meant that at the age of 55 I am sitting at home in my biking clothes with a fresh cup of coffee typing this comment at 11am on a Tuesday morning. Later I might go for a ride, if I feel like it. Before my daughter comes home from school and we spend some time together. Yep early retirement, and with a family. Knuckle down folks, it can be done and it doesn't mean having no life. Just the will to think for yourself and not be an image conscious slave to the consumer machine.
PS There was also some hitchhiking :-)

Excellent. Good on you.
My hitch-hiking story: hitching Ak to Whanga. Got in a car. First stop: the bottle shop. Drinking immediately. (incl driver). Discussion: what its like playing League in prison vs Head Hunters. Driving erratic, oncoming cars braking hard, swerving to avoid us.....
Lesson: Hitching isn't always a good idea.

Hi Grum, great post !!   I agree entirely - you can do it all just not all at the same time.  As they say patience attains everything it strives for.  Early retirement is the same.   PS: Ill have a post on biking coming up late March/April so keep an eye out for it and let me know your thoughts.

I don't think Warren Buffet has to be careful to keep his cash cow,he is one of the worlds wealthiest men,where he lives is his choice and perhaps more because he likes it.
On the other hand just make shed loads of money and enjoy the ride without cutting down on anything,that also works.

No i disagree.  There are plenty of stories where people with wealth beyond reasonable measure have pissed it against a tree and there is no reason he couldnt have done the same.    It is his everyday choices and values which keep him wealthy.

Brilliant article Elizabeth, 
Following our engagement 2 years ago, my now wife and I sat down with pen and paper and wrote down our financial and personal goals in life. One of the best things we did early on was read 'Hammer that Mortgage' by David Tilman. Although it has a pretty naff title, its actually a very easy to read New Zealand book and contains some absolute gems such as the latte mortgage concept and a good illustration of the financial impact of constantly trading up and buying larger and larger homes in an attempt to keep up with the Jones. 
Mr Money Moustache and Early Retirement Extreme are also well worth a browse for helpful hints. The key take home message is that its not how much you earn, rather its how much you can save.
Whilst we don't considered we are radically different from everyone else, we are now becoming increasingly aware that we think about the value of money differently to most of our friends. 
Our everyday practical examples of living frugally include not buying into the cafe and pub culture, growing our own veges, grocery shopping with a list, making our lunches, foregoing Sky, keeping fit through the tramping club and running at our local 5km Parkrun rather than gym memberships, and borrowing books from the library instead of the bookstore.
There's probably many more examples we do unconsciously but after a while living frugally becomes second nature and doesn't feel like such a hardship at all.
Keep up the column, look forward to reading it every Tuesday. 

GP.... I agree with u about .."hammer that Mortgage"....   a really good book.

Hi GP, great post.   You and your wife sound like a great team!!   There is a common echo amongst all the emails i receive whereby the hardest part of taking the financial road less travelled, aka early retirement, is that family and freinds just dont get it and liken it to depravation and hardship.  I say stick with it and when you are enjoying extended summers and they are returning back to work, you will be able to remind them of their so called 'depravation' and 'hardship'.   Keep in touch!  :)

Great to see you have read all the books , perhaps write one and you won't need to be writing everything down.
Another good idea is have a list of your goals in the shower,alternatively don't waste your time and just make shed loads of money,then the only list will be for which Porshe you want to buy,by that time you will work out thats the ones selling the advice who making the money.

Hi Liz
I am finacially independent,just stacked up a few millions,my daily choices were make shed loads of money and enjoy the ride and i did my share of socialising along the way,plus had all the toys and enjoyed the ride..
But from a young persons perspective stick with it until you have been there seen and done it,the main thing is to have no regrets. .
PS i am still enjoying the ride,if i want something i buy it ,i will struggle to spend all the money i have so why  be frugal,do i want my kids flying first class on the inheritance,no.

I can tell you really are 'enjoying the ride'.