How founders can avoid financial stress & create better businesses
At the age of 10, Lacey Filipich began saving half of every dollar she earnt.
By 19 she had bought her first property, and a further two more by the time she turned 23.
As an engineer working in mining, the West Australian began trading shares, and by 31 she earned enough income from her assets to retire.
But she didn’t.
Instead, she dedicates her time to educating thousands of people about the concept of FIRE, or Financially Independent Retire Early.
How does FIRE work?
“Basically you stop spending so much on stuff. You take the money you would have spent on stuff and you save it. And once you’ve saved it, you then buy assets with it. Assets are things that pay you, things like shares, bonds, index funds,” she revealed in a TED talk which has now clocked up more than 880,000 views.
In 2010, the chemical engineer turned entrepreneur created Money School, an online learning tool which teaches financial literacy to thousands of people across 32 countries.
“Money stress makes you dumber,” confessed Lacey, citing research conducted by Princeton University that revealed worrying about your finances results in a drop in cognitive function similar to a 13-point dip in IQ, or the equivalent of feeling constantly sleep deprived or hungover.
It’s a message she wants to convey to a group of budding female founders at an Accelerator for Enterprising Women Summit taking place at Murdoch University on August 13.
“When you are financially stressed you are not going to make as good a decision when it comes to money, your business, or your life, because you are suffering from cognitive overload,” she said speaking ahead of the free event open to young women aged 18 to 24.
Her top savings tip: develop an automation process and stash money away into a savings account not visible on your online banking and not connected to any card.
“If you can’t see it, you’re less likely to spend it, and once you’ve committed it’s hard to undo, so it requires less willpower,” said the financial educator.
Lacey says the best recipe for sleeping well at night financially is having a good buffer fund which will be different for everyone.
“If you’re living at home that might mean you need a month’s worth of living costs. If you’re living out of home it might mean three months worth of rent and enough to cover your basic living expenses,” she said.
Advice particularly relevant with many casual employees experiencing job losses and cuts to hours due to COVID-19 lockdowns.
“Know what your base living costs are so you’re aware of just how much you’ve got left to spend on luxuries,” she said
With tax returns about to land into the bank accounts of millions of Australians, Lacey recommends avoiding the temptation to reward yourself with a purchase, and instead pay down debts, like credit card, personal loans and buy now pay later.
“If your debts are paid off and your buffer is healthy, I would buy shares,” she recommends.
“Share trading is cheap and you don’t need to wait until you have $10,000, you can start with as little as $500, and then increase the amount slowly,” she suggested.
When it comes to your business, Lacey believes it’s better to sacrifice some speed rather than put yourself in a state of financial stress.
“We think we need a really flashy website at the beginning of the business – we don’t. There are plenty of businesses that launched without one,” she said.
“Don’t spend money on your business that isn’t going to reap rewards immediately.”
Lacey will be delivering the keynote address at the Accelerator for Enterprising Women Summit in Perth on August 13. Click here to register to attend in-person or online.