Stop Chasing Financial Freedom – Do This Instead

We're all told to chase financial freedom. But for most people, that's 20 years away. Financial peace, on the other hand, could be six months away... and it's available at any income. In this episode, Ed and Andrew explain the difference between the two and the simple systems that buy you peace of mind. You'll learn: Why financial peace matters more than freedom right nowThe research shows that money worries can cost you 13 IQ pointsSix practical ways to get financial peace, whatever your incomeFinancial peace isn't about how much you have. It's knowing where your money's going, instead of wondering where it went. Let us know your thoughts by leaving us a voice message on the Property Academy Hotline⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.speakpipe.com/PropertyAcademy For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Sign up for the weekly Private Property newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:08Speaker 00

  Hello and welcome along to the Property Academy Podcast by Opes Partners. I'm your host, Stephen Knight.

• 0:12Speaker 01

  And I'm Andrew Nichol.

• 0:13Speaker 00

  And this was a show that helps Kiwis go from zero to five investment property. So you could be financially free and stick around for the next 15 minutes because you're going to learn the truth about financial freedom, the difference between financial freedom versus financial peace and six simple actions you can take today to get financial peace long before you retire. Now, often we talk about financial freedom constantly on this show and that's because when I survey property investors and say, hey, what do you want? What are you into? What are you doing all of this investing for? They often say to me, financial freedom, right? Why are you giggling away?

• 0:50Speaker 01

  Are you flailing about?

• 0:52Speaker 00

  Oh, no, I am. It's because I get so excited when I think about Kiwis being financially free. But what does that actually mean? Often, financial freedom is about like being work optional. Like you can go to work, you might enjoy going to work, but you don't, you don't have to, right? But for many people, that could be 20 years away. It could be 30 years away. It's way, way, way in the future. But what can you aim for in the meantime? And so I kind of think, well, if financial freedom is 20 years away, financial peace, which we're going to define a bit more, that could only be like six months away if you really wanted it to be. But if we were to talk about the actual difference about financial freedom versus financial peace, like what do you see the differences as?

• 1:36Speaker 01

  So financial freedom, I'd kind of put it as the, where there's work optional, like you said before, you don't have to earn an income because you've got enough money to be able to live the lifestyle you want. Financial pace, I kind of think that's when you take away that anxiety that comes with planning your financial future. Now, in some ways, that can be the shorter, some places it might be also the, the one that is the harder to achieve. So if I think about some examples of some of my really wealthy clients, they have the financial freedom to be able to stop working, but they don't have the financial peace to be able to do it.

• 2:08Speaker 00

  Oh, yeah. Talk to me all about that.

• 2:09Speaker 01

  So for example, some people that I, that I often think about when I kind of consider the fact that sometimes people work so hard to build up their wealth, but, but don't know how to enjoy it yet. These people could stop working tomorrow, they could spend double what they want to spend and they will never run out of money. However, they're still working and one of the partners doesn't want to do work anymore and the other partner absolutely still wants to and is worried about not having enough money and going back to work later on.

• 2:39Speaker 00

  That's really interesting because you would often think that if you've got lots of money, you're going to be at peace with your money, but, but perhaps you aren't. So maybe they've still got to do some of the other six things we're going to talk about in a moment.

• 2:50Speaker 01

  But I think more common though, for people, it might be, okay, well, you know, could I stop working tomorrow? No, no, I couldn't right now because I've got a whole lot of debt that I've got to, you know, make work. Am I at financial peace? Yeah, I know that I'm on the trajectory I want to. And if I wanted to, you know, speed up the process of, of financial freedom, I could do that as well.

• 3:07Speaker 00

  The problem that I see is that right now, so many Kiwis do not have financial peace. 65% of us, so two out of three people worry about money monthly. That's up from 60% in 2020. And only 18% of us said they, they barely or never ever think about money. Now, to be fair.

• 3:27Speaker 01

  Lauren.

• 3:29Speaker 00

  To be fair, would I worry about money monthly? Like I think about it a lot, like I consider the risks. So maybe I would be part of that. Having said that, I, I would say that I have a lot of financial peace and I've got it through some of the things I'll talk about in a moment. But the opposite of financial peace, I think we will all understand, which is financial anxiety. And I know you know about this as well.

• 3:52Speaker 01

  Yeah, well, thinking about growing up, like that's the time where you're getting to the end of that monthly pay cycle and you've got that last leg of the month left, the last week, and you don't have any money left. You've got to use the scraps in the fridge to make dinner. Your mortgage payment's coming out pretty soon. You've got the power bill which hasn't been paid yet. It's all of those kinds of things. And you're just thinking, how the hell are we going to live for the next week before we tick over to the 20th of the month and get our pay packet again?

• 4:18Speaker 00

  Well, I remember as well that I would have been about, I want to say like 12 or 13 years old and I think my brother must have been home from boarding school because you know how teenage boys, despite the fact that they don't smell that clean, they spend ages in the shower, don't they?

• 4:37Speaker 01

  Really? I don't, I don't think.

• 4:38Speaker 00

  Well, that's what happened in my household. Well, that's why you're so clean now. And squeaky nickel, that's what they'd call you. Just made that up. That's what they call me, squeaky McKnight, but not, but not because I'm in the shower too long, it's just how I sound. And.

• 4:55Speaker 01

  Squeak was what we called someone that didn't spend much money.

• 4:59Speaker 00

  Oh, really?

• 4:59Speaker 01

  Because he's so tired, he squeaked.

• 5:03Speaker 00

  And I remember that my brother being at home and really racking up the power bill and it was 500 bucks for the month.

• 5:10Speaker 01

  Oh, that's a lot of money.

• 5:12Speaker 00

  Now, bear in mind, this is probably 20 years ago and we just, we, we were very normal people, right?

• 5:18Speaker 01

  I wouldn't say that. Normal financially, is that what you mean?

• 5:21Speaker 00

  Normal financially, right? You know, my mum was raising four kids on, on her own, right? So I remember that that caused a bit of financial anxiety. Now, ultimately my mum listens to the show, so she'll be able to speak for herself, but that was my interpretation of it. And I certainly had levels of financial anxiety with power bills when I was 20 years old and my power got turned off because I was very poor at managing money. But that's kind of the opposite of financial peace. And how do we move away from that and be more at peace with our money? So what are some of the things that you can do to get financial peace?

• 5:55Speaker 01

  I honestly think if you can make things as automatic as possible, that really, really helps. So if I think about like my rental properties, right? I keep it as simple as possible in terms of having an account with a bank where all my rent goes into and all my bills get paid out of. And that might be that, okay, well, I know I've got a mortgage over here at TSB. So I just set up an automatic payment to TSB. I've got a payment that goes to ANZ, that goes to ANZ to cover the shortfall. But all of my rent goes into one account and then it gets distributed from there. Now, if you've got different entities like I do, that's pure entity. So you wouldn't buy.

• 6:29Speaker 00

  Like trusts and companies and stuff.

• 6:31Speaker 01

  Correct, correct. But, but if you think about it really simply, if you've got a couple of rental properties owned by a look through company, put all your rent into one account for those and pay all your bills out of it.

• 6:38Speaker 00

  Yeah, for me, it's rates and insurance and body corp, right? Like I used to get so much anxiety every time a body corp bill would come that I'd just delete the email and wait for the final, wait for the final, um, final reminder. Okay, okay, fine, I'll pay it now. You know, I know that's like really useless, right? But it's just to say, I know that there are other people out there like me. I'm not the only one who used to do that. And so I just sat down and it only takes like, I think it takes 15 minutes to really set up all of these automations we're talking about in your bank accounts. But I am so much more at peace with my money since all of my rates, all of my insurance, all of the body corporate payments for the rental properties are automated on a monthly

• 7:21Speaker 00

  basis, rather than coming out in one big annual hit and then you're really feeling it. And that does mean that maybe not as much money builds up in your bank account. So you don't feel as rich at different times, but it makes you feel so much more at peace with your money. And I know that you've got another tip for number two to achieve financial peace.

• 7:43Speaker 01

  Number two is don't pay your mortgage out of your spending account. And if you're not, if you don't have a mortgage yet, if you're renting, again, I think the same applies for your rent. So when you get paid, automatically take the money that needs to go to your mortgage or your rent and take that out of your account and put it into a separate account. That could be your home account. And from your home account, you probably pay for things like your, your rates, if you own your house or your insurance or, or your mortgage or your rent. And then you can just spend your money in your, in your transactional account on your things like groceries or your coffee or your lunch out. Because if you're constantly using your car and you're looking at it, oh yeah, yeah, no, I'm rich today. And then you shout your friend to eat lunch and then your mortgage goes out tomorrow. Oh, now I'm in overdraft.

• 8:26Speaker 00

  Well, even when I got my, when I had my first job, I got paid fortnightly, I paid rent weekly. And so then I had to do all of this mental, you know, accounting where you're like, okay, yes, I've got to make sure that my rent, I need to make sure I don't spend that. Whereas now I get paid weekly, I pay my, my home mortgage monthly. And so every week I get paid, the next day, the mortgage money gets moved out, gets put into the mortgage account. And that's where the money starts to build up. Because the other thing is if you get paid weekly, but you pay, pay your mortgage monthly, you might find that you got paid five times in one month because that's just where the weeks land. So you'll have some more money build up there. But if I didn't do this, I might think I was actually a bit richer.

• 9:10Speaker 00

  Then all of a sudden I get a bigger charge to my mortgage and all of a sudden I'm, I then could potentially scramble. So I know that both of the first two things are automate your money. But number three for me is having some sort of system like this of different accounts where the money is allocated. Because for, for me, financial peace is not having to open up my bank account every day and look at what's in there because I just know what's in there. As soon as I get paid, the next day, all of that money or like the vast bulk of it gets moved into different accounts.

• 9:46Speaker 01

  Same.

• 9:46Speaker 00

  Right? Just because then if I was tempted to spend it, I would go and spend that money. But if I know, oh, actually I don't have that much left, this is my spending money for the week. Well, that's what my spending money is for that week. And so number three is not having. To open up your bank account every single day. If we're talking about getting financial peace, what have you got number four on your list?

• 10:07Speaker 01

  Number four for me is getting on the same financial page as your partner.

• 10:11Speaker 00

  A hundred percent.

• 10:12Speaker 01

  Yeah. So you think about Dave Ramsey, who's an American money guru. I really enjoy watching his reels. He said that 38% of married couples say that money creates the tension in their relationship. And the more debt you have, the more likely you are that that money is going to create that tension.

• 10:29Speaker 00

  So how would you get on the same page about money as your partner? Because it's all, like, it's all easier said than done, right? Like if it's like, okay, fine, let's get on the same page, but how do you do it?

• 10:39Speaker 01

  So listening to Stevie and Nefi, who have got their own podcasts, she owns this.

• 10:44Speaker 00

  That's our sister podcast at Opes Partners.

• 10:46Speaker 01

  They were talking about some of the ways that they do that. And Stevie, for example, so Stevie and her partner, John, they're building their wealth. They're in the building wealth phase, they're building a house, they've got rentals. And they sit down once a month and they actually go through and, and kind of work through where they're at financially. And, and it doesn't have to be, you know, open a spreadsheet and agree on everything. And you spent too much on shoes last month, John. It can just be about kind of figuring out the high level we were trying to get to. And Nefi and her husband, I think they go out for some walk or something like that. They do it that way. I think that you shouldn't go into it expecting to be on the complete same page when it comes to spending.

• 11:29Speaker 01

  But I really like Hannah McQueen, the founder of Enable Me. I like her strategy of you need to work out what your respective non-negotiables are. So like for Ed and I, okay, we're in a relationship, Ed will love this. I want my Netflix subscription and my wine subscription. That's, that's my non-negotiables.

• 11:47Speaker 00

  One of those is much more expensive than the other.

• 11:50Speaker 01

  And, and Ed, he wants his meal out once a week and he wants to be able to get a fishing rod once a year to go fishing. Right. And so then anything over and above that, we're going to be thinking, okay, well, we want to get ahead financially. That means that we need to take on more debt. I'm happy to do that, but Ed's not. But he understands that actually we're taking on this a high level of debt and contributing towards rental property because we want a better financial future.

• 12:15Speaker 00

  And I suppose the benefit of that is you get to choose your three non-negotiables. Everything else is on the table for getting cut. And you, and you've got to be prepared for that and actually cutting back because you've already got your three things that you said that you wanted. For me as well, financial peace is about having a buffer. So me and my wife have a revolving credit. She's obviously starting her business. So when you start from that, you go from, from having an income to not having an income for a bit. And you're starting to build that back up, right? And what has really helped us with that is having money saved in the revolving credit that we can then draw upon while she is in that building phase. And having that buffer there gives us so much financial peace and being like,

• 12:59Speaker 00

  it's okay if it takes longer to build that business or it's okay if there are a couple of additional costs if that was to happen. Because we have got that buffer there. And the way that I basically convinced Angela to quit her job, though she did it a bit sooner than I thought she was going to do. That's a story for a different day. As I said, well, here's the thing, if this doesn't work, we have got X amount of time where you could earn $0 and we would still be okay. Now, obviously you don't necessarily want to spend all of the money that you've saved in your life, but it gives you the confidence to be able to say, if you had to, you could make it work.

• 13:41Speaker 00

  So having some amount of buffer available, even if it isn't a revolving credit, can give you quite a bit of financial peace. Doesn't mean that there is a financial piece 100% of the time. Because let's say you had a revolving credit and you were in a similar situation and, uh, and you were drawing down on it quite quickly, faster than you thought. That might not cause some financial peace, but it gives you that buffer is what I'm talking about. And I know you've got the last one on our list, number six to get financial peace.

• 14:08Speaker 01

  I think number six for me, it's, it's knowing that I've got some assets. You don't have to have a plan in place to solve all of your wealth gap or all of your wealth journey today. And sometimes, you know, when you sit down with an investor, particularly a young person that might say, okay, I know I need to contribute more to my shares account, contribute to my KiwiSaver. And I need to buy three rental properties over the next 10 years and I'm going to hold them for 25 years. Sometimes people get caught up with the, well, how am I going to buy number three? Because right now the bank will only give me enough for one. This is all getting a bit hard. You've just got to be making sure you're constantly working towards building your assets.

• 14:48Speaker 01

  You don't have to have the solution for everything all at once, but you have to know that you've got something more than just a hope.

• 14:55Speaker 00

  Well, I think having a plan, like let's say that your net worth was $10,000 today, but you sat down and you figured out that if you ramped up your KiwiSaver contributions to 10% and you did that consistently for the next 30 years or whatever it happens to be, that you would have enough to quit work for good and be really, really happy. That doesn't change that your net worth is still $10,000 today. You're not going to change that really, really quickly. But if you can figure out that, oh, I have a plan and if I just follow this plan, then I will be okay in the future. Well, now you don't have to stress as much about the future because you've just sorted it. Now you've got to do some things like make sure you don't lose your job so that those contributions go down to zero.

• 15:40Speaker 00

  But it gives you the confidence to face your future. Even things like, let's say I created my own wealth plan to figure out whether I'm going to be able to do money wise, what I want and achieve financial freedom in the future, right? And then I review that in a couple of years. I'm like, oh, maybe house prices haven't grown as much as I thought they would. Now I'm all of a sudden not as on track as I thought I would be. Well, that's where you can then adjust and say, well, maybe I start paying down principal on my investment properties. Because that's going to start to create wealth within those properties. Okay, that puts me back on track. Okay, I'm going to start to do that. But having a plan and regularly reviewing it is going to be one of the main things you can do to create financial peace.

• 16:22Speaker 00

  Because then you can stop those money worries when you're lying in bed at night or standing in the shower and you don't have your phone in front of you. So your mind finally starts to wander, unless you're listening to the Property Academy podcast to fill that void. Cause some people do listen to this podcast in the shower, which I, I, I kind of love. But that can help calm those money worries and move you a bit more towards financial peace.

• 16:43Speaker 01

  And I think that the financial piece is kind of, is knowing where your money is heading. Rather than looking back and going, where the hell did all my money go?

• 16:51Speaker 00

  And over the last 15 minutes, you've learned the truth about financial freedom, the difference between financial freedom and financial peace, and six simple actions you can take today to start to get it. Right, let's wrap it up there, but please don't forget to rate, review and subscribe to the podcast. Really does help us get the message out to more people.

• 17:13Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Steve Atknight. We're going to be back here tomorrow with even more daily strategies, tactics and insights to help you get the most out of the news on the property market. Until next time.