The 7 Steps to Financial Freedom

Financial freedom is something we all want:

• The time to do whatever you like.

• Not taking orders from other people.

• Free to move and travel the world on your own schedule.

For most, this seems like a pipe dream.

But, for those who know how to get there… it’s not a pipe dream. It’s a goal.

I’ve been in the world of personal finance for a few years now, and I’ve refined a path to financial freedom that anyone can adopt… including you.

I’m living proof that this works, and I’m on the final step myself.

I’ve called it: The 7 Steps to Financial Freedom.

A proven pathway to help you begin building your own path towards financial freedom.

Let’s begin with step 1.

Step 1: Accountability

Accountability is the perfect place to start:

• Requires little to no action.

• Easy to achieve.

• Can get you building small wins right away.

There’s a big problem in today’s society…

There’s a growing group of people who refuse to take blame or accept responsibility for their own position.

They’ll blame:

• Their parents.

• Their friends.

• The government.

• Their teachers.

Anyone… except themselves.

And although their arguments can be justified to an extent… what’s the point?

What good is it blaming others for your misfortunes, when you can put that energy towards building a better life for yourself?

So, for step 1, I urge you to prioritise your mindset.

In order to win, and see results, you need to understand that it’ll be because of the work that you put in. Not external factors.

Switch from a victim mindset to a growth mindset, because this is what you need to see results.

It shouldn’t take long to alter your mindset. In truth, you may already have this growth mindset.

But, if you don’t, acknowledge that it’s you, and you only, who’ll achieve financial freedom.

Step 2: Budgeting

The first actionable step towards financial freedom involves gaining a better understanding of your current finances.

To do that, you have to create a budget.

For individuals, a budget can come in many shapes, sizes & formats.

It’s all down to what works for you.

There are generally three core components to everyone’s expenses.

These components enable you to split your expenses into categories, and gives you a better idea on where you can reduce your spending.

The three components are:

Needs.

• Rent/mortgage.

• Groceries.

• Travel/Car..*

• Clothing.*

• Phone.*

• There are certain things that, although we need, some people may find themselves spending way too much on.

Wants.

• Entertainment. (TV, Netflix, Video games etc.)

• Going out/eating out.

• Holidays.

Savings/Investments.

• Emergency fund.

• Savings account.

• Investments.

• Retirement funds.

The idea behind splitting your expenses into these three, is to identify where you can save money.

There’s a greater chance that you’ll be able to reduce your wants, due to the nature of them not being essential.

The core steps to creating an accurate, sustainable budget goes like this:

1. Start with your objective, ideally as a figure of disposable income (income minus expenses).

2. Write down your total monthly income.

3. Identify all monthly expenses & categorise them into N/W/Is.

4. Work out how far you are from your objective.

5. Make changes to your expenses to reach your objective.

6. Update your expenses to fit the changes made above.

7. Difference to objective. (Should be 0 after changes are made.)

Step 3: Emergency Fund

When pursuing financial freedom, you’re going to be taking on financial risk.

• Investing

• Starting a business

• Experimenting with side hustles

So, it’s in your best interest to build an emergency fund.

An emergency fund is a small savings fund that you’re able to access quickly, in case of any unforeseen events occurring.

• Job loss.

• Water leak.

• Medical expense.

You name it, the emergency fund is designed to cover it, so you don’t have to start borrowing money.

It ties in perfectly with step 2.

It gives you something to start building towards right away, once you’re able to increase your disposable income from your budget.

The common rule of thumb is to build a fund of around 3 months living expenses.

But in truth, it doesn’t have to be this much. Or, it could be more. It’s up to you.

For me, the biggest benefit of building an emergency fund wasn’t the financial aspect.

It was peace of mind.

You soon turn a corner and feel more comfortable in taking on the next steps to financial freedom.

So, once you feel as though you’ve turned this corner, proceed to step 4.

Step 4: Removing Debt

The first 4 steps act like a preparation phase, before the bulk of the work in steps 5, 6, & 7.

These 4 are all very much interchangeable, and you can work on them at once to position yourself for the final three.

The fourth piece of the preparation phase?

Removing bad debt. Bad debt is the killer of dreams.

The reason why so many people fail to live a life that they dreamt of as a child?

Because they’re quick to lose themselves financially.

Amongst other things, debt & a habit of borrowing money is one of the biggest contributors of this.

Dreams soon fade once you get into the cycle of having to trade all your time for money.

Especially when interest is high, and continuing to compound, debt is eating into your wealth, and ruining your ability to…

Achieve financial freedom.

Ways to Avoid Debt and Borrowing:

Sometimes, things in life are inevitable.

I can’t say that everyone can go through life & avoid borrowing money, or getting into debt.

It can’t happen.

Debt, in a way, is what makes the world go round. Everyone owes everyone money, which keeps us working.

Here are some tips to help you avoid the need to borrow money in the future:

Create An Emergency Fund

Of course, the first way would be to create that emergency fund that we discussed in the previous step.

Rather than borrowing money from a third party lender, borrow money from yourself as & when you need it.

Have your own personal mini bank.

It may seem pointless having a chunk of spare change lying around, but… that’s the point.

It’s for emergencies.

I can’t stress the importance of an emergency fund. I have one that covers about 6–8 months expenses, but a fund that size isn’t necessary at all.

It just helps me sleep better at night.

Get a few months’ expenses under your belt, and you’ll feel so much better.

Use Your Network

An underrated factor, especially if you’re in dire need of money.

Using a third party lender should be a last resort. The interest rates some lenders are giving out money at, is absurd.

Before you consider this, don’t hesitate to reach out to family, friends, or other associates.

Of course, pride comes into this. But, I doubt a friend or relative would make you pay interest on some cash that they’re willing to lend you.

Who you know is important. As they say, your network is your net worth.

Pay Attention

I don’t have any figures to back up this next theory, but bare with me.

The amount of people that borrow money, and the amount of people that need to borrow money, isn’t equal.

What I mean by this is, not everyone that borrows money, needs to.

Why?

Because people don’t pay enough attention to their finances.

If everyone paid more attention to their finances, some people can avoid the need to borrow.

As a result, I say to people… pay more attention to where your money is going.

It’s as simple as that.

The main alternative though, will be that emergency fund you’re beginning to build this month.

Step 5: Living Below Your Means

Living below your means is the greatest cheat code in personal finance.

With a bit of discipline, you can get years ahead of your peers by increasing your disposable income.

Step five is where I shine.

It’s the biggest cheat code in personal finance.

Living on <100% of your income. The smaller the percentage, the better.

Sure, it comes at a cost though.

But, who tries to achieve financial freedom without an element of sacrifice along the way?

A simple concept, but for most, a hard thing to adjust to over a long period of time.

The lack of financial education has led to a lack of understanding about the true value & power of money.

As a result, for the average person, once they earn money, they spend it.

They spend 100% of what they earn, or near enough.

To summarise, living below your means becomes possible when you learn how valuable money is.

Living below your means is rare, because nobody knows anything about money.

To explain what living below your means is, let’s stick to numerical examples.

When you earn money, you start at 0%.

• If someone spends all of their money, they’re at 100%.

• If someone is good with money, and only spends two thirds, they’re at 66.7%.

• If someone is exceptional with money, and only spends half, they’re at 50%.

• If someone spends more than they earn, they’re over 100%.

You get the idea. Let me take you back to why we’re here. The smaller your percentage, the quicker you’ll achieve financial freedom.

This number is what we call disposable income. As I mentioned earlier, it’s the biggest cheat code in personal finance.

Disposable income is the true measure of how strong someone’s financial situation is.

Someone who earns $5,000 and spends $4,000, is doing better financially than someone who earns $8,000 and spends $8,000.

Why?

Because their percentage is smaller. 80%, in comparison to 100%.

Disposable income for a person is like profit for a business.

Treating your finances like a business is one way to help you increase your percentage.

Don;t get me wrong, your income is important.

But it’s what you do with it, that really matters.

Step 6: Investing Your Money

The idea of financial freedom is to build multiple income streams, to replace your job.

One of the best places to start? Investing.

In a position to begin increasing your disposable income? Great.

Now, you might be asking the question…

What do I do with the money?

Everything we’ve spoken about was for one thing: increasing disposable income.

• Accountability.

• Budgeting.

• Emergency Fund (something you can do with your DI.)

• Removing Debt.

• Living Below Your Means.

Now it’s time to start putting some of this into action.

Once you’re in a position to cover your living expenses on your own, guess what…

…you’ve achieved financial freedom.

The large benefit of investing your money is that you’re letting the money do the work.

You don’t have to invest your time, which you can spend doing other things like building a business.

When it comes to something like real estate, you’re defeating the point of the whole process. You need time to maintain your investments.

Emphasise the concept of efficiency. For investing, it’s being able to get the best return, for the least amount of time invested.

Our time is a more important valuable asset than our money, due to the potential ROI.

As a result, it’s important to be mindful when choosing your investments.

In the stock market, you have two primary asset classes:

Stocks

Stocks are the most well-known type of investment.

When you buy a stock, you’re buying a small piece of ownership in a public company.

Stocks can be a great way to grow your wealth over time.

The value of the stock increases as the company grows and becomes more profitable.

But, they’re not as good as these…

Exchange-Traded Funds (ETFs)

An ETF is a type of investment fund that trades on stock exchanges like individual stocks.

ETFs track a specific index or sector. It can be a great way to gain exposure to a wide range of investments, with low fees.

Depending on the index, an ETF acts as a “basket” of investments.

It minimises risk & enables you to invest without the need for extensive research.

The crucial deciding factor between these two is time.

When investing in individual stocks, you need time for research.

Sure, there might be a chance of higher returns if you’re good at picking the right companies to invest into.

But, when it comes down to efficiency, the right move would be to stick to ETFs.

So you can use your time in other ways of building income streams.

Step 7: Increasing Your Income

The final step towards financial freedom is what brings everything together.

It speeds up the process of arriving at your destination.

Having the capacity to increase your income will only make things easier.

It’ll help you begin living the life that you’ve always wanted.

This is where the magic happens, and this is where you have to put in work.

The more you’re earning outside of your job, you quicker you can begin living on your terms.

The idea behind building your own income streams, is that it gives you all the benefits of life alongside it.

Use the 4 W’s (and 1 H). You want to give yourself the ability to choose:

• Who you work with.

• When you work.

• What you work on.

• Where you work.

• How you work.

Financial freedom isn’t about retiring from work.

It’s about reprogramming your mind.

Removing all negative connotations that you have associated with the dreaded W word.

To do that, you can’t neglect the first six steps. It’s the financial discipline that you have developed in the first 6 steps that will help you finish with 7.

You’ve come this far, and you’ve set the necessary foundations for yourself, but this is the hardest step.

It’s a step that you can be working on since the beginning, but will most definitely be the last step to complete.

So many struggle with this for one reason: they don’t know where to start.

It’s such a broad venture, and the opportunities today are endless when it comes down to the topic of making money.

• What to do.

• What business to start.

• How much money you need etc.

There are so many decisions to make, and it can be difficult navigating the first few steps.

Don’t worry, I was in the exact same position not so long ago.

This step will outline the factors I used to narrow down my options. Also what increased my chance of success with a business catered to me & my strengths.

If you’re starting a business, it can be hard to stop, and start a new one if something isn’t working.

You’re investing a lot into it, and because of this, you want to make sure you’re making the right decisions.

Preparation is key, especially if you’re investing more than your time, but more in this later.

Visualisation is super important during this phase. Imagining starting a business, and going about selling a product/service can be beneficial.

A big reason that new entrepreneurs fail, is their inability to paint a picture of how their business would run.

So, as a result, they don’t go any further.

If you have a visual image, you’ll have something to work towards. The likelihood of you failing or quitting altogether decreases.

These factors are what helped me narrow down my options. And because of this, I now recommend this structure to everyone who wishes to start a business.

• Time — how much time do you have at your disposal?

• Money — are you able to invest money into your venture?

• Other assets — what else do you possess that you can use to your advantage?

• Interests — is there a specific industry that you will find more fulfilling?

• Skills — what are your strengths and can they be leveraged?

Step 7 is about choosing a venture that will replace your primary income.

But, it’s also about doing something that won’t feel like “work.

That’s why these 5 factors are so useful.

I wish you all the best on your quest for financial freedom.

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