Financial freedom is a major game-changer and can set you on the path to everything you’ve always wanted for yourself.
I’m not talking about the regular stuff that’s predefined – finish school, get a job, build a career, retire at 65 if you’re lucky, wait to die.
I went through the motions of this and even found a career that I loved but I wasn’t happy.
You see, I was slowly working myself to death and I wasn’t sure why. The only people getting rich were the company owners.
I wanted to stop, take a step back, and try to do and be something else for a change.
But I couldn’t do it because I realized it is impossible to follow the path you want when you’re tied up with debt and have little savings.
To take a step back and do what I wanted, financial freedom followed by financial independence was necessary.
Why is Financial Independence Important?
Let me tell you a little story about my life during the last recession from 2008 – 2010.
I was an excellent employee, never missed a day of work, and was an asset to the team.
However, when the recession landed, none of that mattered at all. My department was scrapped and I was unceremoniously booted out.
Ditto for the next job where the company closed doors within a few months of my starting the job.
My financial life was completely out of my control and I went through hell during those years.
By early 2010, it became clear job security is an illusion.
It does not matter how indispensable you think you are, you can be booted out at any time without any notice.
This realization propelled me on the path to financial independence.
I became determined to free myself from the shackles of requiring a job to pay my bills and live the life I want.
It was a tall order and I didn’t waste any time stepping up to the plate to make it happen for myself ASAP.
To summarize, financial independence is the best way you’ll be able to live your life on your terms and do the things that make you happy when you like.
What My Financially Independent Life Looks Like?
As a financially independent person, when an unexpected bill shows up, I can deal with it.
When I suddenly feel the urge to travel somewhere, I do exactly that. I was in the middle of hightailing it to Barbados when quarantine started.
When I see a cause I care about, I do not have to think too hard before throwing in some support for it.
And when I want to splurge a little, I go ahead and do it.
I do not have to worry about not having enough money and I am so happy I can do the things I enjoy because life is so short.
And it all started with a firm determination in February 2010 when all I had to my name in savings was $900.
Does that sound like something you want for yourself sooner rather than later? You’ve come to the right website.
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How Do You Get to Financial Independence?
There are several mini-steps you have to take to get yourself on the path to financial independence and some big ones along the way.
Below, I have outlined the top 11 steps to achieving financial independence ASAP.
1. Improve Your Financial Literacy
A lot of people don’t understand how money works and the dynamics behind holding onto it.
Fortunately, there are so many resources available now, online, and offline.
These resources will help you understand how money and debt work to benefit companies and how you can make your money start working for you.
Some of the best resources I came across in the beginning when I started improving my financial literacy include:-
- Your Money or Your Life by Joe Dominguez & Vicki Robin
- The Richest Man in Babylon by George Samuel Clason
- The Total Money Makeover by Dave Ramsey
- The Automatic Millionaire by David Bach
- The Wealthy Barber by David Chilton
These books are great for beginners but experienced people can still pick up a few things in them.
If you don’t have time to read books, you should have time to listen to them, right?
Listen to these books for free when you sign up for a FREE 30 day trial of Audible. This trial also gets you 2 free books.
If you decide not to proceed after the free trial period, the books are yours to keep! Try it HERE.
You don’t have to read all of them at once but if there is one I recommend starting with, it’s Your Money or Your Life.
2. Commit To the Journey
I never tire of telling my students it’s not just about money. It’s also about choosing to commit to the journey involved in getting there.
You have no idea how many people start on this path and then when it becomes a little too much work, it’s inconvenient or cramps their lifestyle, they want out.
No one can make this commitment for you.
You are the only one who can decide you’ve had enough of worrying about money all the time and want to financially independent.
I share some fantastic resources for committing to the financial journey mindset in Take Control of Your Financial Independence Bundle.
3. Make a Plan
Always make a plan.
Don’t do it by the seat of your pants. Don’t make it up as you go along. Don’t search for tips as you go along.
You must make a plan. Where are you financially? Where do you want to go financially? What do you need to get to your financial nirvana?
How much money is required? Do you make enough money now? How can you generate additional income to get you there faster?
You might find Easy Guide to Money Management: Small Steps for a Huge Difference a great resource on this step.
4. How Much Money Do You Owe?
Everyone and every company you owe money to have basically made you their little profitable workhorse.
You work yourself to the bone to deliver your money into their pockets at the end of every month. For years and years and years.
You need to end this ASAP. Make a list of your liabilities. That’s how much money you owe, which could be:-
- Credit cards
- Personal loans
- Auto loans
- Student loans
- Any other type of consumer debt
Knowing how much you owe is a good way to center yourself on this journey and focus on what’s important
5. How Much Money Do You Have?
This is a list made concurrently with the amount of money you owe. How much do you have to your name?
- Inheritance (if any)
- Properties (Investment and home equity)
Knowing how much money you have and calculating the difference between it and your debts gives you a realistic and undeniable picture of your current situation.
You can use a simple excel sheet for 4 and 5 or you can adapt the free worksheet included in Easy Guide to Money Management: Small Steps for a Huge Difference.
6. Start Cutting Your Coat According to Your Size
This was one of my mum’s favorite sayings when I was a kid. She drummed it into our ears consistently.
It means don’t spend money you don’t have. Don’t buy what you know you cannot afford. And never ever spend more money than you have.
It’s another way of saying “spend less than you earn.” Don’t try to imitate someone’s else life and pocket.
I’m a minimalist and one of the benefits of being a minimalist is less spending.
Sometimes, people make fun of me for living this way to make me uncomfortable.
However, my response to the mockery rarely ever defers from, “It doesn’t matter how much you try to project yourself on me. Minimalism makes me happy and that’s what counts to me.”
That usually shuts ’em up. Focus on your journey and financial goals. Focusing on needs instead of wants is a great way to start this process.
7. Start Tracking Your Spending
You must know where all your money goes. Down to the last cent. A general idea of it in your mind is not enough.
You need an overall picture in front of you every month. This is the best way to identify where your excesses are and start learning how to curb your spending.
You can adapt the free budget tracker included with the Easy Guide to Money Management HERE.
8. Don’t Forget Yourself
Don’t forget yourself in this process. One of the best things I learned from The Automatic Millionaire is “pay yourself first.”
Yes, you’re paying off debt but when you get your paycheck every month, you should pay yourself first.
This money goes into your savings, investment, emergency fund, etc.
It should become an automatic process for you every month before you start paying other bills.
9. Start Investing
This is a future more in-depth post but the basics here – once you have a fully-funded emergency fund, you should start carving out money for investing.
This is another level of financial education if you’re not financially savvy.
I read a different set of books apart from those recommended above for this phase.
You can invest in ETFs, real estate, art, peer to peer lending, and several other things, which I will be covering in later articles.
However, a good place to start with investing with an eye towards retirement is The Bogleheads’ Guide to Investing by John C. Bogle.
10. Stay on Track With Monthly Check-ins
Every month, check-in to yourself and keep track of your goals and where you’re going. This is very important to stay motivated.
If you are on the journey with your partner, they should be part of the monthly check-ins as well.
Look at the big picture, where you are, how much further you need to go, and what you need to adjust for a greater chance at success.
The journey is slow and long but the potential rewards are phenomenal.
11. Earn More Money
To get to financial independence faster, you can start trying to earn more money. Remember what I said above, job security is an illusion.
Do not depend on it fully as a source of income. Start looking at ways to make more money.
I will be writing much more about additional ways to make extra money in future posts.
Ugh, How Long is All This Going to Take?
Did you read that in King Julien’s voice because I totally did when I wrote it? 🙂
There isn’t a one answer fits all for this question because there are so many factors involved such as:-
- The amount of debt you have
- The amount of income you generate every month
- Your ability to cut down on expenses and downsize your lifestyle
- The size of your family
- Your overall financial target
In the end, it all depends on you. Using myself as an indicator, in 3.5 years:-
- I paid off over $40,000 in debt
- Saved over 1 year’s emergency fund
- Saved a backup emergency fund
- Started investing
- Saved enough to quit my job and start my own business
I am single and live a minimalist lifestyle. I spend money on what I need, not what I want.
The bottom line, anyone can do it. As long as you’re determined and equip yourself with the right mindset, tools, and resources, it can be done.
The next post will cover how much you need for financial independence.
I was going to cover that in this post but it ended up a little longer than I planned so breaking it into two parts. Subscribe HERE to receive an update once it goes live.