FIFO Focus joins Big Al as part of the REDFM series FIFO Life.
In part 4, Matt talks about finance and how it can effect FIFO workers.
Ensure You Have Something To Show For All Your Hard Work
When it comes to working FIFO and managing your finances, it is critical to ensure you are not setting yourself up to work this lifestyle forever (unless of course, that’s what you and your family want!)
This week on FIFO Life, Matt Hern, FIFO Focus’ Financial Planning Partner gives two key tips on how you should look at and plan your finances for a more rewarding future.
Tip 1: Live off the equivalent of a non-FIFO base salary.
The great financial trap of working in remote locations is becoming addicted to earning a higher FIFO income such that you become unable to afford to quit FIFO. This can create great financial and life stress if you are retrenched or if for personal reasons you don’t want to work FIFO any longer.
To protect yourself I recommend that you look at your salary package as base salary plus hardship allowance.
For planning your financial freedom instead of defining them the way your employer does I recommend you define your base salary as the amount you would earn if you got a job NOT working FIFO, for example, if you were to work in the metro area.
Then when working out you regular lifestyle expenses, including mortgage and other debt repayment, ensure is it within your base salary. In this way if you suddenly lose your FIFO job and have to get a metro job, it’s not a stress. You will still be able to keep the roof over your head and food on the table.
Anything on top of the non-FIFO base salary, consider it as “hardship allowance” – which becomes your ‘rewards budget’, discussed below.
Tip2: Make the rewards matter
Reflect on the rewards you want for having endured the hardship of working in a remote location and away from friends and family. Think of it in terms of short term rewards during your rostered leave and also the lasting rewards for having worked FIFO for a number of months or even years. To inspire you to live off your non-FIFO base salary the rewards need to be personal and meaningful to you.
Your short term rewards can be lifestyle experiences you enjoy during your rostered leave such as quick holidays, family outings and even toys such as a jet ski.
Your meaningful long term reward could be to quickly repay your family home so you can get out of the FIFO life after that. One of my clients said, “I’m thirty now, I want to be debt free by the time I’m forty.” Enduring the hardship of several years working FIFO enable him to be debt free on his home residence by the time he was thirty-five and that was his meaningful, lasting reward.
For some people a meaningful long term reward could mean having a contingency plan. Remember that the FIFO roles are typically in highly cyclical industries so there may be a very fast acceleration with companies suddenly need lots of people and offering salaries are through the roof, but they also have a fast deceleration with job losses and pay reductions.
So provision for the fact that you may lose your FIFO role and it may take you three months to find a metro role, or 12 months to find another FIFO role for example. That means you need three to twelve months of mortgage and living expenses put aside in highly liquid place such as cash.
To ensure you have something to show for all your hard work identify experiences that motivate you to put money aside for tomorrow, rather than spending it on today. Identify things that really tap into your value system of what matters most to you in life. That could be your kids’ education, if you’ve got kids at home. It could be a big family holiday that you’d never thought was possible except for this extra hardship allowance.
It’s important to actually crunch the numbers so that you don’t accidentally allocate too much of your hardship allowance to short term rewards to the detriment of the more meaningful, lasting rewards.
If you don’t know where to start with all of this, do yourself a favour and see a certified financial planner. Make your FIFO experience work for you and your family in a long and lasting way.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Matt Hern is an Authorised Representative of Charter Financial Planning, Australian Financial Services License 234665.