steps to financial freedom

7 Steps to Financial Freedom

Erik Featured, Financial Education, Thoughts of a Mastermind 11 Comments

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Financial freedom is a goal of mine. I want to be able to do what I want, when I want.

Doesn’t financial freedom sound great? What if you could skip your commute and spend time with your friends or family uninterrupted all day? Wouldn’t that be fantastic?

On this blog, I’ve talked about how personal finance is personal, and I’ve also shared two simple steps you can take today which will get you on the path to financial success.

After taking those two steps, what’s next? Once you know your goals, and start tracking your finances, there is a lot to ask and know.

I’m glad you asked, because right now, I’m going to share with you a seven step plan to get to financial independence – the ultimate personal finance goal.

The 7 Steps to Financial Freedom

You may have heard of the seven steps to financial freedom before. Maybe you haven’t. There are two versions of the seven steps to financial freedom I’ve come across over the past few years.

One is by Dave Ramsey and the other is by Tony Robbins.

Dave Ramsey’s 7 Baby Steps to Financial Freedom

The first seven steps to financial freedom is from the one and only, Dave Ramsey.  Dave Ramsey, for those of you who don’t know, is a personal finance and money management expert with a radio show and many courses and workshops that help people get their finances in order.

Dave Ramsey’s 7 baby steps to financial freedom are:

  • Baby Step 1 – Build a $1,000 emergency fund
  • Baby Step 2 – Pay off all debt using the debt snowball
  • Baby Step 3 – Save 3 to 6 months of expenses in savings
  • Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
  • Baby Step 5 – College funding for children
  • Baby Step 6 – Pay off home early
  • Baby Step 7 – Build wealth and give

I like these, and completely agree that for most people, these steps are great for building wealth and reaching financial freedom. If a person doesn’t have $1,000 in the bank, then that should be goal number one on the way to financial freedom. Next, pay off your consumer debt and start saving for the future. Finally, become fully debt free and share your wealth with the less fortunate.

If you follow these steps, you will be wealthy – I have no doubt.

Tony Robbins’ 7 Steps to Financial Freedom

money master the game 7 steps to financial freedomThe second set of seven steps to financial freedom are from Tony Robbins. Tony Robbins wrote Money: Master the Game a few years ago and goes over his seven steps to financial freedom in it.

Tony Robbins’ 7 steps to financial freedom are:

  • Step 1 – Make the most important financial decision of your life (Decide to be the investor, not a consumer.)
  • Step 2 – Become an insider: know the rules before you start investing
  • Step 3 – Make the game winnable through knowledge
  • Step 4 – Make the most important investment decision of your life (dollar cost average, asset allocation)
  • Step 5 – Create a lifetime income plan (consider insurance and annuities for income)
  • Step 6 – Invest like the 0.001 percent (model the portfolios of hedge funds)
  • Step 7 – Just do it, enjoy it, and share it!

I read Money: Master the Game back in January of 2017 and I really enjoyed it.  While there was quite a bit of fluff, there were many actionable tips and takeaways for me to implement in my life.

Step two of Tony Robbins’ steps is all about managing fees, how financial advisers may not be the best route to go, and buying and holding are all things to know and consider before investing.

Finally, he talks about alternative routes to income and wealth once we have a substantial nest egg. It’s one thing to have a lot of money, but it’s another to have a lot of money that is protected from disaster.

I want to be unique with my content and ideas. Both of these plans have a lot of merit, and I’ve built off of them and created my own seven step plan to financial freedom for you.

The Mastermind Within’s 7 Step Plan to Financial Freedom

Coming up with a seven step plan was tough. Everyone’s situation is different – and with anything you read or consume, it’s important to take a step back and see how it can fit into your life.

All I can share and point to is my seven step plan to financial freedom – what I’m personally trying to do to grow my wealth, and get on the way to financial freedom:

  • Step 1 – Build an Emergency Fund

An emergency fund is most important. It’s truly tragic – around 70% of Americans don’t have $1,000 in their bank account.

What happens when the furnace or AC goes out in your house? What happens if your car breaks down, or you get sick? There’s so many unplanned emergencies to account for. Take it from me – it feels amazing having some cash in the bank that’s not for anything.

 

  • Step 2 – Pay Down Consumer Debt (credit cards, auto loans, and student loans)

Guess what – debt sucks. I’m sure many of you think that as well. Credit card debt is the worst. Paying 20% in interest every month is not something you want to do if wealth is your goal. Destroy your debt!

 

  • Step 3 – Save 10% of your Income

After building an emergency fund and destroying your debt, the next steps are to start saving. Take 10% of your income, and start saving it for the future.

After paying off your consumer debt, take that money and start directing it towards investment and savings accounts for the future.

I’m saving 50% of my income in 2017 and it’s helped my debt situation, net worth, and peace of mind. Get that savings rate up!

 

  • Step 4 – Learn about Investing

You need to learn how to invest.

Financial freedom isn’t going to come through investing in CDs. The only thing guaranteed about a CD is you are guaranteed to lose money due to inflation! (Okay, in some situations and rate environments they are okay – but not right now)

Do you want to be an active investor or passive investor? Active investors should look at starting businesses or buying real estate. Do you want to sit back and watch your money grow without much work? Stick it in the stock market.

Learn about the different fees, downfalls and traps in your chosen market. For example, paying a financial adviser 2% over 30 years could amount hundreds of thousands of dollars lost!

 

  • Step 5 – Invest in Yourself and Grow Your Income

The best investment you can make is in yourself.

If you earn more, you will be able to save more. If you save more, you will be able to increase your investments.

My goal is to increase my income through my day job and entrepreneurial efforts – in the future, I’ll be able to continue to invest in different things and grow my wealth effectively.

 

  • Step 6 – Stay Consistent

Paying off debt and then going back into debt isn’t going to help on the way to financial freedom. Saving $5,000 in one year isn’t going to amount to much. BUT, saving $5,000 a year for 30 years and investing it in something returning 5-7% a year can grow to hundreds of thousands of dollars.

Consistency is the key to everything. I try to work a little bit each day towards my goals – growing my blog, building knowledge in marketing and business, learning about real estate and other investments, and continuing to add value at work. It’s been a wild ride the past few years, but it’s certainly paying off.

 

  • Step 7 – Give Back (Time, Money, or Knowledge)

At the end of the day, I will be wealthy following these steps. At 25, I’ve amassed a net worth of $100,000+. I’ve learned a lot, and continue to learn a lot each and every week. Here’s the thing though: ALL OF THAT DOESN’T MATTER UNLESS I SHARE IT WITH OTHERS.

Giving my time, money, and knowledge can help others achieve their goals and dreams. That’s what makes me happy – seeing someone else make a connection in their head and get on their way to reaching their goal. That’s one reason why I blog!

We make a living by what we earn. We make a life by what we give.

Right now, I’m at step five in my plan for financial freedom. I need to keep investing in myself and stay consistent and disciplined with my investments. Saving a few hundred bucks a month is great, but to become financially free will require more than that.

Conclusion

Everyone’s situation is different – personal finance is personal, after all.

That being said, you now have three different, seven- step plans to financial freedom to draw inspiration from and put into action. After reading this, take a step back to reflect on these different plans, and how they may align with your own plan.

I challenge you to come up with your own seven step plan for financial freedom!

Take action today and get on your way to financial freedom!

 

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Comments 11

    1. Post
      Author
  1. Off the top of my head…

    1. Stop the bleeding – Start tracking your spending and get yourself a budget. You got start operating in the red.
    2. $1,000 emergency
    3a. If you got a 401K with company match start investing up to that amount
    3b. Pay off consumer debt
    4. 3 month emergency fund
    5. Invest a minimum of 20% of your earnings in tax advantages retirement accounts
    6. Start working on building some passive/semi passive income
    7. Pay off mortgage once you are maxing out all available tax advantages accounts

    Not thrilled with that list but that is the 2 minute off the top of the head.

    1. Post
      Author
    2. are your steps 3a and 5 not the same thing? I look at my 401k as retirement but would it be smarter if I invest in that and also something outside of what my employer offers? I’ve been contributing 15% of my paychecks to 401k since i started working and thats been going on for 5 years.. i just want to optimize and maximize,,

      1. Post
        Author

        Hi Angel,

        The difference is that most companies only match up to a certain percentage (for example, at the company I work, I get a 4% match)

        Grant’s step 5 was to contribute 20% to these accounts, which is probably an increase from his company match in 3a

        At 15% for you, you are doing well. Keep it up, learn a little more each day, and you’ll continue to improve your financial situation 🙂

  2. I think the best way to achieve financial freedom is to build your own business. WHen you’re on a salary, your income is always a function of how many hours you work. Only when you have a scalable business can you grow your income exponentially.

    1. Post
      Author

      Completely agree with you – that’s step 4 🙂 Building your income can come in any shape or form – be it at a job or in business.

  3. Pingback: Zero Waste: A Month of Tracking My Trash (Guest Post from The Mastermind Within) - Tread Lightly, Retire Early

  4. This is a great list to have financial freedom and live as you wish. #7 is the last thing that you can offer, giving back to people through teaching them the knowledge on how to have financial freedom.

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