A simple to follow financial freedom roadmap on how you can achieve financial freedom in five steps or less.
Financial freedom is a buzzword that is thrown around often. There is so much power and meaning in those two words. Breaking it down further, people often ask the question, “that sounds great but HOW can I achieve financial freedom?” In this article we will provide a simple to follow financial freedom roadmap to assist you in achieving financial freedom in five steps or less.
Disclaimer: The financial information provided in this blog post is for general information only and does not take into account your personal situation. It should not be taken as constituting professional / financial advice from the website owner. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
“Real wealth is about freedom.”– James Clear –
Financial Freedom Roadmap
Step 1 in Your Roadmap to Financial Freedom
Identify Why You Want Financial Freedom
It’s such a fun phrase to say all the time, but it holds no meaning if there’s no plan or purpose. If there’s no understanding of WHY you’re doing something, the second it gets difficult, most will give up. Therefore, a clear understanding of the purpose behind this big goal of financial freedom needs to be established. Identify the why behind the want of financial freedom and you find your purpose. “I want total financial freedom”, “ok great but why?”
What would being free from financial stress do for you? What would you do, where would you go? If I told you that you never had to work again, what would you do with your time? Would you finally get on a plane and visit a country you’ve always wanted to go to? Would you spend more time with your kids? Spend your time volunteering for your community?
There’s so many things you can do when your money is no longer a worry in your life. The important thing here is, what sparks joy in your life? What’s something that you spend all day thinking about that you love doing? Being financially free gives you the ability to do that all day if you wanted.
Think about what financial freedom would bring to your life, write it down, and move on to step two.
Step 2 in Your Road Map to Financial Freedom
Get Intentional On Where Your Money Goes
Once you’ve established your why, now we establish the how. The next step on your journey to financial freedom is to get a grip on your money. Finances are a tricky conversation for a lot of people and most prefer not to bother with it and let their bad habits continue.
The main thing is to actually take the time to write out income and expenses and go down the column to see what your biggest expense areas are. If doing it all by hand seems to be too much work, pay for an app like YNAB which automatically update all incomes and expenses you make. You simply input your financial information and it will be able to update all of your finances for you.
I prefer to do it manually by using a Google spreadsheet. Personally, it gives me more control and I know where every single dollar goes by looking at bank accounts and credit card statements. Check out this article for the spreadsheet I use to track expenses.
Once you have a method you like, understand, and can easily use, simply commit to using it. The main point in this step is we want to be able to see any bug spending areas. Without knowing it, you could be spending over $2,000 in eating out and groceries on a monthly basis. And if you don’t track your expenses, how would you ever know?
This step aims to finally give you control over your money so moving forward, you will now have a clear action plan on what needs to be done to finally start making progress towards achieving financial freedom.
Step 3 in Your Roadmap to Financial Freedom
Cut Costs, Increase Income and Invest the Difference
The next step is to then cut costs and increase income. Financial freedom is expedited when you have a high savings rate. In order to increase your savings rate, you can either cut costs ruthlessly, or increase your income. Why not do both?
Look at your expenses now, what do you spend a lot of money on? Is that something that truly brings you joy? If not, cut back on that expense. If you find that you spend too much on going out to eat, buy some groceries to replace a meal out for a meal at home. There’s a surprising amount of joy that can be found in making a meal at home. You can easily watch YouTube videos on making something that you enjoy from the comfort of your own home. However, I’m not here to say stop doing what you love doing, just consider alternatives.
Increase Your Income
Next, think about ways to increase your income. You could keep your eyes open for jobs with better pay, start a side hustle, flip things around your house, or monetize something that you know, love and are good at, and make an impact towards the community. Whatever the case, there’s something out there for everyone to fast track their journey to financial freedom. Once you increase your income, you increase your opportunities.
If you are looking for some passive income financial freedom ideas, read this article on 15 passive income ideas you can start working towards today.
The main goal in this step is to get you thinking about getting as far from your average monthly expenses as possible. If you spend $5,000 a month, you should aim to make $7,500 or $10,000 in order to have peace of mind in your day to day living. While this may seem like a lofty goal, it’s reasonable when you know what you’re working for. Ideally, cutting expenses gives you more breathing room. That’s why it’s important to think creatively about alternatives for your expenses.
Invest the Difference
After you’ve got a difference in your income and expenses, invest the rest. Otherwise you’ll be running on the hamster wheel forever. There’s no point to saving all this money if you can’t get it to work for you in some way.
You can choose index fund stocks for easy peace of mind. For most, this fits people’s wants and needs a majority of the time. Personally, real estate has shown to be a better investment for what you get for your money. If you buy a stock for $3,000, you get $3,000 worth of stock. If you buy a $100,000 home for a 3.5% down FHA loan, you paid $3,500 to get a home worth $100,000. Essentially, you can leverage your money to get an asset that’s significantly more in value. In terms of bang for your buck in achieving financial freedom, real estate might be the way to go.
Over time, your investment portfolio should be able to fund your lifestyle and you will have achieved financial freedom.
Step 4 in Your Road Map to Financial Freedom
Automate Your Accounts For Peace Of Mind (Banks, Savings and Investments)
One of the keys to financial freedom is automation, and to me, this is the most fun! My biggest priority is to save time. When I can automate something that benefits me towards something I already do, I’m all for it. It also removes decisions from the equation. If you have to decide to do something that you don’t fully understand, it can be difficult. With automation, that decision is done on your behalf.
In this step, automation means setting up your expenses, banks and investments to run on autopilot. Every single expense that comes in consistently like utilities, credit card payments, mortgage / rent, insurance, etc., automate it to be paid on a certain day! This is important since late payments are no fun. Why not just make it easier on yourself to pay these off without even thinking about it?
Bank accounts should really only serve one purpose, to hold money for a few weeks / months until they go elsewhere. It’s best to have a checking account like Schwab. Do your research though as some banks are better than others for automation.
Essentially, your checking account is the place where money comes in and out. It’s a central location for all things money. Personally, I have a few checking accounts in Schwab for certain expenses like home expenses, personal, business, and the central one. That way each expense is put into a “bucket” and when it’s time to pay off the credit card, I reimburse myself with the money that was spent on that item into the central account. This is not tax advice but it helps me keep track of where my money is going within each category so I’m not getting business expenses and personal mixed up.
If you have a savings account like Goldman Sachs, these are for expenses that might happen over a longer time span like months or years from now. In these accounts you can automate certain amounts of money to be deposited into them at the beginning of the month. Examples might be $200 each month into an adventure fund, $100 a month for date night, $25 a month for holiday expenses/gifts, $350 for a down payment on a home, and $500 for baby expenses.
These of course will vary depending on your life situation and goals. It’s not a bad idea to decide an amount that makes sense to you and categories that you know are beneficial to what you spend money on. That way, each month, your money comes from your checking account into your savings which then can be used guilt free. At the end of the month if you do a budget reconciliation, you will then reimburse yourself for any expenses made relevant to the amount put into savings.
Adjustments can be made over time to make more or less contributions to each category.
Step 5 in Your Roadmap to Financial Freedom
Once Optimized, Change The Rules
If you can’t win the game, change the rules, if you can’t change the rules, ignore them.
This part in the journey to financial freedom goes against the status quo. If you do what you’ve always done you’ll get what you’ve always got. So let’s change the trajectory!
There’s a way you can live a great life for half the cost. One method is called house hacking. Basically, you live in a home with multiple units and rent the other units out to other people to lower or eliminate your housing payment. Housing costs are often the biggest costs in one’s life. If you can get this down as much as possible, you can then increase your savings rate substantially.
Now if that seems like a path you don’t seem too interested in, consider vagabonding or the nomad lifestyle. Here you visit places around the world for short or long periods of time. The point here is cost of living in the US and other western countries is significantly more expensive than many other countries in the world. So living outside of the country can actually SAVE you money.
Therefore, it wouldn’t be a bad idea to consider going on a short 1-2 week trip outside of the country to get your feet wet and experience the nomad lifestyle. Another option is to take an adult gap year from work, or even 6 months, and give it a trial run to see if a fulltime travel lifestyle is for you. Eventually, you can travel around the world for months or years at a time.
Oftentimes, you can live in great locations around the world for US$1,000 – $2,500 a month. For example, the cost of living in Chiang Mai, Thailand and the cost of living in Cambodia can easily be achieved within this price range. Not to mention healthcare costs are either free or extremely low cost. So any medical expenses are a fraction of the cost than they are in the states.
These medical costs can set you back months or years from your target so why not book a flight to a country known for that procedure, save money, then fly back home. Not to mention the facilities are just as modern and the staff is just as well trained as in the States.
Simply put, a nomad lifestyle can save you 50% if not more of your money while also gives you many amazing experiences while there.
From living life outside the status quo, you only make your path to total financial freedom faster.
In Summary – The Road to Financial Freedom
When you add all of these steps in your future roadmap to financial freedom together, you are setting yourself up for success. I hope you come back to this article time and time again to challenge your thinking because your perception is your reality. If you keep an open mind, find fun ways to make money anywhere, and are giving an impact to the world, financial freedom is near.
Stretch your comfort zone and start living a life of purpose.
If you want additional money management tips to help you reach total financial freedom, check out this article: Money Management Tips for Financial Freedom.
Eric Piccione is an author, blogger, investor, and fitness enthusiast. He is also the father of a beautiful daughter and husband to an amazing wife. Eric loves to talk about money and investment topics on his blog financialfreedomandme.com. If you want more information about Eric and what he is up to, check out his website! He posts monthly income reports so you can track his family’s progress and mindset on what they’re currently doing and striving for.
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